Starting a business can be a daunting and complicated process. There are numerous factors that a potential business owner must consider. Some of these concerns may be financing the business, setting up a business plan, choosing the correct business organization, naming the business, dealing with licensing, permits, and zoning concerns, hiring and compensating employees, and attaining insurance for your new business. The law surrounding these areas is diverse and often specific to your locale. An attorney with experience in this area is the best resource for a new business owner.
Financing and The Business Plan
A potential new business owner must always be aware of the costs involved in starting a new business. There are start-up costs and one-time expenses that must be considered. In order to gain financing the business owner will want to contact a financial institution or locate other investors.
Before you attain financing, a business plan is often required. A business plan will typically include the following:
- A description of the venture
- What service the business will provide
- Results of research indicating a need for the business
- A marketing plan
- Staffing plans
- Management plans
- Financial plans
Business Organization Forms
Prior to starting a business, a potential business owner must be aware of the main business organization forms, their characteristics, and the law that governs them. The potential business owner can then make an educated decision regarding which business organization form is most appropriate for their specific purposes.
- The Sole Proprietorship is created when an owner simply begins business. They are simple and cheap to form and are usually chosen by one-person businesses. The owner owns all of the assets. The owner also has unlimited personal responsibility for business liabilities. The owner is taxed on all income from the business at applicable individual tax rates.
- A General Partnership is formed when two or more persons carry on as co-owners of a business for profit. Each general partner participates in management, owns the assets, and enjoy profits and losses. Each general partner is personally liable for business related obligations. General partners are personally taxed on their individual tax returns.
- A Limited Partnership differs from a general partnership in that there is at least one general partner who manages the business’s operations. In addition, there is at least one limited partner who contributes capital, but does not have substantial management control. The limited partner has limited liability to the extent of their capital contribution to the partnership.
- A Limited Liability Company combines elements of partnerships and corporations. LLCs must file articles with the state. As in a limited partnership, the owners only risk losing money that has been invested into the LLC. Only LLC assets are used to pay its debts. However, an LLC is not a separate taxable entity, and LLC owners report profits and losses in their individual tax returns.
- A Corporation is a separate legal and taxable entity. One must comply with statutory formalities to set up a corporation. Barring certain exceptions, the owners of the corporation are protected from the corporation’s liabilities.
Naming A Business, Licensing, Permits and Zoning.
A potential business owner will need to name their new business. Name availability can be determined by contacting the appropriate state or county office, typically through a state’s Secretary of State.
After naming the business, business owner should consider a variety of concerns, including but not limited to:
- Necessary licenses and permits
- Posting a permit
- Zoning compliance
Now that the business is set up, and the required permits and licenses are attained and posted, a new business owner can being to staff the business. State and federal law governs the actions of business owners during all phases of hiring. A business owner should be well advises of relevant legal standards during the hiring process. Concerns include:
- Planning for and posting job openings.
- The interview process.
- Avoiding discrimination claims.
- Observing privacy rights.
- Avoiding the hire of illegal immigrants.
- Observing age regulations.
- Completing necessary filing and registration for all employees.
The new business owner will be responsible for employees’ payment and compensation. Generally, the Department of Labor is a good source for information regarding the following relevant concerns.
- Minimum wage law under the Federal Fair Labor Standards Act (“FLSA”).
- Exemptions to the FLSA.
- Vacation pay, sick pay, and holiday pay.
- Severance packages.
- Pension plans and ERISA administration concerns.
- The Family Medical Leave Act.
Insurance for a New Business and its Employees
Without proper insurance a new business owner puts his or her livelihood at serious risk. The law also mandates certain forms of insurance. A business owner should analyze their potential risk exposure to assist in the selection of the best policies for their business.
Insurance for a Business may include:
- A commercial multi-peril policy or business owner’s policy
- Property insurance
- General liability insurance
- Malpractice or professional liability insurance
- Product liability insurance
- Business interruption insurance
- Business vehicle policies
- Umbrella policies
Insurance for Employees may include:
- Workers’ Compensation
- Health insurance
- Life insurance
- Disability insurance
- Keyman policies
Starting a business may involve many areas of the law. The law surrounding these areas is diverse and often specific to your locale.
DISCLAIMER: This site and any information contained herein in intended for informational purposes only and should not be construes as legal advice. Seek competent legal counsel for advice on any legal matter.
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