6 Legal Requirements You Should Know before Starting a Business
Laws have been created to protect every man in every field of life. Every country has laws to control personal issues to professional conflicts. Business owners have to be extra careful as their business has a great worth that many would like to take over. Fortunately, there are laws to protect them; however, they must abide by their regulations first.
Here I have shared six legal requirements one should know before starting a business to avoid any problems. Although you can fulfill all these requirements yourself, it is suggested to acquire the help of a business lawyer. He will not only make this complex process easy for you but also ensure your business follows all local and federal laws.
Choose a Business Structure
Every business has to follow a structure to protect itself from issues that may occur in the future. Most small businesses follow Sole Proprietorship or Partnership, but these are inefficient compared to LLC or Corporation. As a proper business that plans to scale, you should choose one of the latter as both treat the business as a separate entity.
● Limited Liability Company
Limited Liability Company (LLC) protects your personal assets if the business is sued or declares bankruptcy. You can file business tax as a personal income tax, but you will have to pay a self-employment tax.
Corporation provides more security to the business owner than LLC, but it’s more complicated and expensive to form. You will have to pay a separate tax on profits as a corporation.
Protect Your Brand
Every business works hard to build a brand name that is trusted in the market. It hurts the foundation of the company if someone steals its name away. That’s why it’s a legal requirement to choose a unique name and have it registered before starting operations with it. Furthermore, register a trademark for the product or service you offer.
It’s an intellectual property like logo, text, or any form of expression that identifies products or services.
● Entity Name:
It identifies your business from the rest, prohibiting others from using it.
It’s the address of the website of your name that has to be registered before someone else gets it. You can check the availability of a domain name at Whois.net.
Register a Tax ID
Every business has to pay taxes. Depending on the country and state you are in, you may be required to get a tax ID before starting operations. In Canada, businesses are provided a unique nine-digit Business Number to file taxes and deal with local, provincial, and federal government in other matters. You can register your company with Canada Revenue Agency on its official website.
Apply for Permits and Licenses
Depending on the type of business, you may be required to get a permit or license from the government. For example, a dentist can’t open a clinic without getting a license. A business may have to get more than one permits from different levels of government and in different provinces.
Open a Business Bank Account
It goes without saying, you will need a business account other than your personal account to deal with the finances of the company. It’s not just inefficient but also important from a legal perspective. You shouldn’t collect payments from clients in your personal bank account unless you are operating as a sole proprietor.
Get a Business Insurance
Although not mandatory, it is recommended to get commercial insurance for your business. There will be many ups and downs in the market, and your company will also face unpredicted unfortunate situations. Insurance will help minimize the damage by affording some or all of the expenses.
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