Starting a business can be a really exciting and liberating thing, but it can also be really scary when you think about the legal implications of it all. The worst thing you can do is start to build up a business and your reputation without knowing how to navigate the legalities, which could potentially hurt you in the long run. There are many types of laws to familiarize yourself with pertaining to your business including marketing & advertising, employment and labor laws, intellectual property, and privacy laws. Although it isn’t necessary to hire a lawyer as soon as you launch, it may do you some good to do your research and maybe even look into scheduling a consultation with one to assess the risks.*
Here are five important legal questions to ask yourself when starting a new business:
1. What business structure should I choose?
Business structure refers to the type of business you will be and how it will be classified, such as a corporation, limited liability company (LLC), sole proprietorship, cooperation, corporation, S corporation or a partnership. These are the most basic types of business structures, they get more specific as you dig deeper into the different structures.
· Corporation: This type of structure is recommended for large, companies who are already pretty established in their markets. Corporations have multiple employees and are little more complex than the average small business.
· Cooperative: Also known as a co-op, cooperatives consist of people who come together due to some social, professional or economic commonalities to provide a service that meets all their needs. Cooperatives conduct their activities through a jointly owned and controlled business.
· Limited Liability Company: An LLC is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. An LLC may be the most popular type of business structure when it comes to monetizing your blog and making it a legit business for many creative smart girls.
· Sole Proprietorship: Sole proprietorships are pretty self-explanatory in that it means you are going into business alone and you are solely responsible for all assets and liabilities.
· S Corporation: An S corp is very similar to a C corp and was created through an IRS tax election. You can avoid being taxed twice, for the corp and for the shareholders, and only be taxed on the personal level.
· Partnership: There are many different types of partnerships; general, joint, limited. The benefits of partnerships are that they are cheap, easy, allow you to share responsibility and also create positive effects for employees. Each type of partnership varies upon the type and the arrangement of the agreement.
2. What employment regulations do I need to follow?
Hiring employees and making sure you are doing everything legally can be very tricky, but luckily the Small Business Association has you covered. There are seven steps to hiring your first employees for your business:
· Obtain an employee identification number (EIN)
· Set up your record for tax withholding
· Get verified for employee eligibility
· Register with the new hire reporting program
· Get workers compensation insurance
· Inform employees of their rights
· File your taxes
3. How do I go about filing for trademarks?
Applying for a trademark for your business has become an easy process that can be done online and even without a lawyer. First, you should check the Trademark Electronic Search System database to make sure that no other company has filed for the same trademark. Applications may take up to 90 minutes to complete online, costing you roughly $275-325 and you can expect to hear back within six months of filing. Trademarks are super important because you get everything that comes with the name including social media handles, web domains and more.
4. How do I protect my intellectual property?
Intellectual property is more important than you think; Google, Microsoft and Apple have all spent $18 billion on intellectual property alone. It doesn’t matter what it is you have, an idea, name, logo, etc. - you need to protect it. Some things you can do to make sure your intellectual property (IP) is protect is file for a patent, get copyrights and trademarks, hire an attorney who specializes in IP, and even visit stopfakes.gov which provides IP rights and information assistance.
5. What should I know about filing my taxes?
First things first, your business structure will always affect your taxes liabilities. Figuring out what tax implications your business structures entails is the first step to understanding how to do your taxes. This also includes knowing how much or if you need to be making estimated payments throughout the year, based on your structure. The IRS allows business to deduct expenses that are deems ordinary and necessary, so figure out what expenses you can deduct from your taxes. Necessary expenses are those that aren’t required for your field, while ordinary are expenses that are common for people in your line of work. It’s also important to know that you are responsible for self-employment taxes and taking your share of profits. There are other expenses to account for such as if you use your home as an office and startup expenses. Do your research and consult with a lawyer and accountant to help you out.
Was this helpful? Comment, email or tweet us your experiences of getting the legalities straight for your creative business. We’d love to hear your stories!
*There are no lawyers on the Creative Smart Girl team and we are in no way giving legal advice in this blog post. This post is simply meant to advise our readers of resources they can use to help them, in addition to consulting with an attorney.