As a budding entrepreneur, you can’t ignore the legal aspects of starting a small business. You need to ensure that you are authorized to conduct business within your state legally and have all the required permits and licenses.

But how can you ensure that all paperwork is done right? And what are the other legal components involved in starting a business in the United States?

Let’s discuss all of the legal requirements you need to know about and fulfill to operate your business smoothly.

Which Are the Most Important Legal Aspects of Starting a Small Business?

Let’s take a closer look at everything you need to take care of ‒ state filings, obtaining a federal tax ID number, opening a business bank account, and getting other business licenses and permits.

1. Register Your Business Name

First things first, you need to think of a relevant and unique business name and register it. Registering your business name is important to ensure that others don’t copy it.

But how can you register your business name and where?

You should register your business name as a:

  • Legal entity with the Secretary of the State’s office to protect your business and operate it legally
  • Trademark to protect your business at the federal level to prevent others from using your business name
  • Domain name to take your business online with a web address to ensure that no one else acquires it

For the first part, you need to fulfill legal requirements and documentation to register your business as a legal entity. But before that, you need to choose a business structure.

2. Form a Legal Business Entity: An LLC or a Corporation

As a novice, you may want to know: Which is the best business structure?

But the truth is:

There is no definitive answer to this question. The best legal entity for your business depends on your industry, business ownership, investment sources, taxation and profit-sharing preferences, and other operational needs.

However, the most common legal business entities that most entrepreneurs choose to form are an LLC (limited liability company) and a corporation.

What are the differences between an LLC and a corporation?

An LLC offers a flexible management structure, pass-through taxation, easy formation, and minimal compliances.

Forming an LLC protects you from personal liability, which means that creditors can’t go after your personal assets such as your home and personal bank accounts to recover business losses.

You need to file Articles of Organization with the Secretary of State and also create an LLC Operating Agreement to avoid disputes at a later stage. An easier way to do this is to fill out our LLC formation application online.

On the other hand, a corporation is more complicated to form and requires more legal documentation. However, it is often easier to find investors for a corporation as you can offer stocks in your firm to multiple people.

The legal requirements to form a corporation involves filing Articles of Incorporation with the Secretary of State. You need to create Corporate Bylaws to define the financial and functional details of your small business.

Why should you use GovDocFiling’s packages to take care of the legal aspects of your small business?

Because our service and packages are much easier than doing all of the legal paperwork manually. Also, it is much cheaper than having a lawyer or an accountant file the legal documents for you.

What else do you need to legally start your business?

3. Apply for a Federal EIN/Tax ID Number

You need to obtain an Employer Identification Number (EIN) from the IRS. This is a nine-digit, unique number used for taxation purposes.

Filing for the EIN/Tax ID number with the IRS can be time consuming and tedious. But you don’t have to worry about it.

Our LLC and corporation formation packages include both federal and state filings for $345. You can check out other inclusions here.

And the best part?

You can also use our tax ID application to obtain the EIN only for $195, (expedited processing included).

4. Acquire the Required Business Permits and Licenses

Many industries require you to obtain licenses in order to conduct business. But this totally depends on the industry you work in and the state in which you want to set up your business.

However, you need to check with your state rules to identify the legal aspects of starting a small business of a particular type. For example, starting a trucking business involves vehicle registrations and permits.

This legal aspect of starting a small business includes obtaining licenses and permits at both the federal and state government levels. You may be asked to submit the required documentation and fees to acquire the licenses and permits.

To avoid any legal hassle later, make sure that you have all the required paperwork and permits to operate a business within your state.

5. Open a Business Bank Account

It is important to open a business bank account so that you can legally separate your personal and business finances. This will help you protect your personal assets from your business debts.

In fact, opening a bank account is one of the primary steps of starting a small business. For this, you should choose a bank that supports local and small businesses by offering lower banking fees or added convenience and support.

To open a business bank account, you will have to submit legal documents and details, including:

  • Your Employer Identification Number (EIN)
  • Business formation documents
  • Business license
  • Ownership agreement documents
  • Other necessary information depending on the bank you choose and the state you’re in

6. Protect Your Business with Insurance Plans

Many small business owners ignore this aspect of starting a business but you should not. Business insurance can help you protect your business assets as well.

In fact, some types of business insurance such as disability insurance and unemployment insurance are part of the legal aspects of doing business.

There are many other crucial types of business insurance that can protect your small venture from potential risks.

Some of the most common ones include:

  • General liability insurance to protect your business from financial loss, property damage, etc.
  • Product liability insurance to protect your business from loss or injuries caused due to a defective product
  • Commercial property insurance to protect your business from loss or damage to company property caused due to a natural disaster or accident

Though buying insurance like these is not an essential legal requirement, you should not neglect this step. Relevant insurance plans can help protect your business against financial loss.

Pro tip: Before buying any insurance, read all documents carefully to understand which kinds of loss it will cover.

Are You Ready to Set Up Your Small Business Legally?

Now that you’re aware of the legal aspects of starting a small business, it’s time to set up yours. 

GovDocFiling not only makes business formation easier and hassle free but also offers a comprehensive Business Start Up guide for free with our formation packages. It can help you get your business up and running in no time.

Do you have any questions about the legal requirements for forming an LLC or a corporation? Get in touch with us for help anytime. We’ll be happy to assist you.