Tips for Doing Business Legally
Things to consider before you start doing business. All of these are best accomplished by working with an attorney in your state experienced in business formation.
Choose a legal entitySimply by engaging in business by yourself you are by default considered a Sole Proprietorship. This means that there is no legal separation between you and your business. If you are engaging in business with one or more other people then you may be considered a General Partnership, even if you did not enter into a written agreement. Again, there is no legal separation between you and your business, but at least in a General Partnership the risk is spread between the partners. Still, in most cases you will want to create a legal entity that gives you some measure of limited liability and provides a legal separation between you and your business. This could be a Corporation, Limited Liability Company, or some other type of entity. One thing that all of those have in common is that you must take affirmative steps to create them, involving paying a fee and filling out various forms that are then registered with your state. Choosing which legal entity to form for your business is a complex process involving weighing the pros and cons of each, depending on your particular needs. An attorney can help explain the differences between each option and how they apply to your particular business.
Understand what laws apply to your particular businessDepending on the nature of your business a variety of laws may apply. Many service oriented professions are regulated by the state, and selling certain products may be highly regulated. Cities and towns may regulate your type of business more strictly than the state does. Before you start engaging in your business make sure that you have taken the necessary steps to be able to conduct that type of business in every jurisdiction in which you operate. And if you have employees then you must comply with an entire set of laws for that too. An attorney can help you research which laws may apply to your particular business.
Consider the tax implicationsIncome tax, sales tax, federal, state, and local, and other taxes may be triggered by the business that you engage in. And if you are doing business in multiple jurisdictions then you have to make sure that you are complying with the tax laws of each of them. Your choice of legal entity will directly impact the way your business is taxed. You should consult with an accountant as well as an attorney in order to best understand the tax impact of your particular business activities before you engage in them.