Legal Essentials for Starting a New Business

Have an idea for a new business? With all the energy and optimism to drum up new customers, launch a website, and build the first prototype, it’s easy to put off getting your legal ducks in a row.

These 9 easy steps will help you avoid pitfalls down the road and help you scale your business as you grow.

1. Did You Pick A Name? Make Sure You’re Legally Permitted To Use It
   Perform a free search online for business names registered with the Secretary of State to tell if a name is available.
2. Register and file A Fictitious Business Name/DBA (“Doing Business As”)
   File a DBA if using a name that’s different than the official corporation or LLC name you filed, or if you’re a sole proprietor and your company name is different than your own name.
3. Determine The Legal Structure Of Your Business
   There are advantages and disadvantages to each structure. The main differences are treatment of taxes, ownership, and management control. To protect your personal assets (such as your personal property or your child’s college fund) from liabilities of the company, form an LLC or form a corporation.
4. Get A Federal Tax ID Number
   Similar to your personal social security number, this ID allows the IRS to track your company’s transactions. For sole proprietors, it is not required, but is good practice so you don’t have to use your SSN for business matters.
5. Understand Employer Responsibilities
   Hiring your first employee triggers your legal obligations as an employer, including federal and state payroll and withholding taxes, self-employment taxes, anti-discrimination laws, OSHA regulations, unemployment insurance, workers’ compensation rules, and wage and hour requirements.
6. Obtain The Necessary Business Permits And Licenses
   Your business type and physical location influence the licenses and permits needed. It could include a general business operations license, zoning and land use permits, sales tax license, health department permits, and occupational or professional licenses.
7. File For Trademark Protection
   Trademark law is very complicated, and while registering doesn’t automatically give you common-law rights to a name, it makes it much easier to recover.
8. Open A Bank Account To Start Building Business Credit
   Relying on your personal credit to finance your business means your mortgage, car loan, and personal credit cards all impact how much money a bank will loan for your business. Separate your personal finances from your business and show cash flow capable of taking on a business loan.
9. Register For State And Local Taxes
   Register with the state to obtain a tax identification number, workers’ compensation, unemployment, and disability insurance. You may be tempted to use online “standard” legal forms. Warning: one-size-fits-all tactics may not apply to your situation, and there may be ways to protect you that only a credible professional would spot. It’s your name on the legal documents—you can’t afford to have zero knowledge about your obligations.

Contents of this article are not intended to be legal advice. Consult with an accountant and an attorney before starting a business.