When starting up a business, there are some important legal matters that you’ll have to deal with, no matter how much you’d love to just dive in and get started. However, if you neglect these legal steps, you’re going to find that maintaining the business down the road becomes much more difficult, and in some cases, impossible. It’s in your best interest to take these legal aspects seriously and get them sorted out as soon as possible when starting a business.
1) Develop a Strategic Business Plan
This plan will be the blueprint and backdrop for your business – the thing upon which all other aspects of starting your business are based. Also, having a business plan will make it much easier for you to receive financing for your new business. Very few people actually have the available funds to cover start-up costs, and a business plan is something you can present to family, banks, or other private investors to gain their confidence in your venture. It should outline in detail how you plan to operate your business, and exactly what this business is.
2) What Kind of Legal Entity is Your Business?
This will determine whether you can be sued for issues arising between the business and your customers. It is extremely important, and often neglected when starting a business, but this can actually make or break you during those crucial first years when the business is trying to be established and grow. You do not want to be left with liability issues, debt problems, or unnecessary obligations, and what kind of legal entity you are will also determine the tax strategy that the government applies to your business. Protect yourself from liability issues, and make sure you’re not personally held responsible for any unfortunate happenings.
3) Determine Capitalization
You cannot survive as a business without proper capitalization, and this will include both matters of equity and debt. Equity is gained through sales of business ownership interest, such as stock shares, allowing this portion of capital to not require repayment to financial backers. Before you even think about starting your business, you’ll need to have a decent rapport with your bank or an established financial institution. If you don’t have adequate capital, your business will fail, regardless of how thorough your business plan was.
4) Taxes, Taxes, Taxes
Everyone pays taxes… and so will you and your business. You’ll have to deal with income tax, employment tax, sales tax, and any other state taxes imposed by local governments. If your business fails to pay the required taxes, you as an owner will be held responsible – thus, you’ll need to develop tax plans for your business on a regular basis, in order to ensure you’re following the most current regulations and tax laws.
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