When you think about establishing a new business or firm, there are multiple boxes to cross and metaphorical hoops to jump through. It’s common to create a business plan that is focused on driving sales, generating profits and hiring the best talent, but one of the most crucial aspects to get right is understanding the legal obligations of managing a company. Whether you’re providing a public service, you’re working with private clients, or you’re selling a product, it’s incredibly beneficial to make sure you have an expert in your corner to ensure you’re aware of the requirements and to minimize the risk of legal issues cropping up. If you’re on the cusp of launching a firm or you have ambitions to become your own boss, here’s an informative guide to the legalities involved.
Selecting a business entity type
When setting up a new venture, there are various options in terms of business entity types. The path you take will determine how much personal liability you have. In cases where the firm is run as a sole proprietorship, for example, the business isn’t viewed as a distinctive entity from its owner or owners. In the case of an LLC, a limited liability company, the venture is a separate entity, which is independent of its owner. The LLC model reduces risks for proprietors. There are pros and cons of each option, and it’s best to compare advantages and disadvantages in relation to your own personal plans before making a decision.
Naming your firm
If you’re launching a new business, whether that’s a law firm, a clothing store or a new food brand, it’s critical to check that the name you plan to use is not already in use. If you press on and start ordering marketing materials and promotional products with your brand name on, or you start selling products or services under a name that has already been registered, you could end up wasting a lot of time and money, as you’ll need to change the name. Before you make any final calls, use the Internet to search for unique monikers.
Licenses and permits
In many sectors and fields, business owners will need to obtain the relevant permits and licenses in order to operate. There are variations according to the industry and the location of your base and intended customers. Check federal and state legislation. If you start work without the permits you need, you could face penalties, including substantial fines.
Industry-specific rules and regulations
Rules and regulations are there to protect people, ensure high standards of service and quality and optimize performance. If you’re preparing to launch a new firm or a fledgling business, you’ll need to ensure that you’re aware of the legalities involved. These will vary hugely from one industry to another. If you work in construction, for example, you’ll be required to take out specific insurance and liability protection before you can take on contracts. This is particularly important when working with government departments. Another example is a private, independent medic offering first response services. The legalities in this case relate to having the necessary skills, expertise and permits to practice, as well as fitting in with regulations related to which types of emergency vehicle lights to use and when to use them. In the retail sector, business owners should be aware of requirements in terms of customer returns and statutory rights and the importance of providing accurate descriptions of products.
Data protection is one of the most topical subjects on the agenda for businesses. With the threat of cybercrime becoming increasingly potent, and customer trust an essential requirement for success, companies must adhere to regulations and guidelines. The GDPR is the most recent development. Although it is related to the EU, all companies that serve customers in these countries or share data with firms based in EU nations should abide by the new legislation. The aim is to protect sensitive data and prevent it from falling into the wrong hands. All firms should ensure that they are compliant with the latest policies and regulations.
Hiring and employment
As soon as you take on employees or you start paying people in exchange for their services, you assume responsibilities. As an employer, you have a legal obligation to treat your employees in a certain way and to facilitate fairness and equality. You should have contracts and agreements in place so that employees understand exactly what is expected of them and what they are entitled to in terms of payment, sick pay and benefits. One of the most critical aspects for employers to consider is the type of contracts on offer. You might choose to have a team of full-time employees, you might hire independent contractors, or you may have a core team that is supplemented by freelancers or seasonal staff, for example. Employment law can be a gray area when talking about independent contractors, for example, drivers employed by companies like Lyft. There are differences between states, so it’s vital to check before you start hiring.
Every business, no matter the sector, has financial responsibilities. When you start providing services and earning money, you’ll assume responsibility for paying taxes and ensuring you manage your books in the right way. Tax can be a minefield if you’re not experienced in accounting, and you’re not familiar with expenses or tax relief opportunities. Making mistakes can be costly, so it’s always beneficial to seek expert advice if you are unsure how to compile and submit a tax return for your business.
Intellectual property is increasingly valuable in an age where we depend heavily on technology and competition is fierce. Intellectual property relates to anything from trade secrets and ideas and inventions to copyrights and patents. Investing in intellectual property protection helps to reduce the risk of others stealing your ideas or trying to create products or offer services that are based on your original thoughts or inventions.
Terms and conditions
Whenever you make a purchase or sign an agreement, you’ll notice a set of terms and conditions, usually in small print at the bottom of the page. Terms and conditions are essential for protecting both consumers and businesses. This set of guidelines and statements should set out the obligations of the customer and provide detailed information about the agreement. If you offer a service, and you don’t have terms and conditions, or the terms and conditions box has not been crossed by the client, there is a risk that the customer could take legal action if they’re unhappy with the service you provide. Including terms and conditions and ensuring that the client is aware of those terms and happy to accept them will provide protection for you. An example would be offering parking at a lot outside your firm and specifying that all vehicles and their contents are left at the owner’s risk. This means that you would not be liable if a car was broken into or damaged within the lot.
Setting up a business of any kind requires a lot of careful planning and thought. Although the end goal is to generate profits and build a successful brand, you can’t do this unless you’re on the right side of the law. There are several key steps company owners need to take before launching a new firm, including finding a unique name, deciding which type of entity to run, complying with data protection and employment guidelines, drawing up client agreements and researching exactly what is needed in terms of licenses and permits.