Wondering if legal steps can make a big difference in a small business? Fulfilling essential legal requirements is a must for any business to stay legally compliant and prevent lawsuits.
While most budding entrepreneurs have great ideas and enthusiasm, not everyone has a roadmap to deal with the legal steps involved in starting a small business. These include company filings, trademark registrations, agreements and contracts, and more.
Though the legal steps for building a small business seem boring and time consuming, taking them can make a big difference to the growth of your business. You should, therefore, consider hiring a good attorney, business consultant, or legal firm to take care of the legal aspects of your small business.
Let us help you understand the legal steps every small business owner should take when starting out.
Which Legal Steps Should a Small Business Take to Make a Big Difference?
Here’re the legal steps you shouldn’t miss when starting a small business:
1. Pick a Business Name That You’re Legally Allowed to Use
Did you pick a name for your business already? Make sure you’re legally permitted to use it.
For this, you don’t need to hire an attorney. All you need to do is to see that your business name isn’t infringing on the rights of an already registered business. You can perform a free search to check that the name is available to register with the Secretary of State.
You should also conduct a free trademark search to see that no one else has trademarked your chosen business name. You can perform a trademark search on the USPTO website.
Also, make sure your business name is available as a domain name and social media handle names as you’ll have to take your business online someday. You can search for domain name availability on GoDaddy.com or other domain name registrars.
2. Register Your Business as a Legal Entity
Forming an LLC (Limited Liability Company) or a Corporation is another essential legal step for your small business. It will help you protect your personal assets such as your home, car, bank account, etc. from any liabilities of your small business.
You can complete the state and federal filings to register your business on your own. However, the legal formalities and paperwork might be overwhelming and confusing for you. That’s why we recommend hiring GovDocFiling to take care of the paperwork for you.
Companies like GovDocFiling offer simplified state and federal filing processes for both LLCs and Corporations. You can also expect to get expedited application processing at no additional cost.
If you’re comfortable mixing your business and personal finances, you can also choose to register your small business as a Sole Proprietorship (one owner) or a Partnership (multiple owners).
Remember that each business structure has its own set of advantages and disadvantages. The best way to make a choice is to consult an expert in the field.
After all, choosing your small business structure is one of the most important legal steps you’ll take. It can make a big difference to the operational, management, and taxation processes of your small business.
3. Get an Employer Identification Number (EIN)/Tax ID
You will also need to get a federal tax ID for your small business from the IRS.
Obtaining this nine-digit Employer Identification Number is one of the essential legal steps for small business owners who want to hire employees, open a business bank account, file taxes, and run a business.
If you start a small business as a Sole Proprietor, it will not be a mandatory legal step for you to get an EIN/Tax ID. You can use your own social security number instead. However, it is still a good practice to file for a Tax ID with the IRS. Then you can use it for all business-related transactions and taxes.
4. Get the Necessary Business Licenses and Permits
Acquiring the required business licenses and permits can make a big difference to the way you conduct your small business.
For example, if you are running a real estate business, you will need to have a real estate license. Without it, you won’t be legally authorized to buy, sell, or rent properties as a company.
5. Register a DBA (Doing Business As)
If you’ve registered your small business as a Sole Proprietorship or a Partnership, you might want to do business using a fictitious name, instead of using your own name. One of the necessary legal steps that can help you do so is to file for a DBA.
Even LLCs and Corporations can file for a DBA if the owner(s) decides to conduct business using a name different from the official registered name.
You can easily file for a DBA at the state level.
Legal Mistakes to Avoid to Make a Big Difference to Your Small Business Growth
Now that we’ve discussed the essential legal steps that will make a big difference in a small business, let’s take a look at the legal mistakes to avoid.
Here you go:
- Trying to do it all by yourself.
- Not getting legal advice at the onset of your small business.
- Not creating proper contracts and agreements when working with vendors, suppliers, employees, clients, co-owners, etc.
- Not defining the roles, responsibilities, and financial authorization of each of the owners, directors, or shareholders of your small business.
If you want to make a big difference with your small business, don’t make these legal mistakes. Preventing them will help you save time, money, and resources, which will otherwise be spent on handling lawsuits.
Ready to Make a Big Difference to Your Small Business?
We understand that you may have tons of things to take care of when starting a small business. However, you should not miss these legal steps that are crucial to the smooth functioning of your business.
Do you need help taking the right legal steps to make a big difference to your small business growth? Connect with us in the comments below.
Brett Shapiro is a co-owner of GovDocFiling. He had an entrepreneurial spirit since he was young. He started GovDocFiling, a simple resource center that takes care of the mundane, yet critical, formation documentation for any new business entity.