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3 legal essentials when forming a business

On Behalf of | Aug 9, 2023 | BUSINESS ORGANIZATIONS - Business Organizations

Once upon a time, most people were employees, and only a few actually owned businesses. The Internet has made it much easier for anyone to start their own business and these days becoming an entrepreneur is seen as a cool thing to do – whether it’s to be your main income, one of a stream of incomes or just a side hustle to your main employment.

Yet, however easy Instagram makes it look to set up on your own, you need to remember that a business needs a firm legal grounding to succeed. 

Here are some questions to ask yourself:

Do I need permission?

Some businesses do not require the permission of anyone. Other fields require you to get licenses from local or federal authorities. Going ahead without them could lead to costly fines and immediate closure.

What contracts do I need?

If you rely on others to supply you with goods or services, you need some way of ensuring they deliver on their promises. A well-written contract can do that, or at least it can make it far more likely they will and give you grounds to reclaim if they don’t.

You will also need contracts with your customers to ensure they pay you for your work or goods. Contracts give both parties rights, so be sure you know what you are signing.

How will I pay tax?

You will pay tax to the IRS, but how you will do this depends on how you structure your business. The simplest option in many cases is to register as a sole trader, but even if you do not expect to grow much you may prefer one of the more formal business structures to create a legal distance between you as a person and your business.

Learning more about these and other aspects of starting a business will be time well spent.