Starting a Business - An Overview
Starting a business can be a daunting and complicated process. The potential business owner must consider numerous factors, including financing the business; setting up a business plan; choosing the correct business organization; naming the business; addressing licensing, permits and zoning matters; hiring and paying employees; and securing business insurance. The law surrounding these areas is diverse and often specific to your locale.
An experienced attorney can assist you today.
Financing and the Business Plan
A potential new business owner must always be aware of the costs, including startup costs and one-time expenses, involved in starting a business.
To secure financing, the business owner will want to contact a financial institution or locate other investors. A business plan is often required. It will typically include the following:
- A description of the venture
- What kind of service or product the business will provide
- Results of research indicating a need for the business
- A marketing plan
- Staffing plans
- Management plans
- Financial plans
Business Organization Forms
The potential business owner should be aware of the main business organization forms, their characteristics and the laws that govern them.
A sole proprietorship is created when a person simply begins business. It is easy, cheap and a common choice for one-person businesses. The sole proprietor owns all of the business assets. The owner also has unlimited personal responsibility for business liabilities. The owner is taxed on income from the business at applicable individual tax rates.
A general partnership is formed when two or more people carry on as co-owners of a business for profit. Each general partner typically participates in management, co-owns the assets and shares in profits and losses. Each general partner is personally liable for business-related obligations. Partnership profits are taxed via general partners' individual tax returns.
A limited partnership differs from a general partnership in key areas. At least one general partner manages the business's operations while at least one limited partner contributes capital but has no substantial management control. The limited partner's liability is limited to the extent of its capital contribution to the partnership; that is, the limited partner is not personally responsible for partnership obligations.
A limited liability company (LLC) combines elements of partnerships and corporations. The owners, called members, only risk losing money that has been invested into the LLC. LLC assets — never personal assets — are used to pay its debts. An LLC is not necessarily a separate taxable entity, however, and these LLC owners report profits and losses on their individual tax returns.
A corporation is a separate legal and taxable entity. Its owners must comply with statutory formalities to set up a corporation. With certain exceptions, the owners of the corporation are protected from the corporation's liabilities.
Naming a Business, Licensing, Permits and Zoning
A business owner will need to name the new business. Name availability can be determined by contacting the appropriate state or county office, typically through the secretary of state. The business owner should also confirm that the name is not a trademark belonging to another party.
After naming the business, the business owner should consider a variety of factors, including but not limited to:
- Necessary licenses and permits
- Posting a permit
- Zoning compliance
Hiring Employees
Now that the business is set up and the required permits and licenses have been obtained, the new business owner can begin to staff the business. State and federal law govern the actions of business owners and managers during hiring. The business owner should be aware of the relevant legal standards during the hiring process. Concerns include:
- Planning for and posting job openings
- The interview process
- Avoiding discrimination
- Observing privacy rights
- Avoiding the hire of illegal immigrants
- Observing laws regarding both child labor and age discrimination
- Completing necessary filing and registration for all employees
Employee Compensation
The new business owner will be responsible, of course, for paying the employees. The US Department of Labor regulates and enforces many of the laws on employee compensation. Relevant labor, employment and compensation considerations include:
- Minimum wage law under the federal Fair Labor Standards Act (FLSA)
- Exceptions to FLSA
- Vacation pay, sick pay and holiday pay
- Severance packages
- Pension plans and the Employee Retirement Income Security Act (ERISA)
- The Family Medical Leave Act (FMLA)
- Applicable state law
Insurance for the New Business and Its Employees
Without proper insurance, the new business owner puts his or her assets at serious risk. A business owner should analyze potential risk exposures when selecting the best policies for the business. Certain forms of insurance are mandatory.
Insurance for a business may include:
- Commercial multi-peril policy or business owner's policy
- Property insurance
- General liability insurance
- Malpractice or professional liability insurance
- Product liability insurance
- Business interruption insurance
- Business vehicle insurance
- Key-employee policy
- Umbrella policy
Insurance for Employees may include:
- Workers' Compensation
- Health insurance
- Life insurance
- Disability insurance
Contact an Attorney
Starting a business involves numerous and diverse areas of the law. Both state and federal regulations come into play. This is why it is so important to work with a knowledgeable lawyer when you are planning a business.
Contact an attorney to learn more.
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