There are certain legal requirements that you need to meet when starting a business. Fail to meet these legal requirements and you could face serious penalties. Below are 5 of the most important legal requirements to consider before launching your business.
Registering Your Business Name
While laws vary across the country, many US states require you to register your business name with the Secretary of State. This can usually be done through your state website. This is important for registering your business as a separate entity from any other companies operating within your state that may have the same (or a similar) name. Some states have business name search features that can prevent you from choosing a company name that has already been taken. It’s worth clarifying that registering your business name is not the same as trademarking your business name (which is optional and provides added legal protection).
Applying for Licenses and Permits
Every company needs to apply for a general ‘business license’ in order to legally operate in the US. You can apply for this online. Certain types of business may also have to apply for other licenses and permits. For example, if you’re opening a bar, you’ll likely have to apply for a liquor license (plus a music license and food license could be necessary if you plan to host live music and sell food). Such licenses and permits can usually be applied for through your state website.
Obtaining an EIN
All US companies have to file a tax return with the IRS, which means obtaining a unique tax code called an EIN (employer identification number). This is made up of 9 digits that are formatted like so: xx-xxxxxxx. It is essentially a social security number for your business. The filing service for federal tax ID number application can be found through the IRS website.
Taking Out Worker’s Comp
If you plan to hire employees, it is mandatory that you take out worker’s compensation insurance. This insurance policy will pay compensation to any employees who are injured or made sick as a result of your work. Worker’s comp rates vary from business to business. Generally, it all comes down to how risky your industry is – insurance rates are likely to be higher for a construction company than an accounting firm, but employees are exposed to more daily dangers. Putting in place health and safety measures may be able to reduce your insurance rates.
Complying with Industry Standards
Different industries have their own set of standards that every business must comply with. This includes health and safety standards, security standards, environmental standards, marketing standards, labeling standards and fair trade standards. There are various companies that you can hire to make sure that you are compliant. This can be worth doing to make sure that you’re not breaking the law without realizing. Some of the most common ways that businesses fail to comply include not protecting customer data and mislabelling products (for example calling a product ‘organic’ when it is only partially organic).
