What are the legal steps for starting a small business?

This might sound like a dumb question, but are there any legal steps I must take to actually start a small business? Do I have to file paperwork anywhere, or is it as simple as creating a name and doing the work? I am going into a business of installing Monument foundations in various cemeteries. I will be starting this business with one other person.

Question posted by Bplans User (488 points) 5 years ago. Answers: 3



Matters were rather simple until you mentioned the fact of having "one other individual" in the business with you. The critical element is whether or not the person will be employed or contract labor. But let's consider all matters.

Do you intend to have a name for your business? If so, you will need to file a fictitious name document with your state's Dept. of State. You will also have to publish notice in a local newspaper of your intent to conduct business using the fictitious name.

Do you intend to incorporate? If so, you will need to file incorporation documents with your state's Dept. of State. There alternative methods to perform this task. You can purchase an incorporation kit at your local business supply house, fill out the forms and mail them in with your incorporation fee. The obvious alternative is to have a lawyer perform this task for you. Of course, there will be a legal fee to pay. The upside is that after answering a few questions the lawyer will be able to conduct the process in rather short order.

If you hire the other individual as an employee you will be obligated to apply for a Federal Employer Identification Number (FEIN). It is required where the owner has one or more employees. If you contract the services of the other individual your social security number would suffice for IRS records.

Still, there is the impact of incorporation on your need to file appropriate documents with your state's Dept. of Revenue regarding the matter of paying workman's compensation. That is money that goes toward funding unemployment compensation for those who become unemployed under specific, acceptable circumstances.

Thought not technically defined as legal, the lack of proper insurance under certain circumstances could leave you exposed to the possibility of lawsuits.

Finally, there is the matter of sales taxes. If you sell product to the end-user you are liable to your state's Dept. of Revenue to collect the sales tax and pay it quarterly to your state.

There can many more details directly and indirectly related to legal issues. I would strongly suggest you go to a introductory workshop on starting a business. These workshops are commonly offered by Small Business Development Centers and SCORE. I would also suggest you identify and speak to a law firm which specializes in incorporation. Finally, I would suggest you go to workshops sponsored by your local IRS office and the nearest office of your state's nearest Dept. of Revenue.

Take this one step at a time. Go to the workshops and learn your obligations under the various legal structures of business enterprise.

I wish you well.

Stephen Windhaus

Answer posted by Stephen Windhaus (825 points) 5 years ago



Starting a business involves planning, making key financial decisions and completing a series of legal activities. These 10 easy steps can help you plan, prepare and manage your business. Click on the links to learn more.


Best of Luck,
Milton Zlotnick

Answer posted by Milton Zlotnick (1,134 points) 5 years ago



the first step is set up your business and then sell your product your customer and forget your loss to build your business

Answer posted by prathamesh (33 points) 5 years ago