Timothy A. Phillips, CPA

Navigating Your Start-Up's Journey to Success

Dec 12, 2023

Generally Accepted Procedures of Starting a Business: A Beginner's Guide


Welcome, Future Business Leaders!

Embarking on your entrepreneurial journey is thrilling, but it's crucial to start on solid legal ground. This newsletter is your guide to understanding the legal foundations of setting up a business. From choosing your business structure to registering your business, we cover the essentials to ensure you're legally compliant and set for success.

  1. Choosing Your Business Structure

Your business structure affects everything from your taxes to your personal liability. Let's explore the options:

  • Sole Proprietorship: Ideal for individual entrepreneurs. Simple to set up, but you're personally liable for business debts.
  • Partnership: Great for businesses with multiple owners. Similar to sole proprietorships but for more than one person.
  • Limited Liability Company (LLC): Offers personal liability protection and tax benefits. A popular choice for small to medium-sized businesses.
  • Corporation (C-Corp or S-Corp): More complex, offering liability protection, potential tax advantages, and options for raising capital.
  1. Registering Your Business
  • Name Reservation: Choose a unique name and check its availability.
  • Legal Structure Filing: File the necessary documents with your state's business agency (e.g., Articles of Incorporation for corporations, Articles of Organization for LLCs).
  • Employer Identification Number (EIN): Obtain an EIN from the IRS for tax purposes.
  • Business Licenses & Permits: Depending on your location and industry, you may need specific licenses or permits.
  1. Understanding Legal Requirements
  • Zoning Laws: Ensure your business location is zoned for your type of business.
  • Employment Laws: If you're hiring employees, understand labor laws, tax withholdings, and workers' compensation requirements.
  • Contract Law: Learn the basics of contract law to effectively manage agreements with suppliers, customers, and employees.

Practical Steps for Legal Setup

  1. Research & Planning
  • Understand Different Structures: Research the pros and cons of each business structure.
  • Seek Legal Advice: Consider consulting a business attorney for personalized advice.
  1. Registering and Paperwork
  • State Requirements: Follow your state's specific registration process.
  • Keep Records: Maintain all registration documents, licenses, and permits.
  1. Tax Obligations
  • Understand Tax Implications: Different structures have different tax obligations.
  • Register for State Taxes: Depending on your location, you may need to register for state taxes.
  1. Ongoing Compliance
  • Annual Filings: Some structures require annual reports or filings.
  • Keep Up with Changes: Stay informed about changes in laws affecting your business.

Remember, getting the legal aspects right from the start can save you from headaches down the road. It's about protecting your business, your finances, and your peace of mind. As a new entrepreneur, take these steps seriously and build a strong legal foundation for your business. It's not just about complying with laws; it's about setting up your business for long-term success and stability.

Wishing you a legally sound and successful entrepreneurial journey!