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Visit Martindale-Hubbell, Trusted Legal Resource for Over 130 Years
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Guide to Legal Essentials for a Small Business
How to keep your business on the up-and-upDon't neglect this paperwork. Jump through all the hoops placed in front of you in order to:
- Build a sound presence within your home town.
- Stay in good graces with the IRS.
- Protect yourself from trademark, labor, and other lawsuits.
Action Steps
The best contacts and resources to help you get it done
Hire a lawyer
While you can try to handle all the legal mumbo-jumbo yourself, it's easy to overlook something that a more experienced eye will notice instantly.
I recommend:
Search the American Bar Association online lawyer directory or Lawyers.com to find an attorney or visit LegalMatch if you need someone immediately. Make sure that the individual has experience with the legal needs of small businesses before hiring.
Choose a business structure
Operating as a sole proprietorship, a partnership, a limited liability company, or a corporation will affect your tax rate and how easy it is to start and stop your business, to borrow money, to avoid losing personal assets if you're sued, and much more.
I recommend:
Learn the basics of how business structures differ, then investigate which one will work best for your particular situation. Should you decide to forego an attorney and file an LLC or incorporate on your own, check out bizfilings.com.
Take a name
If you're a sole proprietor, you'll need to register a fictitious business name, also known as a DBA ('doing business as') unless you use your name as the name of your business.
I recommend:
Complete and file your DBA statement online at LegalZoom.
Get licensed
Not every business owner needs a license to set up shop, but woe to you if you do need a license and are caught operating without one.
I recommend:
The Council on Licensure, Enforcement, and Regulation (CLEAR) maintains an online database of professional organizations that provide licenses to businesses such as contracting, dentistry, and acupuncture.
Protect your intellectual property
If you create something new that becomes successful, you can be sure that others will copy your work and try to beat you in the market. You can make it more difficult for knock-off products to appear by protecting your creations.
I recommend:
Copyright literary or artistic works that you sell, patent new business techniques or products, and trademark your business name and slogans.
Prepare for employees
Unless you're running a sole proprietorship in which you do all the work with no employees, you must apply for an Employee Identification Number (EIN) for tax purposes.
I recommend:
Here's one time the IRS makes it easy for you, allowing you to file Form SS-4 online.
Tips & Tactics
Helpful advice for making the most of this Guide- Adjust your business structure if you take on a partner. Sign a partnership agreement; don't rely on a handshake for legal protection.
- Make sure your employees know the laws they're operating under whenever possible. Ignorance of the law provides no protection in court.
- Consider the risks that your customers might take when using your products and take steps to protect yourself from lawsuits that could arise from possible misuse. (For instance, warnings that 'This coffee is extremely hot' are designed to keep customers from suing take-out restaurants if they burn themselves.)
