Starting a small business is both challenging and exciting. After doing your research, writing a roadmap or a business plan and choosing your business structure, you will probably want to consider the other legal requirements involved so your new business operates with all the needed permits and licenses.
Usually, independent contractors aren’t impulsively avoidant of these laws and they are simply unaware of what is really needed.
In this article, we will present you 5 legal requirements to review and understand before deciding to launch your small business.
1. Registered Business Name
In order to register a business name, you will likely register FBN or Fictious Business Name or DBA or Doing Business As. This process allows your local government or state know the name you are running your business under. This process doesn’t provide a trademark protection, however, it does allow you to create and use the name you want for different branding purposes without having to integrate. If you decide not to register a DBA name, the business name will default to the name of the legal owner of your current business. For instance, if your name is David Smith and you form a company, the legal name of your company will be David Smith. If you decide to name your business David Smith Consulting, you will have to register this as a DBA name and the registration can vary from one state to another.
2. Federal Taxes – Any type of business that has employees or operates as a partnership or corporation will need an EIN from the IRS. EIN stands for Employer Identification Number and identifies your business company for tax purposes. You can think of it as a social security number for your business. You can use this number to open a bank account, apply for business licenses, and file tax returns. The simplest way to apply for an Employer Identification Number is online through IRS EIN Assistant.
3. Local and State Taxes
Local and State Taxes – When it comes to federal taxes, independent contractors are also required to pay local and state taxes – payroll, self-employment, property tax, sales, and income. These taxes can vary from one state to another and are based on your business structure. Please keep in mind that if your company has employees, you as a business owner will be also responsible for paying unemployment taxes. Inform yourself about these state tax obligations.
4. Business Licenses and Permits – Just like any type of business, all independent contractors must have proper licenses and permits. Depending on your business niche, your industry, and where your business is located, you may need to be licensed on both state level and federal level. The federal licenses are required for businesses included in any sort of activity that is regulated and supervised by federal agencies. State permits and licensing will vary depending on your location.
5. Business Regulations and Laws
Even as a small business owner, you are responsible and you are a subject to the regulations and laws that apply to large corporations. These include marketing, advertising, privacy laws, intellectual property, finance, and etc. You need to make a research and see which of these regulations and laws may apply to your business.
As you can see there are a lot of legal considerations and details that have to be taken into consideration when starting a small business. Make sure to inform yourself about everything and start your business right!
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