When you have a business, the passion for service or product comes naturally. However, it’s less exciting to talk about the legal needs for functioning legitimately. The legal requirements vary significantly based on the industry, location, and business type says Ian Mausner . Hence, there is a need for detailed research. And while you can’t replace suggestions from an expert legal counsel, this article talks about some of the essential legal requirements that small business owners need to consider before they start their business.
According to Ian Mausner, when the business strategy and mission is clear, the next step is to fix the legal structure. Your choice can impact everything from your ways of functioning the business to liabilities that you will face when you pay the taxes. A few legal requirements to keep in mind are:
Sole Proprietorship
The easiest structure for a single business owner is sole-proprietorship. And as the sole proprietor, the business owner has very few regulatory obligations and an increased degree of flexibility and control. You don’t need paperwork for establishing the sole proprietorship. It gets created automatically the moment you start the business. But in case you want to use a business name, use your name.
Additionally, a sole proprietorship doesn’t create a distinct business entity. It means there is no legal difference between business debts, assets, and liabilities. It might become risky for the owners because they might be on the hook for any financial or legal failures of the business.
Partnership
There are many kinds of partnerships. If you get into business with another person or other people and fail to create a formal business entity, then your business gets counted as a general partnership. And like a sole proprietorship arrangement, the partners in the general partnership are completely accountable for all business obligations and debts says Ian Mausner. Furthermore, they are also responsible for actions took by the partners, which is one of the prominent reasons why the majority of the lawyers urge business owners to opt-in for an LLC or a corporation instead of a general partnership. The general partnerships get tax akin to the sole proprietorship, with the partners reporting the share of credits, income, profits, expenses, and the losses on the personal tax returns.
The limited liability company
The LLC or the Limited Liability Company balances the relative flexibility and ease of the partnership format. With the corporate structure are maximize risk security and probable tax benefits. The LLC owners aren’t personally accountable for the business obligations. Also, by default, the LLC members get consider self-employ. And they file and pay the taxes similarly as a sole proprietorship or general partnership owner. However, an LLC can elect to get tax akin to a corporation. In order to create an LLC, you need to file the articles of your company, with your state. Additionally, the LLC must have the operating agreement which details. The way the LLC should get run along with the responsibilities and rights of members. There small business owners select the LLCs for their flexibility and simplicity.
These are the three basic laws that small businesses should opt-in for as per Ian Mausner. That aside, they should also consider another legal counsel required to set up a small business.
