Legalities: Business on the Right Side of the Law

Posted by Rob on November 16, 2009 under Labor Law | Be the First to Comment

Starting a small business is no child play! The rules and regulations governing enterprises might seem quite complex and more than anything…endless! While it might be a bit frustrating, it is very important to get the rules right before contemplating a new business. Starting with naming the bus

Queries regarding the mandatory procedures and accompanying paperwork tops any amateur entrepreneur’s FAQ list. Some of the most basic requirements are as follows:

Business license: In the United States, a business license is a must in order to conduct a legal business. The regulatory authorities differ depending upon the location of the business. If you plan on operating within a city, then such a license can be applied for with the relevant authorities of that city only. Other countries will also have their own specific set of requirements.

Naming the business: So, you have a very catchy name for your business, eh? Better check if it is available, before you get sued for trademark violation.

• Register the name as a fictitious one if you plan on conducting the business in any name other than your own.

• In the U.S., sole proprietorships and partnerships will have to register their trade name with the secretary of the state.

• Likewise, corporations will have to register with the Department of Financial Institutions of that particular state.

• Register the trade name as a trademark if you intend to sell products under the same name.

Form of ownership: Business organizations could be of different types, such as sole proprietorships, partnerships, incorporated businesses, so on and so forth. Tax and liability issues are different for each and hence you may need to consult a legal expert for help. Some of the relevant documents that come into the picture are listed.

• Partnerships: Although not a compulsion, partnerships could file the articles of partnership with the state government. Buy and sell agreements between the buyers and sellers ought to be maintained for convenience.

• Limited Liability Corp. (LLC): Articles of organization, operating agreements, buy and sell agreements are some of commonly used documents.

• Corporation: A pre-incorporation agreement must be put in order. Approval for incorporation must be sought from the government after filing the articles of incorporation with them and in response, the state government will issue a Charter for Corporation, stating all the powers of and laws to be followed by a corporation. Buy-sell agreements must be taken care of as well.

• Sole proprietorship: This is among the simpler forms of business organization and involves very little paperwork.

Location: One may need to take zone permits for locating a business in a particular area, especially if it involves manufacturing or selling. The zoning department must be contacted for the same. Ensure that your business also has the relevant environmental permits, which is currently an area of great concern.

Employees: While hiring people, strictly adhere to immigration and child labor laws. The employment eligibility of new employees will have to be verified in accordance with Federal Immigration Reform and Control Act of 1986 and the relevant document is the Employment Eligibility Verification Form I-9. Compensation offered must not be in violation of minimum wage laws. The U.S. Department of Labor, Wage and Hour Division will give you all the relevant information on labor laws. An unemployment insurance tax will have to be paid to the state if you employ personnel for 5 months or more, or if you have paid out gross wages of $1,500 or more in a year’s time. The rates of taxation might vary from state to state.

Intellectual Property Rights: IPR, as it is known, should be used to protect your ideas from being misused or appropriated by others. You can either register the intellectual property as a trademark, or protect it under the Copyright and Patent Act.

Taxation: Legalities surrounding taxation must also be strictly adhered to. From the employee’s compensation, you will have to deduct taxes payable to the federal and state governments apart from the deduction for employee insurance. In addition, businesses have to pay taxes on their own income to the federal and state governments.

Health and Safety: Health and safety standards must be maintained at work in order to ensure the safety of employees. Most states have similar standards and for more information, contact the local OSHA (Occupational Safety and Health Administration) office. Every enterprise employing three or more people must provide for insurance against on­the­job accidents. More information can be obtained from your state government office.

Seller’s permit: A seller’s permit will be required if you plan a retail outlet.

Find all the legal forms and contracts that you may need on What is most confounding about the legalities of starting a business is perhaps the complex terminology used. could help you deal with the particularly tricky stuff!

Laws exist to make processes a whole lot smoother and are essential for any well functioning society. While the legalities involved in starting a business may seem onerous, once you deal with them, consider half your troubles gone!