Legal Checklist for Startups
The initial stages of a business can be a hectic time and it is easy to overlook the legal aspects of the startup process. However, to comply with local and national laws, it is important that a startup follow the proper legal guidelines. The following checklist will help entrepreneurs know what steps to take to avoid feeling overwhelmed.
1. Decide if you will form a corporation or a partnership
A corporation is an entity in which only one person makes decisions about the future of the company. An association is an entity that involves two or more people in the decision-making process. Which of the two entities you create will be based on the expectations and goals of the company. You will also need to register a business name at this time. Check trademark registrations to make sure you are not violating any trademark with the name you choose.
2. Apply for a federal tax identification number
All transactions carried out by the company are controlled by a tax identification number. It serves as a kind of social security number for your business. You’ll want to register this as soon as possible to comply with the laws.
3. Make sure all proper documentation is completed and submitted to the proper authorities.
For both litigation protection and tax purposes, it is vital that you file the correct forms with your local legal authority. This is usually the city government or the local court. There is usually a fee associated with the onboarding process that averages around $ 500.
4. If you work in a partnership, determine how much equity and responsibility each partner owns
Determining ownership and other important matters in advance can avoid tension and awkward situations in the future. Many associations fail to agree on the terms of the association ahead of time, resulting in oversights later on. Determine how ownership is determined, what time commitment is expected, and the type of wages each partner is entitled to.
5. Make sure employees are properly classified
Labeling an employee as an independent contractor can have legal repercussions and fines from the IRS. If someone is an employee, you must provide them with benefits if they work a certain number of hours a week.
6. Establish a proper business plan and make sure there are policies
A business plan and operating policies will help establish your business and a roadmap for the future.
7. make sure all permissions are valid
Depending on the type of company formed, certain permits will be required. These can include zoning permits, liquor licenses, sales tax license, and more. Some regulations may be stricter than others depending on the type of business.
It is always in your best interest to consult with a business attorney during startup formation. A business attorney can help ensure that you comply with all laws, including the more obscure regulations that you may not be aware of. Following these seven guidelines and seeking legal advice will help ensure that your start is correct in the eyes of the law.