Legal procedures to start your business

You are ready to start your small business but where do you start? Let's focus on the legal aspects you should consider when starting up your small business.

The first thing you need to decide is what type of business you will be. Are you going to set company up as an LLC, a S-Corp, etc.? Below is a brief description of the various types of business licenses that can be acquired.

Sole Proprietorship:
This is the simplest business structure. There is no legal separation from the owner to the business. Any debts that belong to the business also belong to the owner personally. It is not a corporation and is not required to pay corporate taxes. Instead, the person owning the business pays personal income tax on profits earned. This type of business can sometimes provide difficulties with finding capital for the company.

Limited Liability Company (LLC):
An LLC is generally advantageous for small businesses. It is a hybrid business that combines the limited personal liability feature of a corporation with the tax advantage of a partnership or sole proprietorship. Profits and losses can be passed through the company to its members, or the LLC can elect to be taxed like a corporation. LLC's do not have stock and are not required to observe corporate formalities. Owners are called members, and the LLC is managed by these members or by appointed managers.

S-Corp:
S corporation status provides many of the benefits of partnership taxation and at the same time gives the owners limited liability protection from creditors. The S corporation rules are contained in Subchapter S of Chapter 1 of the Internal Revenue Code (sections 1361 through 1379).

Corporation:
A corporation is a business completely separate from the individuals that own it. There is delegated management, limited liability, investor ownership, a separate legal personality, and transferable shares. A corporation is the most complicated form of business.

Once you decide on the type of business you will need to acquire a business license. This can be done usually at your state or local government offices. Requirements will vary from state to state so you will want to contact your Small Business Association (SBA). Your best bet for advice and help will be to find an attorney that is qualified / expert in the field of business law. They can provide you with even more detailed step by step information making sure that all the t's are crossed and the i's dotted. There are "do it yourself" kits you can purchase or sites that walk you through the process online.

Other major legal issues you need to think of early on in your business building is to check with your zoning boards to make sure you don't have any restrictions for permits or zoning. If you wait too long on this you could end up closing your doors before they even open!

Some states and local governments require surety bonds. These bonds are like insurance policies. Make sure to check with your offices to find out if they are required for your business.

Below are some additional do's and don'ts to prepare you legally for your business startup.

• Do : disclose everything to your lawyer, good and bad about your proposed business and past businesses you may have operated.


• Do : discuss with your lawyer the details needed for any partnership contracts, employee handbooks, employee consent / agreement forms, non-compete agreements, etc.


• Do : obtain a federal tax identification number and speak with a tax professional and set up a plan to take care of taxes.


• Don't : start printing off your letterhead and business cards until you have had a lawyer verify you are not infringing upon any trademarks or registered items.


• Don't : spend money you have set aside for taxes or other federal with-holdings on anything else.

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