Step 8 Complete Your Legal Legwork Be sure to research and meet the regulations in your field.

From a legal perspective, there's a good deal more tostarting your own business than simply coming up with a unique ideaand opening your doors. Once you've decided on your businessidea and name, composed your business plan, and selected the mostappropriate type of workplace, the time has come to take care ofall the necessary legal legwork.

Before opening day, you need to find out which of the numerousbusiness-related rules, regulations, licenses, permits and formsare applicable to your venture. Brush up on the specifics of eachand complete any required paperwork. Relevant tasks typicallyinclude: (1) obtaining a federal Employer Identification Number(EIN); (2) applying for state and city business licenses; (3)obtaining state sales tax and resale tax certificates; (4)investigating zoning regulations; and (5) registering your businessname.

Because state, county and local regulations vary dramatically,call around to find out what is--and is not--required in your area.A good place to start is by contacting the Small BusinessAdministration (SBA) office in your state. Inform the SBA thatyou're planning to launch your own business and wouldappreciate receiving a start-up information packet. Another helpfulresource in most areas is the local chamber of commerce, whichoften provides all of the regulation and application information inone convenient bundle.

Keep in mind, too, that the applicable regulations and licensesvary according to the type of business you are starting.That's why you should also talk to entrepreneurs who arealready operating the kind of business you're planning to open,just to ensure you've got all the legal bases covered. Toprovide some sense of just how business-specific the legal legworkprocess can be, our Starting Smart entrepreneurs are back to sharetheir recollections.

Marian Fletcher, Lets Go Party

"I found out that I couldn't work legally out of myapartment, and I had to apply for all sorts of licenses and pass atest given by the Health Department," explains MarianFletcher, 55, whose Baltimore-based party-planning and cateringservice recently celebrated its second anniversary.

"Although local zoning restrictions didn't prohibit mefrom running my business out of my apartment, required HealthDepartment modifications made it virtually impossible," saysFletcher, referring to the renovations officials required that shemake to her kitchen area if she wanted to work from home."Health Department inspectors said I had to have certainthings installed in my apartment, such as double sinks, and theycomplained that my overall kitchen capacity was too small. Itdidn't take me long to realize that I needed to set things upin a different way."

As a result of these requirements, Fletcher ended up rentingspace in a commercial cooking facility, located 10 minutes by carfrom her apartment. The facility was already fully licensed andapproved, and it contained all the equipment she needed. However,before she could start whipping up edible creations for herclients, Fletcher needed to fulfill additional Health Departmentdemands. "I had to provide proof that I'd taken classes tolearn about food preparation, and I had to pass the HealthDepartment's test covering cleanliness standards,food-preparation guidelines, and the like. I received a certificatefrom the Health Department after fulfilling all of theirrequirements."

In addition to Health Department requirements, Fletcher had toapply for numerous licenses. "I needed everything from atrader's license--which allows me to offer my services atseminars and other group settings--to sales tax and resale taxlicenses," she says. "I also had to file a DBA (doingbusiness as) application with the Baltimore Department of Licensingto secure my business name."

Vic & Suzette Brounsuzian, Meg-A-Nut Inc.

"From a legal standpoint, the first thing I did wasregister my company name. Then I registered the business with theIllinois Department of Revenue, and applied for my federal EmployerIdentification Number," explains Vic Brounsuzian, 44, who runsa small shop selling nuts and fine chocolates with his wife,Suzette. In the fall of 1995, the Brounsuzians set up shop in aplaza located in the village of Streamwood, Illinois.

"I had a booklet from the SBA that identified everything weneeded to do, so I followed it step by step," Vic says."Since this wasn't going to be a homebased business, thenext big thing we had to do involved working out an acceptablelease agreement with the shopping plaza. That, of course, washandled through our attorney. In the end, we settled on athree-plus-four lease, which means we have a three-year commitmenton our original lease, and the option to carry on with anadditional four-year lease if we decide to stay. The figures forthe additional four years are already worked out, so all we have todo is notify the plaza six months in advance to let them know ifwe're planning to continue on for the remaining fouryears."

Prior to their grand opening, the Brounsuzians faced a series ofinspections and requests for renovations. "Here, everyone doestheir own inspection--the village of Streamwood does an inspection,the fire department does an inspection, and the Health Departmentdoes an inspection," Vic states. "Reviewing preliminaryplans, the inspectors say things like, `You need athree-compartment sink here, you need special wall outlets withtheir own circuit breakers there.' Once you finish everythingup and they see something they overlooked, they tell youthat you've got one week's time to change it; then theycome and inspect the place again. In order to get into business,you just go and do whatever it is they want you to do."

