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Making Your Home
Business Legal: 9 Steps To Legally Setting Up Your New Business
Before starting out, make sure your business follows all applicable laws. Taking
care of the legal issues associated with starting a new business will keep you on solid
ground and allow you to focus on creating a thriving enterprise.
by Brett Krkosska - All Rights Reserved
Managing Editor
http://www.homebiztools.com |
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| It's important that your
business be on the "up-and-up" right from the start. Taking care of the legal
issues associated with starting a new business will keep you out of hot water in the
future. Here are the first steps you need to take: 1. Decide on a Form of
Business
The easiest business entity to set up is a sole proprietorship. The Federal government
recognizes you as a sole proprietorship when you file your individual income taxes in
April.
As a sole proprietor you control the business entirely. You are, in effect, |
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| lawfully viewed as one and the same with your
business. All assets and profits belong solely to you. You are also personally liable for
all debts and legal actions brought against your company. |
If you're concerned about potential liability from legal actions against
your company, you have the option of forming a corporation or a limited liability company.
There are certain requirements, which you can learn more about at AilCorp.com, BizFilings.com, and 101incorporate.com.
You can find out more about other ownership structures, such as partnerships, at Nolo.com or the Small Business Administration.
2. Register Your Business Name
Your business name must be registered if it is something other than your full legal name.
This is a way of informing the public that you will be doing business as (DBA) an assumed,
or "fictitious" name.
Generally, a search is done to ensure your name is
not already in use, and an application is submitted to make it official. You can
investigate current use of your chosen business name by looking in your local phone book
and browsing listings at infospace.com.
Some states require a notice be published in the
local newspaper. The details of registering varies from state to state, so check with your
state office or county clerk for specifics. Either give them a call or check for
online information from your state using the governmental directory at GovEngine.com.
It's also a good idea to find out if your chosen name is taken in the form of a state
or federal trademark. You can utilize the services of TradeMarkSetc.com, or The U.S. Patent and
Trademark Office provides an online trademark search service, and, if desired, allows
you to also apply for a trademark or patent online.
For complete assurance that your business name is not already taken, you may want to
consider employing a competent lawyer specializing in trademark and patent law.
3. License Your Business
Licensing of your business depends on the type of business you plan to start. Licensing
occurs on the state and/or local level. Federal licensing is only necessary for businesses
who engage in specific, controlled activities (things such as making firearms, alcohol,
tobacco, etc.).
Many cities, but not all, require a general
business license, plus there may be a license required for your particular business type.
You should contact your city clerk office to find out what licenses you need.
Some types of businesses are required by states to obtain an occupational license. These two sites, ClearHQ.org and aciNET.org,
let you search occupational licensing requirements in your state.
4. Report Income Tax
You are responsible for filing and paying income taxes on your business. Assuming your
business is a sole proprietorship, you will pay income tax on your net profits. You report
your income tax using Form 1040 at tax time, with the additional requirement of filing
Schedule C or C-EZ: Profit or Loss From Business. You can get IRS Publication 334
(Tax Guide for Small Business) for more information. Visit the IRS online for publications and
detailed filing requirements.
5. Pay Estimated Taxes
 If you expect to owe more than $1,000
in federal taxes, you need to make estimated payments quarterly. This may seem like a
burden at first, but ignoring this requirement will result in IRS underpayment penalties.
On the plus side, it does protect you from having a big payment due at tax time. You can
learn more about this from IRS
Publication 505: Estimated Tax Payments.
6. Pay Self-Employment Tax
You must pay self-employment tax on income over $400 using Schedule SE. You file this form
along with Form 1040. Why must you pay self-employment taxes? Because you are required to
pay your fair share into Social Security and Medicare. Oh joy!
7. Get a State Sales Tax Certificate
Contact your state treasury office for information on obtaining a sales tax certificate.
Quickly locate your state agency using the directory at GovEngine.com. A sales tax certificate obligates you to pay applicable
sales tax on goods you sell. If your product is to be sold wholesale, or if you are buying
materials wholesale, inquire about a resale certificate to avoid paying taxes twice.
8. Obey Zoning Regulations
Be sure to check with your city and county offices about zoning regulations for your
business location. Local governments have laws that enforce the appropriate use of
property used to produce income. You don't want to be in the position of having to shut
down later because of zoning violations.
9. Get Free Advice
The SBA (Small Business Administration)
is a good place to learn more about the nuts and bolts of legally operating a small
business in your area. This office can answer many, if not all of your questions about
doing business locally. Use their online locator to find your regional office. Another important
resource is the Service Corps of Retired Executives (SCORE). This organization provides personalized and free counseling to
assist you in making the right decisions for your business.
Attending to the above steps will put your business on a firm footing. For the average
home business, doing these things is enough to let you charge full speed ahead. However,
no two businesses are alike, and it's not a bad idea to consult with a lawyer and
accountant for additional information pertaining to your type of business. Doing so may
prove valuable for you, both before startup and later on as your business becomes more
complex.
ABOUT THE AUTHOR:
Brett Krkosska provides how-to advice on small
and home-based work issues. Get start-up guidance, business ideas and inspiration at http://www.HomeBizTools.com. Become
a subscriber for a
fresh and original perspective on today's business issues.
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