Starting and running a successful business, getting
qualified leads, and earning more revenue is the ultimate goal of every
entrepreneur. But starting a company and taking it to the unprecedented heights
of success is easier said than done. You will need to create a solid business
plan, assess your financial resources, complete the legal paperwork, choose the
right partners and investors, and choose the right marketing and business
management tool, and a lot more.
Believe it or not, the legal paperwork and determining your
company's legal structure is one of the most challenging aspects of a new
business setup. Choosing the name of your startup, registering your company
with the government, and getting a business license, tax code are the most
important requirements of any business.
If you are planning to launch a startup business, it is
strongly advised to fulfill all the legal obligations before taking the plunge.
There is a lot of legal paperwork from financial regulations to tax obligations
and employment laws to register a company. Make sure your startup company
complies with all the legal responsibilities so you can easily achieve your
business goals.
Let’s check out some most important legal requirements for
setting up a new business.
1. Choose the Business
Entity
When it comes to starting your small business from scratch,
choosing a proper business structure is the key. It is one of the most
important aspects of startup formation as it can significantly affect your
personal liability and fundraising ability.
There are four most common business structures that startup
founders can choose, depending on their business type and goals.
i.
Sole Proprietorship
A sole proprietorship is a type of business that is solely
owned by a single person. It is an easier and cost-effective business entity as
there is only one person involved. Tax obligations are pretty simple as the
founder is not taxed separately from its owner.
ii.
Corporation or Co Corp
A corporation is a business that is a legally separate
entity from its owners. Keep in mind that it is one of the most expensive
business entities as corporations are obliged to file separate income tax on
their profits. However, this type of business structure offers personal protection
as the owner, stakeholders, and other persons involved are not liable for the
company’s debt and obligations. Companies that are working as corporations are
subject to pay federal, state, and local taxes.
iii.
Limited Liability Company (LLC)
A Limited Liability Company is a famous business structure
that can provide you with the best protection from personal assets. The founder
is not responsible for any financial and legal faults, and the personal assets
such as home; vehicle are free of any risk. It is a pass-through entity, as
this business entity allows you to file your business income as your personal
income, but you are obliged to pay self-employment tax.
iv.
Partnership
It is a type of business structure where two or multiple
people share ownership and are responsible for the business's loss and profits.
In case, if any of the two parties are found breaching the contract, they may
become liable to pay off a certain penalty which has been set as per both the
parties. If you want to choose this business entity, you are required to
register your business with your state.
2. Name Your Business
Once you choose the right business structure for your new
business setup, now it’s time to choose a name that truly shows what your brand
is all about. While naming your business, make sure it is not already
registered or used by another company. Usually, businesses are registered state
wise, so conduct a trademark search to make sure the name you would like to use
is available.
3. Register Your Business
Keep in mind that if you choose an LLC or corporation
entity, your company’s name will automatically be registered with your state
and legally protects you at a state level. You can also register your business
as a doing business (DBA) that doesn’t offer legal protection, but in some
cases, business structure and location.
4. Get a Business License and
Permits
In order to operate your business, you will need a business
license from the federal and state government level. Depending on the industry
and the business location you choose for your startup company, you might need
some specific licenses. For example, building permits, fire permits, local
business licenses or industry-specific permits. If you have a plan for a new
business setup in the UAE mainland, you can contact a local sponsor in Dubai
or a licensing agency who can guide you on what you need to get a business
license in a particular area.
5. Understand Tax
Requirements
Business founders are obligated to pay specific taxes,
including federal taxes, self-employment taxes, sales tax, and more, depending
on the business entity you chose for your company. Therefore, it is advised to
hire a tax consultant who can better guide you on how to file taxes and which
taxes you will be responsible for.
6. Protecting Your
Intellectual Property
Intellectual Property includes copyrights, trademarks, trade
secrets, patents, logos, inventions, software, and much more. Protecting your
IPs is one of the most important legal requirements that startup founders have
to fulfill in order to run a risk-free business. Intellectual property
protection will prevent your startup company from any preemptive rights. By protecting
your IPs, you can enhance your business value for investors, partners, and
suppliers. If you don’t want your competitors to copy your unique idea, file a
patent immediately.
7. Sign a Non-Disclosure
Agreement
Issuing a non-disclosure agreement to your employees,
contractors, and third parties is an important legal requirement that every
business owner should fulfill. A non-disclosure agreement can protect your
business idea, trade secrets, clients’ data, and other confidential information.
In a Nutshell
Launching a business is an intricate process. But if you
comply with these important legal requirements, you will save your new business
setup from different legal battles down the line.