Like Marian Fletcher, the Brounsuzians were surprised by some ofthe requests made by Health Department officials before theirpremises could be approved. "When you get into a business likethis, the Health Department is very, very fussy. In our case, theyeven required that the scoop holders for our nut scoopers be acertain length, so that if customers ever leave the scoopsdangling, they will not touch the bins below," Vic says."Believe it or not, they came in with a tape measure andmeasured every single one of them. And we've got over 120 binsin the store."

Judy Proudfoot, Proudfoot Wearable Art

"To find out what I needed to do legally, I spent a lot oftime talking to other crafters about what they did to get startedin their businesses," says Judy Proudfoot, 45, who has beendesigning and selling handpainted T-shirts and other clothing itemsat craft shows and shops since May, 1995. Working out of herAlexandria, Minnesota, home, Proudfoot uses a unique watercolormethod with acrylic paints to create wearable works of art.

For entrepreneurs like Judy Proudfoot, who sell clothing itemsat both retail (to customers) and wholesale (to shop owners), statesales tax certificates and resale tax certificates are especiallyimportant. Anytime a clothing item is sold to the public in a statethat collects sales tax, the seller is responsible for collectingand submitting the applicable sales tax to the state. The statesales tax certificate enables these accurate transactions to occur.However, when selling a clothing item wholesale to a shop owner, nosales tax is charged, because it is the shop's responsibilityto collect the tax from the ultimate customer.

For example, if a fabric store sells a bolt of cloth to acustomer, sales tax must be collected and paid to the state; ifthat same bolt of cloth is sold, at wholesale, to a manufacturer ofchildren's outfits, the sales tax will be collected when thoseoutfits are finally sold at retail to the public.

The resale tax certificate protects the entrepreneur from havingto pay sales tax to the state for such transactions. It alsoshields the entrepreneur from having to pay sales tax to anysupplier from whom raw materials are originally purchased.

In terms of legal legwork, Proudfoot says she had it relativelyeasy when she was first starting out. "As a sole proprietor, Iwas able to use my Social Security number rather than get an EIN. Ididn't need to register my business name because it containedmy legal name. I didn't have any zoning problems becausecustomers would not be coming to my home.

"There are significant advantages to having a private,homebased business," Proudfoot explains. "There are justa lot of things you don't have to deal with."

Common Requirements

Although legal requirements vary geographically and by type ofbusiness, some of the most common start-up essentials include:

(1) Obtaining a federal Employer Identification Number(EIN). The EIN allows the federal government to keep track ofan employer's tax withholding amounts for employees and anyfunds paid to independent contractors. Although a sole proprietoris free to use his or her Social Security number instead, manybusiness forms require an EIN, so all business owners shouldconsider applying for one. To get one, simply file IRS FormSS-4.

(2) Applying for state and city business licenses.Contact the business license bureau in your city or county to findout what kind of business license, if any, you need to purchase.Also, check with any local or state agencies that may havejurisdiction over occupational licenses related to your type ofbusiness. Failure to obtain all necessary licenses and permits inadvance of opening day may result in significant fines or ultimatebusiness closure.

(3) Obtaining state sales tax and resale taxcertificates. If you will be selling goods directly to thepublic, you'll need a state sales tax certificate so that youcan submit sales tax payments to the state for every item you sell.If you will be buying raw materials wholesale from distributors, orwill be selling goods wholesale to shops and other distributors,you'll need a resale tax certificate so that no sales taxeswill be collected for such transactions. To obtain thesecertificates, or to find out if your particular business requiresone, contact the agency that is responsible for sales taxcollection in your state.

(4) Investigating zoning restrictions. Zoning laws mayaffect you when establishing your new business, especially if youlive in an urban setting or wish to operate your business legallyfrom home. Because zoning laws are typically used to protectneighborhoods from intrusive businesses, you need to investigateall applicable ordinances in your area before cementing plans forthe type of workplace you desire. In most areas, you should contactyour local city hall to learn about zoning laws in yourcommunity.

(5) Registering your business name. If you are includingyour full legal name as part of your selected business name, youcan skip this step in most states. However, if you will beconducting your business using a fictitious name (that is, anybusiness name that does not contain your full legal name as part ofit), you will be expected to file a DBA ("doing businessas"), also commonly known as a fictitious name statement. DBAsexist to inform the public that you are launching a business usinga name other than your own. Filing the DBA generally takes place atthe county clerk's office.

A business writer for the past eight years, Kylo-Patrick Harthas run a successful homebased consulting business since1989.