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The Legal Side You Never Knew About Starting a Business

Many people start a business because they are good at a particular skill and feel they would enjoy making money at it.


However, there is a legal side you never knew about starting a business and, unfortunately, many business owners discover this after they have landed in hot water.

The First Steps

One of the first legal steps involved in starting a business is incorporating. Incorporation is usually done on a state level at the Secretary of State or Department of Revenue office, or online in many states. Registration will allow the state to give you a state withholding number for employee taxes and a tax withholding exemption, if allowed. This means you don’t have to pay taxes on products you purchase for resale, but must charge sales tax to your customers and then remit taxes to the state.


Register with the Federal Government

Any business owner should still need to register with the federal government and get an federal employment identification number. This will be used on all future tax filings and most legal paperwork, including employee payroll.


Many accountants will encourage business to qualify as an S corp in order to reduce the amount of taxes owed by the business’ owners every year. To understand how to start an S corp, you must read all the necessary qualifications mandated by he Internal Revenue Service. The first step is to file Form 2553 Election by a Small Business Corporation with the IRS.


It’s important to understand an S corp is responsible for Medicare, Social Security and income tax withholding as well as federal unemployment tax (FUTA)and must deposit employment taxes on a timely basis.

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Let Your Family Help You

It’s best if you don’t hire employees right away if you, or family members, can do the work. It saves on payrolls costs, keeps you from having to go through a hiring process and keeps you from hiring people who may not have your best interests at heart.


When you do decide to hire employees, it is advisable that you institute criminal background checks and drug testing. It may cost a little to get started, but will keep you out of a world of legal trouble.


You can figure out payroll yourself, but it is highly advisable to either get an accountant or a qualified payroll company to do it for you. It will save time, hassle, and possibly money to hire people who know the system. That way you can concentrate on doing what you do best – your business.


Get Legal Aspects Done

You will need to get liability insurance, and possibly other forms of insurance such as workman’s compensation.


Businesses will have a myriad of legal forms they will have to undertake. That includes everything from rental contracts, employment applications, land and vehicle purchase agreements, vendor and merchant services contracts, confidentiality agreements, and client contracts.


These are forms you don’t want to try to write yourself because leaving out one phrase could put you in a tricky legal situation. There are a number of basic forms for all of these needs on, which can save you time in searching.

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