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Start-Ups

Understanding the Legal Side of Starting a Business

By Barbara Beauregard   |    August 18, 2015   |    3:21 PM

Determining the Legal Requirements of Your New Small Business

You’re trying to get your new business off of the ground and you think you have everything sorted: a great idea, market research, a business plan, and more. It’s easy to think that you can simply open up shop and start conducting business, but don’t get carried away too quickly. There are many legal considerations to consider before you can begin profiting off of your business venture. Let’s examine the legal side of starting a business so that you’ll be one step closer to realizing your entrepreneurial dreams.

But, before we begin—remember that the information contained in this article is not a substitute for professional legal advice. Be sure to contact an attorney or legal organization to determine the exact legal needs for your fledgling business.

Permits and licenses for your new small business

Many small businesses will have to secure the necessary permits and licenses before beginning operations. The permits and licenses that you need will vary widely from one state to the next and from one industry to the next. For example, federally regulated industries (like selling alcohol) require an entirely different set of permits and licenses than a consulting business. Even home-based businesses require permits and licenses in some states. The Small Business Administration (SBA) has created a helpful list of state business license offices, where you can find out more information about what your situation requires.

Don’t forget about professional licenses, either. If occupational licensing laws apply to your profession then those same licenses will need to be maintained as you go about starting up your business.

Legally, how will you structure your business?

You also need to determine the legal structure of your new business. The type of business entity that you have will determine your tax structure and which forms you have to fill out come tax time. Sole proprietorships, LLCs, partnerships, corporations… each business entity has it’s own set of rules. Again, the Small Business Administration (SBA) has comprehensive information about the differences between different business entities.

While you’re determining your business entity type, you’ll also need to register your business and business name with your state’s secretary office.

Read up on employee laws

Do you plan on hiring employees? If so, you’ll have an entirely new set of rules and regulations to research. Because these laws are so plentiful and can be so complicated it’s worth working with a qualified legal professional to ensure that you’re meeting all of the requirements. You’ll need to learn about payroll and withholding taxes, unemployment insurance, various regulations, and more.

Protecting your business with insurance

Depending on your industry, there may also be numerous insurance requirements that you have to meet in order to do business legally. Liability insurance is one big cost that business owners in certain industries will need to plan for, but it’s hardly the only type of insurance you could need. Not only can these costs add up quickly, but you’ll also be in legal trouble if you don’t have the right types of insurance.

Speak with a legal professional before beginning business

Again, it’s worth repeating that you should consider consulting a legal professional before opening up the doors to your new business. Regulations and laws are ever-changing, and an in-the-know advisor will make sure that your new business is operating on the right side of the law.