Starting your own business can be a lot of work and figuring out what legal aspects are involved can be overwhelming. Go through the following legal checklist to make sure you are not forgetting anything!
Legal Business Structure
Choosing your appropriate legal structure depends on many factors like: control aspects, personal liability, continuity desires, ability to raise capital, tax considerations, legal regulations, hiring plans for employees and desires to form partnerships.
There are many types of business entities and the specific rules vary by country and by state or province. The most common choices are:
- Sole Traders
- Limited Liability Company
Some key legal documents related to your business are:
- A written agreement between the owners like the articles of association, a shareholders agreement, a joint venture agreement or a partnership agreement.
- A non disclosure agreement to protect the usage of confidential information by your employees or other parties that you do business with.
- Employment contacts to address the rights and obligations of both the company and its employee(s).
Licenses, Permits & Registrations
Depending on the type of business you run and where you are located you may need specific business licenses and/or permits from your country, state, county or city.
They come in many variations and examples include, local business licenses, building permits, health safety related permits, permits for home based businesses, fire permits, industry related permits (like running a legal practice, hospitality, construction or manufacturing business).
Depending on your legal entity structure, the type of business you run and where you are located you need to register and file for a wide range of taxes which could include:
- Register your company with the tax authorities at country and/or local level.
- File annual corporate income tax returns or include your business income in your personal income tax returns depending on your legal entity structure.
- Register for VAT / sales taxes and submit returns on a regular basis.
- When you operate an international business you need to figure out whether you have any tax obligations in your foreign customers locations like filing foreign corporate income tax or VAT / sales tax related returns.
- When you have employees you may need to obtain an Employer Identification Number and fulfill all types of wage withholding tax obligations.
When you are planning on hiring any employees, you need to understand your obligations as an employer and what you can and cannot do. Again a whole new world of rules apply as soon as you start employing other people and this can become quite complex. Some key aspects include:
- What are the implications of hiring an employee versus an independent contractor.
- Know your employer laws.
- Create standard employee contracts.
- Know your tax obligations like payroll, withholding taxes and related filing obligations.
- What are the implications of firing someone and related unemployment insurance.
- Do you know the applicable anti-discrimination laws.
- What are the minimum wage/hour requirements and are there any other specific industry related regulations.
Intellectual Property (IP) Related
Depending on what type of business you have, protecting your IP or using others IP may also come into play. In general, the main property that creates value in your company is your IP. However, the legal aspects surrounding IP can become very complex and most startups or SME’s just “intentionally” ignore most of the IP aspects related to their business because of this complexity, the lack of resources and needed investments to make.
Overall, protecting your IP involves:
- Registering your trade name, key brand & product names and logo’s.
- Registering your domain names.
- Register your inventions and innovations through Patents.
- Create Copyrights for creative expressions and original content.
- Making agreements on proprietary and confidential information comprising your Trade Secrets.
It’s important to realize that it is not enough to simply register or claim ownership to your IP. Generally, the owners of IP are required to monitor and proactively enforce their rights or risk losing them.
- Bookkeeping – In most countries your are obliged by law to record all your business transactions and keep all underlying documents in a certain format for a minimum period of time. So it is essential to figure out your record keeping obligations and set up a proper filing and bookkeeping system for all documents and transactions.
- Chamber of Commerce – In some countries you are obliged to register your business with the Chamber of Commerce but it can also be a good starting point because generally they have a lot of resources covering all aspects of starting a new business.
- Email regulations – When you send emails to your customers or when you are targeting potential customers via email campaigns you need to find out what the applicable email regulations are because each country has its own set of rules. Aspects covered by these rules generally include opt-in versus opt-out, B2B or B2C emails, unsubscribe rules and minimum information to be included in your emails.
As you can see a lot of legal aspects are involved when starting or running your own business and we only covered the most common items to think of here. Depending on your background you can do a lot of things yourself by using common sense, being practical, and putting some time and effort into further investigating the particular aspect.
However, at some point it can become very complex and being practical is no right solution anymore. Then it’s time to get an outside legal advisor involved. To find the right legal advisor for the job, start at our Consultants 500 platform!