Small Business: Find Out Your Legal Requirements

After spending some time creating a solid business plan, you’re now ready to make your business a reality. You have the funds ready and you’re all set to start. But wait – there’s one more step: registering your business and making sure that it complies to all legal requirements set by the federal and state authorities.

The whole process can be overwhelming especially if you’re haven’t had any experience registering a business before. Where do you start? What are the papers or documents you need? What specific laws and regulations do you need to follow?

The following are the key legal requirements for small businesses:

Business Structure

Before you start checking out the legal requirements for your type of business, the first thing you have to do is decide on your business structure. The reason is that there are different requirements and registration processes for each kind of business structure.

Below are the most common business structures:

• Sole Proprietorship – this is the simplest business structure under which one can operate. If you plan to operate your business on your own, register as a sole proprietor. Among all business structures, the sole proprietorship has the least legal requirements.
• Partnership – this is a business arrangement where two or more parties (called partners) own and manage the business.
• Corporation – under this structure, a business or company acquires a separate legal identity, separate from the owner/s and their personal assets.
• Co-operative – this is a business structure wherein the company is owned and controlled by the people who use and benefit from the services.

If you’re uncertain about the structure that is right for your business, consider seeking advice from a professional accountant. But most likely, since it’s small-scale, you will be choosing either sole proprietorship or partnership.

Registered Business Name

Choosing a name for your business is a crucial step and there are some guidelines that you need to follow in order for your business name to be approved. Upon deciding on the name, the next step is to register it to protect your company’s identity. To do this, you have to submit your request online to the BC Registry services. According to the U.S. Small Business Administration, your business name must reflect your brand identity. 

There are four different ways to register your business:

• Entity name – Protects your business identity at a state level. Each state may have different rules about entity names.
• Trademark – Protects your business identity at a national level. It prevents others from using your trademarked names in the same or similar industry in the United States. For more info, check out the US Patent and Trademark Office.
• Doing Business As (DBA) name – also known as “trade name”, “fictitious name”, or “assumed name”, while it doesn’t provide you legal protection, most states require that you register your BBA name if you use one.
• Domain Name – if you plan to put up a website, you will also have to register the URL or domain address of your business.

Business Permits & Licenses

Depending on your type of business and where you plan to operate it, you must obtain the necessary permits and licenses in both the federal and state levels. The requirements and fees may vary depending on your business activity and the issuing agency. Financing options such as cash advance online and personal loans are available to cover for the said fees. State licenses also vary by location. States tend to have a broader range of activities than the federal government. Take note that some permits and licenses expire after a period specified period of time. Make sure to keep track of when you need to renew them to avoid penalties.

Federal, State and Local Taxes

If you’re operating under partnership or corporation and you have employees, you will need to secure an Employer Identification Number (EIN) from the IRS, which is used to identify your business for tax purposes. Sole proprietors such as self-employed individuals also have a federal tax obligation, which is determined by your business structure.

Apart from the feral taxes, you are also bound to pay state or local taxes, such as those pertaining to self-employment, payroll, income, sales, and property tax. The tax rules vary from state to state so make sure to check with your local tax office to know how much you need to pay.

Business Laws and Regulations

All businesses are subject to certain laws and regulations, such as:

• Federal Acquisition Regulation (FAR)
• Electronic Regulations (Find, Review, and Submit Comments on Proposed Regulations)
• Equal Employment Opportunity Commission (Small Business Information)
• Advocacy (Laws and Regulations Affecting Small Business)
• OSHA (Regulations)
•  EPA (Regulations)
• IRS (Regulations and Publications)
• EI Special Benefits for Self-Employed People

 For more information about these policies, check out the SBA website.

Special Benefits for Self-Employed People

Self-employed individuals can choose to register for the Employment Insurance Special Benefits. These include maternity, parental, sickness, and compassionate care benefits.

Starting a business can be a rewarding experience. But there are so many legal work involved before you start selling your products or services and earning money. Apart from creating a solid business model, many entrepreneurs struggle with registering their business. It’s not that they are willfully avoidant, it’s just that they don’t know what to do.  But really, there are just five major requirements to start with. A little research can go a long way in making this process less challenging.

Lidia Staron writes for CountingWorks, an accounting news and advice website.

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