Starting a Small Business: 5 Legal Issues to Consider


Starting a business is no small matter – even if you are starting a small business. When it comes down to it, your business must be registered and filed with the state that you live in and it must be recognized federally. You want to make these legal considerations for tax, payroll, and stockholder purposes. For one, you don’t want to spend a fortune on taxes, so you want to make sure that you incorporate your business appropriately. Also, you don’t want to wind up with an audit of your finance either – one audit and your whole business could be negatively affected. Here are five legal issues to consider when starting a small business.

Starting a Small Business
Starting a Small Business

1. Choosing your type of entity. When it comes down to it, most businesses start off as a sole proprietorship, but later on – as the business grows – can change to a partnership. In some cases, you may even want to register as an LLC, or a limited liability corporation. An LLC is set up for individuals who plan on expanding their business. An LLC will also protect your partners’ personal assets for any financial faults of your business.

2. Where to file your business. One of the most important considerations to make when starting your small business is where to file your business. In most cases, filing your business in your own state could have big tax implications. If you want to save your business money when tax time comes around, you may want to file out of state. However, if you are setting up a small business as a sole proprietorship or partnership, you can probably just as simply file your business in your own state or province. Out of all the considerations you must make before starting a business, this one should be at the top of your priority list.

3. Insurance plans. When you are starting a business, you want to purchase a number of different insurance plans that will protect your business. For instance, you want to protect your business in the instance that someone is injured – either a patron or an employee. Moreover, for most small businesses, it can really set you back if you need to go to court for any reason, which is why legal insurance is so important, because then you can have all your legal fees covered.

4. Structuring. When it comes down to it – if you do have stockholders – you will need to figure out how you will structure your business. For instance, you have to ask yourself whether or not you want stockholders or investors in your business. Organizing the class structures of your stock options is important, especially if your business grows. The last thing you want is for a group of stockholders to claim ownership of your business – all because you mismanaged their ownership stake in your business.

5. Filing protections for your intellectual property. When it comes down to it, your intellectual property is just as valuable as your actual business. Your intellectual property can include something your business has made or it could be the way you designed your logo – even your business’ name is intellectual property. Just like you don’t want someone stealing your merchandise, you also don’t want your intellectual property to be stolen either.