5 Legal Steps for Starting Up Your Company

There are approximately 320 startups launched for every 100.000 adults in the United States on a monthly basis, according to Forbes. That equates to more than 540.000 new companies every month. Furthermore, entrepreneurial companies have added more than 40 million jobs to the United States economy in the past three decades, and are highly poised to influence the national economy as well as the job situation over the next few years. These days, mostly due to recession, people who were not employed before they started a new venture represent the majority of the total number of business owners. In fact, according to last year’s Kauffman Index, about eight out of ten entrepreneurs were not previously employed. So it is no wonder that starting a business feels like an overwhelming task for a vast number of entrepreneurs. However, with some careful preparation and planning, the task might not look so discouraging after all.

Step 1: Check if the Name You Chose is Available

So after a couple of brainstorming sessions you finally select with a fitting name for your company; but do not start designing a logo or printing out your business cards just yet. First, you have to be sure that your name is not infringing on the rights of an already existing company. You do not even need an attorney, as you can perform a Google search and find all business names registered with the Secretary of State. Next, you should conduct a free trademark search and see if the name is available in all 50 states. Keep in mind that you can still infringe on someone else’s trademark, even if they have not formally registered it with the Patent and Trademark Office.

Step 2: Incorporate Your Business

Forming a corporation is the next crucial step you need to take in order to protect your personal assets from any liabilities of the company. You need to take this step slowly, because each business structure has its own gains and setbacks, depending on your circumstances. There are basically countless options, but three most popular choices are: S Corporation (great for small businesses), C Corporation (for companies who plan to go public or seek funding from VC) and LLC (recommendable to small businesses that want legal protection and minimal formality).

Step 3: Register a DBA

If you have a sole or a general partnership, a DBA (Doing Business As) must be filed in order to conduct business using a name that is different from the official LLC (Limited Liability Company) you filed. While this may seem complicated and unnecessary to some, let’s explain why you need a DBA in simpler terms. For example, if your business is officially incorporated as BusinessNet, Inc., you need to file DBAs for the variations BusinessNet.com and BusinessNet. This is usually a one-and-done deal, because DBAs are typically filed at the country level.

Step 4: Learn Employee Law

Even if you plan to employ only one person (according the Department of Business, two-thirds of small business in the UK do just that), your legal obligations as an employer start as soon as you hire the very first person. You should learn everything you can about withholding and payroll taxes, employee compensation, wage requirements and more. So in case that your employee suffers an injury, and decides to hire a personal injury attorney; you will know exactly how to handle the situation. Luckily, there are some fantastic resources available online to help you learn everything you need, and a good place to start is definitely the US Small Business Administration site.

Step 5: Obtain the Necessary Permits and Licenses

Your fifth and final step involves making sure that you find out if your business requires any particular permits or licenses in your state. Some of the licenses you may need to obtain include land use, business operation, zoning and professional licenses, among others. Depending on your state, your licensing could vary considerably from a similar business in another state in the US. In some cases, even federal requirements may differ from those enforced at the state level.

Sort Out Your Legal Obligations Right Away

As we mentioned before, starting a business can be pretty stressful, but no matter how complicated things with your startup get, you have to set aside some time and address these legal matters. Getting everything done right from the start will help you avoid any future pitfalls and scale your business successfully as you grow.