People starting a new business must take care of many legal, financial and other matters. Addressing these issues at the right time — when the business is being formed — can help avoid future problems and increase the likelihood of success. Here are some of the key legal matters to take care of when you start a new business.
Choose Your Legal Structure
This is one of the most important decisions you will make, as it affects many issues, including the personal liability of owners, reducing taxes, how easy it will be to bring in investors, and what will happen to the company when the owner dies.
The main business forms are a sole proprietorship, partnership, corporation, and limited liability company.
Sole proprietorships are for people who run their business without co-owners. Sole proprietors are personally liable for their own acts and the acts of employees. Liability extends to all the proprietor’s assets.
Partnerships are structures for two or more people who jointly run a business. All partners have potentially unlimited liability for claims against the business (in the case of general partnerships).
There are several options for people who want to be owners yet have limited liability for claims against the business. Limited partnerships offer limited liability and the tax benefits of a partnership. Corporations offer shareholders the benefits of limited liability, a voice in the management of the business, and ease of transferring interests, but they do not offer the same tax benefits as a partnership (an exception is the "S Corporation"). Limited liability companies provide tax benefits of a partnership along with limited liability benefits of a corporation.
Our law firm can advise you of the advantages and disadvantages of each structure as it relates to your business.
Obtain Licenses
Most businesses need licenses and permits from the city, county, state and, in some cases, federal government. There can be penalties for operating without required licenses or permits, even if you did not know they were required.
Register Your Business’s Name
In a nation with millions of businesses, it’s no surprise how often a name one person selects is already being used. Before choosing your business name, you can reduce the risk of infringing someone else's name by having our law firm check to make sure the name you want is not currently being used. We can also register your name with the appropriate government entities to protect you in the event another business starts up with the same or a similar name.
Make Agreement with Co-owners
If you have co-owners, put in writing important issues like who will manage the business, how key decisions will be made, how profits will be split, who will put in more money if needed, and what rights each owner has if someone wants to sell his or her interest. Depending on the business form you and your co-owners select, this can be done in a partnership agreement (for partnerships), shareholders agreement (for corporations) or operating agreement (for limited liability companies).
Insurance
In today’s society, there are more risks than ever of losses, claims and liabilities, whether from customers, suppliers, workers or government agencies. Have insurance to manage and control these risks. We can advise you of the types of business insurance your company needs.
Employees
Before hiring employees, you need to get a federal tax identification number. This is necessary for reporting taxes and other documents to the IRS. There are also state tax filing requirements for employees.
Federal law also requires employers to verify that an employee has the right to work in the United States. Employers must complete an Employment Eligibility Verification Form (also called an "I-9" form) and, by reviewing acceptable forms of documentation supplied by the employee, confirm his or her citizenship or eligibility to work in this country. The I-9 forms must be kept by the employer for three years after the hiring date or one year after the employee is terminated, whichever is later.
There are also state rules for reporting new employees to a state directory.
Contracts
When starting a company, business owners may be confronted with many different types of contracts, including leases, franchise agreements, loan agreements, purchase and sale contracts and employment agreements. Even though business owners are usually busy dealing with a wide range of matters when starting a business, it is critical that proper attention be given to these and other contracts, since they will have a significant impact on the company's bottom line, Seeking legal advice before signing a contract -- as well as having important contracts drafted by a lawyer -- is a good way to protect yourself from potential problems with employees, customers, suppliers and others.
Starting a new business can be daunting. But with our law firm's help and by following the steps discussed here, you can increase your chance of success and help avoid potentially expensive and time-consuming problems later.
Contact an attorney at Triscaro & Associates today. Please call us for all your legal needs. We offer a full range of legal services to individuals, families and businesses, including personal injury, estate planning, real estate, family law and business matters. We are dedicated to providing the highest quality legal services at a reasonable cost.