Are you looking to start your own small business? As exciting as it is to turn your business idea into reality, there are some important legal requirements you need to know before getting started. Failing to meet legal obligations can lead to fines, penalties, or even force you to shut down. Avoid legal troubles down the road. Experienced business lawyer, Shane Johnson, has advice on the key legal requirements for starting a new business in North Carolina.
Starting a business involves more than having a great idea or product. Every business needs to meet certain legal and regulatory requirements set by federal, state, and local governments. While the specific requirements vary based on your business structure, location, and industry, some common requirements apply to most small businesses in the United States.
It is crucial to understand these requirements upfront and ensure your new business complies with them. It helps ensure your business operates legally, protects your personal assets, and sets you up for success. Read on to learn about the essential legal steps and requirements to legally start your own small business:
Choosing your business structure is one of the first legal steps in starting a business. Will you operate as a sole proprietorship, partnership, corporation, S-corp, nonprofit, or limited liability company (LLC)?
The business structure you choose determines your personal liability, how you file taxes, and what registrations or documents you’ll need. It’s important to pick the right structure for your small business goals and vision.
Some common business structures for small businesses include:
Once you pick a business structure, it’s time to make it official! Registering your business name protects your right to use that name in your state.
If you operate under your own personal name, you can skip straight to other registrations. But if you use a different business name than your personal name, you need to register it:
Registration ensures no other business in your state can use the same name. It also lets you open business bank accounts and take other steps using your business name.
Virtually every small business needs certain licenses and permits from federal, state, and local government agencies to operate legally. Requirements vary based on your business activities, location, and local laws. Here’s a good starting place: Business Registration Checklist | NCDOR
Some common licenses and permits small businesses need include:
Thoroughly research which licenses and permits apply to your business. Get these approved before opening for business to avoid legal penalties.
An Employer Identification Number (EIN) is like the Social Security Number for your business. This unique number identifies your business and is required to open business bank accounts, file taxes, hire employees, and more.
Sole proprietors can use their SSN instead. But all other business structures need an EIN. Apply online through the IRS website – it only takes minutes!
Another key legal consideration is setting up proper tax and accounting practices for your new business. Here are some important steps related to your business finances and taxes:
You should open a dedicated business bank account to keep your finances organized. This keeps personal and business transactions separate for accounting, tax, and liability purposes.
Shop around to find a bank that offers services tailored to small businesses. When opening the account, be prepared to provide details about your business entity structure and legal paperwork.
Also, decide if you need a business credit card tied to the account.
Business insurance is highly recommended to protect your company from certain risks and liabilities. Common types of business insurance include general liability insurance, professional liability insurance, commercial property insurance, and workers’ compensation insurance.
The specific policies and coverage amounts you’ll need depend on your business type, size, operations, number of employees, and more. Work with an insurance agent to determine what plans make sense for your new small business. Having proper insurance gives you peace of mind and protects your business assets.
As your business grows, you must continue meeting legal and regulatory requirements. This includes renewing licenses, complying with labor laws if you have employees, adhering to privacy and data security laws, and following industry-specific regulations.
Stay organized and set reminders for renewals and ongoing compliance requirements. Consider working with legal counsel or other advisors to ensure you get all the important deadlines and requirements. Failing to maintain compliance could put your business at risk.
The legal requirements for starting and running a business may seem complex. However, taking the time to understand the laws and setting up proper legal protections will benefit your business in the long run. Be sure to consult legal and tax professionals when starting your new venture. Following important legal steps from the start will help set your small business up for success.
The most common legal structures for small businesses in North Carolina are sole proprietorships, partnerships, LLCs, and corporations. Consult with your local business lawyer to determine the best structure for limiting your liability while meeting state and federal requirements.
Many local governments require home-based businesses to obtain a business license or permit. Check with your city or county to understand licensing requirements for home-based or online businesses. This helps ensure you comply with zoning ordinances.
A DBA (doing business as) is a fictitious business name filing that sole proprietors can use to conduct business under a name different than their personal name. If you want to operate your business under a fictitious name, you must register for a DBA.
Don’t let the legal requirements overwhelm you! Take things step-by-step, research the specifics of your business, and don’t be afraid to ask for help along the way. With cautious planning and preparation, you’ll be ready to launch your business legally and start turning your dreams into reality. If you’re in Wilmington and planning to set your business dreams into motion, partnering with an experienced firm like Johnson Legal, PLLC, ensures you start on solid ground, fully equipped to face the exciting journey ahead.
Contact us today for a consultation.