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Start Your Business the Right Way!




You have a magnificent idea, an exceptional skill, or an amazing product to sell, and you are ready to start your business. Having a successful business is more than just having a wonderful idea, remarkable talent, or mind-blowing product, you must take the appropriate steps to have a solid infrastructure. There are several legal factors, obligations, and/or requirements that you should follow before starting your business. Below are a few important matters to consider:

1. Business Name


You have decided on a business name and you are ready to create a website, letterhead, and business cards so you can launch your business within the next week. You want to register your business name in your state, but prefer to do that after you do the above-mentioned. Actually, you plan to register your business name sometime next month. Stop! Before you do anything, it would be prudent to conduct a business name search and see if your preferred business name is currently registered in your state. For the most part, except for a few exceptions, if a business name is registered in a state, one cannot use the same business name in that state.


It would also be wise to see if your desired business name has been trademarked. Registering your business name within a state does not mean your business is trademarked. A trademark search will allow you to be informed on a national level to see if your chosen business name is currently trademarked. According to the United States Patent and Trademark Office, ”A state’s authorization to form a business with a particular name does not also give you trademark rights and other parties could later try to prevent your use of the business name if they believe a likelihood of confusion exists with their trademarks.”

2. Business Structure

You will need to determine the appropriate business structure for your business. Will the structure of your business be a Sole Proprietorship, Limited Liability Company (“LLC”), or Corporation?

A Sole Proprietorship is an unincorporated business owned and run by one individual with no division between the business owner and the business. The business owner is entitled to all earnings and accountable for all business obligations and shortfalls. Under this structure, the business owner is not protected against personal liability.

An LLC is a business structure that is permissible pursuant to the applicable state statute. Each state may use different regulations. It is critical that you comply with the requirements of your state if you are interested in forming an LLC. Owners of an LLC are identified as members. Members may include individuals, corporations, other LLCs and foreign entities. Be aware that there are special rules to consider for foreign LLCs. It is a must that you adhere to your state’s requirements and federal tax regulations when operating under this business structure. Under this structure, the business owner is protected against personal liability.

A corporation is a legal entity that is incorporated through the laws of its state. Each state has the power to endorse laws regarding the creation, organization, and dissolution of corporations. State corporation laws require articles of incorporation to document the corporation's creation, and to provide provisions regarding the governance of the entity’s internal affairs. Many state corporation statutes operate under the postulation that each corporation will adopt bylaws to define the rights and obligations of officers, persons, and groups within its structure. Under this structure, the business owners are protected against personal liability. Do note that the formation of a corporation is more costly than the other structures.

3. Licenses and Permits


You will need to be sure that your business has obtained all required licenses and/or permits. This is generally mandated by federal, state, county or local government, as applicable. Aside from that, you may also need to comply with additional licensing requirements due to the location and/or business industry. Failure to comply may have significant consequences, such as high fines, penalties, and/or being shut down.


4. Employer Identification Number ("EIN")


An EIN is a distinctive number that identifies a business for tax purposes. This number is akin to a social security number; however, the purpose of this number is limited to business related matters. Having an EIN is essential for a business owner. An EIN will be necessary to open a business bank account, apply for business licenses or loans, and file your tax returns. It is shrewd to apply for an EIN once you start planning your business. This will minimize hindrances in getting the appropriate licenses or financing that you may need to operate.


5. Workers


If you decide to hire someone, it is imperative that you appropriately classify this individual as an employee or independent contractor. Per the U.S. Department of Labor’s Wage and Hour Division, "The misclassification of employees as independent contractors presents one of the most serious problems facing affected workers, employers and the entire economy." Simply providing a worker with a 1099 does not automatically classify a worker as an independent contractor. To ensure that you are correctly classifying your workers, you must familiarize yourself with your applicable state and federal laws. Failing to appropriately classify workers exposes business owners to the possibility of being fined, which can be very costly.


Please contact one of our trusted and experienced attorneys at Peace & Squires Law so that we can help your business start the right way!

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