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Top 10 Small Business Startup Legal Questions Answered

Let’s face it: there are more than 10, undoubtedly. If you’re starting up your first business, you probably have over a hundred questions to ask. You’re bouncing off the walls. You’re most definitely so stressed that you’re pulling your hair at the roots and tying them up like pigtails. You can’t, though, help but want to endeavor toward the American Dream, and you’d be willing to walk through fire just to do it.

To make it easier, we’ve got the best ten questions you should ask here. You may have others, and that’s fine. These, however, first and foremost, are essential to ensuring your success as a budding entrepreneur.

No. 1: Anything I Need to Know About Business Licenses?

Quite frankly, you have a lot to know, and that doesn’t make it any easier. This is probably why this question sits at the top 10, without a doubt. From state to state, business licensing regulations vary, so pay close attention to where you live.

Moreover, you might find that local licensing isn’t a necessity, but it depends on the city you live in. Yes, you have to observe not only state laws, but local laws as well. Your best bet is to contact the state’s secretary of state office. Email or call them. Ask them anything you like. Their job is to give you the answers you need.

No. 2: What About Personal Assets? Can I Use Them for My Business?

Understand that there’s no specific law prohibiting you from using a personal checking account to run your business. However, we strongly advise not to! Why? Your personal life, honestly, is not your corporate life. Bear that in mind when running a business.

The thing about using personal assets is that you might find yourself subject to creditors and courts in the very near future. Business law really shouldn’t be mixed with personal finance law. Let the business run on its own, protect your own property — such as your house and car — and you should be just fine.

No. 3: What About Legal Compliance?

It’s a good question to ask, because it all pertains to the specific industry you’re in. If you’re in the restaurant/hospitality industry, understand that if you’re running a kitchen, you need to be aware of food safety inspections. Fail those, and your business is dead in the water.

There are other national and local regulations for multiple industries. Do the research, and above all else, consult with your experience business attorney about what you need to check off your legal list.

No. 4: What Will Be the Right Business Structure for Me?

In many ways, this is quite arguably the most important question to ask. It’s the one question you should ask before even registering an idea for a business. You’ve got four types to research:

  • Sole Proprietorships
  • Partnerships
  • LLCs (Limited Liability Companies)
  • Corporations

Beware: each of these business types vary greatly. Characteristics are unique between each. Review each one to determine which one might be the best for you. For instance: if you’re a 1-man operation, and you’d like to keep it that way, a sole proprietorship may be the way to go. The different types of taxes, too, will vary from business type to business type.

No. 5: Okay, I Need to Know More — Do I File for an LLC or Corporation?

After your research of the business types, you might find that an LLC is not too much different than a corporation except for a few minor characteristics. You might be pressed for stress as to which one would be the best suited for you.

An LLC, for one thing, is a bit of a hybrid. It’s like a general partnership mixed with a corporation. You have the legal liability protection available to corporations, but with similar freedoms sole proprietorships have for multiple partners and employees in the company. For instance: an LLC will never pay taxes like a corporation does. Rather, the owners will, very much like how a sole proprietor would.

A corporation, however — although such an entity is covered well on the liability side — has certain restrictions, such as who can actually be an owner of the company.

Equal justice

photo credit: jimbowen0306

No. 6: So What Is a Legal Business Partnership?

We just looked at LLCs and corporations, so imagine the next step down, which is the partnership. We’re getting simpler here, as this is nothing more than two (and possibly more than two) individuals working together for a common goal. That’s it. The reality is this business type has no such paperwork to fill out.

However, you’re subject to a lot of the potential corporate risks without specific protections. Liability is often split between partners, so if a customer or client or even the government files some kind of claim on you, you and your partner are both liable unless a legal agreement says otherwise.

While there’s no real paperwork to file, typically with a partnership, you have to file with the IRS a document stating that you’re launching a DBA (Doing Business As).

No. 7: This Might Seem Like a Dumb Question — How Do I Pay Myself?

That’s actually a good question, because it’s not as straightforward as you think. Yes, it’s your company; and yes, you’re entitled to the revenue stream. However, bear in mind this important fact — your business is not you.

You have to be careful when it comes to paying yourself. Your business isn’t your personal checking account. Do it as if you’re just the same as your employee. You may be the CEO, but you’re entitled to the exact same “paycheck” as the rest of them. Pay yourself through your business account to your personal account, and it’ll cover all your legal bases.

No. 8: Am I Stealing Someone Else’s Ideas?

It’s a pretty good question to ask, actually. We can’t imagine just how many drain and sewer system cleaning services there are in the United States, and there’s always that fear that we might be ‘stealing’ someone else’s ‘idea.’

You have every right to be worried. However, don’t let it stress you out too much, as the correct kind of research could dispel any myth that you might be stealing someone else’s trademark, copyright, marketing of services and other intellectual properties.

You are, in fact, required to administer such due diligence. Research in the USPTO specifically for names in your industry. Make sure your proposed name or services don’t sound anywhere near as similar to even one business clear across the country. You want to avoid any trademark and copyright infringement.

No. 9: What About My Ideas?

You do matter, obviously, so the same situation can be reversed for obvious reason. What happens when someone else apparently has started a business remarkably similar to yours?

Before that ever happens, be sure to apply for your patents, copyrights and trademarks beforehand. Those are your backups for when you can support your infringement claims. Date those applications. When you filed for those rights matter. If you happen to get wind of a business or two looking as if they’ve copied something of your own, file with the USPTO, and a cease-and-desist order will make its way there. As always, though, consult with a trademark, copyright or business lawyer to ensure that you follow correct protocol.

No. 10: The Final Question…. Attorneys? Why?

This sums it all up. Do you need an attorney? To make it completely short and sweet…. Yes.

Starting up a business, aside from all the legwork and capital necessary to fund it, is all about the legal. What better way to make sure it all works out as it should then having that attorney on staff to walk you through all of it?

Just Be Sure to Do Your Research

The lawyer’s there to guide you. Ultimately, you’re in charge. You have to remember that the business is your baby. Take care of it before it starts having major accidents.

About author

Matt Faustman
Matt Faustman 3 posts

Matt Faustman is the CEO at UpCounsel. You can follow his business insights on Twitter at @upcounsel.

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