Keep It Legal
(YoungBiz.com) - Getting ready to start a business? It's always a good idea to consult a lawyer or a certified public accountant about the legal structure of your business and any legal steps you need to take.
Regulations about legal requirements for small businesses vary greatly from state to state, and even city to city. If you aren't sure what's required where you live, here is a checklist for researching the regulations that apply to you.
- Small-business advice: Contact your local Small Business Administration office or Small Business Development Center--they specialize in helping people start businesses. Ask for handouts, brochures and advice on the legal requirements for starting your business.
- Business structure: In most circumstances, someone under 18 cannot sign legal documents or contracts. You may need to have a parent, guardian or mentor as a business partner or associate so this person can sign legal papers for you. A lawyer can explain your options and help you structure an ownership agreement that will fit your needs. For more information, read "Choose Your Business Structure."
- Business name registration: If you plan to use a name for your business other than your full given birth name, most states require that you register your "fictitious" name. This procedure is also known as filing a "doing business as" (DBA) form, or getting a certificate of assumed name. The fees for this registration are usually $25 to $75. In some states, you will also be required to run a public notice in your local newspaper announcing your new business name. In states where there is no name registration statute, a trademark is the best way to protect your business name. For more about registering a business name, read "Filing a DBA" on YoungBiz.com.
- Zoning laws: Check with your city hall planning or zoning departments for zoning laws and local ordinances that might affect your business. You will find the phone numbers in the government and community services pages in your telephone directory. Many city administrations also have Web sites where you can find much of the information you need.
- Local licenses or permits: Some counties and/or cities require licenses or permits in order to open a business. To get this license, it is sometimes necessary to satisfy various regulations as well as pay a fee. If required, this license is usually issued through your city office's license division.
- Health department permits: If your business prepares and sells food, you will need a county health permit. Your facilities will have to pass inspection before you can receive this permit. Depending on the size of your operation, you will also have to maintain certain standards of health and sanitation in order to pass random inspections throughout the year.
- Occupational licenses: Most states have laws that require people in businesses that provide personal care (e.g. barbers, cosmetologists, medical caregivers) to be state-licensed. To qualify for this type of license, you must usually have a certain level of professional training, pass one or more exams, and pay a fee. To find out whether your business is considered a state-regulated profession, go to your state's Web site and contact the agency that oversees licensing.
- Sign permits: If you plan to put up signs or distribute fliers in your neighborhood, you will need to contact your local homeowners' association to see whether you need a permit. If you are opening a retail business, check the local sign ordinances before you have signs made. Most cities have regulations that restrict the size and location of signs.
- Local sales tax permit: Visit your nearest state tax assessor's office and find out whether your business is required to collect sales tax. The sales tax permit itself usually costs no more than $50. Your sales tax permit also qualifies you to be exempt from paying sales tax on merchandise that you buy to resell in your business. Remember that every state has different sales tax regulations, and most states also allow cities and counties to charge additional sales taxes. For more information about sales tax rates in your area, contact The Sales Tax Clearinghouse.
- Federal and state tax ID numbers: If you do not have employees, you will probably not need a tax ID number. However, it is your responsibility to find out for sure. Look for "Laws and Regulations" under U.S. Business Advisor or go directly to the Internal Revenue Service.
- Income taxes: Whether or not you actually make enough profit on your business to owe income tax, it is your responsibility to keep accurate records so that you can file income tax reports at the end of each year. In addition to federal income tax, many states have their own state income tax. If you are unsure about how to handle your taxes, you should consult with a tax attorney, a certified public accountant (CPA) or a tax preparation expert who can help you set up a good record-keeping system and file your tax reports. The IRS Web site offers downloadable tax forms as well as detailed instructions on income tax regulations.