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4 Legal Requirements You Need to Know to Start a Business

— May 18, 2021

Do not let the legal requirements discourage you from starting your business: It is all part of the process.

When you start a business, you want to do it the right way from the start. Make sure you are following federal and state laws and also taking the right measures to protect you and your business. Doing it right the first time saves you from a lot of legal headaches in the future. Here are four legal requirements you need to know to start a business.

1. Branding Your Business

You want your business to have a noteworthy name. Before you get too excited about one you have chosen, or go out and make 1000 business cards, make sure the name is not already taken. You do not want to find yourself in legal trouble over a trademark or copyright violation because you didn’t do your research first.

To protect your original name, register it with the U.S. Patent and Trademark Office. Some states also require new businesses to announce their formation in a local publication. There can be fines for not following this requirement.

Taking the correct legal steps right from the start allows you to focus on what really matters — increasing revenue. To help you make sense of your future earnings, look to sales forecasting.

2. LLC Designation

Becoming a limited liability company (LLC) is one of the most important things to do when starting your business. An LLC designation can save you from complete financial collapse if your business is hit with unexpected expenses or is struggling financially. In such an event, an LLC designation limits the extent to which your personal property, savings or possessions can be seized.

Unfortunately, it is possible to be hit with an expensive lawsuit from a dissatisfied customer or even for your business to fail. You do not want such instances to lead to your financial ruin.

3. Legal Expenses

Know ahead of time what legal expenses to expect when starting your business. One such expense is paying for a lawyer. You may think it is not necessary to hire a lawyer since you plan to be an honest and conscientious owner. However, many unplanned problems can arise.

Image by Andrew Neel, via
Image by Andrew Neel, via

From a customer suing to a disgruntled employee retaliating against your business, a lawyer  can be there to guide you through tricky legal issues. When looking to hire a legal professional, talk to other local business owners to see who they recommend.

Recommendations from a trusted source are always better than finding an unknown person from the internet. Hire a lawyer with knowledge of your industry, and if they are not an expert in your field, they should be willing to learn more about it.

Carrying insurance is another expense. Invest in general liability and make sure to also insure your employees. General liability is important in the instance that a customer gets injured while visiting your business or is adversely affected by your product. It is also important — and the law in most states — to insure your employees. An employee can easily get injured while working and you want to be covered if this were to happen.

4. Tax Filing

You are responsible for paying taxes. First, start by applying for an Employer Identification Number or EIN for short. This number is how the IRS keeps track of your business.

Taxes can get complicated. Make sure you understand which taxes apply to your business. The type of tax you pay varies based on your business. For example, if you have employees, you may be required to pay an unemployment tax. Or, if you sell products or services, you may be required to pay an excise tax.

Hiring an accountant or tax broker can also help with navigating tax laws.

Do not let the legal requirements discourage you from starting your business: It is all part of the process. Check these requirements off your list right away, so you can devote your time and energy to what is most important — building a successful business.

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