Legal Requirements to Start a Business

Many different elements go into starting a new business. One of the primary requirements for setting up a business is to abide by the legal requirements set by federal, state and county rules and regulations. Abiding by these rules allows you to start your business off on the right path to help you avoid legal issues regarding the business structure in the future.

Here is the list of legal aspects you need to consider for start-up. Depending on your situation and type of business, hiring a tax accountant and/or good attorney with specific experience in your industry can help you.

  • Business name

    Before you start printing out business cards, make sure the great new name you thought of isn’t infringing on the rights of an already existing business. You can perform a free search online that looks at business names registered with the Secretary of State — that will tell you if the name is available in your state. Then, take your search to the next level and conduct a no-conflict, free trademark search to see if your name is available for use in all 50 states.

  • Register a fictitious business name/DBA

    A DBA (Doing Business As) must be filed whenever your company does business under a different name. If you’ve got a sole proprietorship or general partnership, a DBA is needed if your company name is different from your own name. For an LLC or corporation, a DBA must be filed to conduct business using a name that’s different from the official Corporation or LLC name you filed.

  • Incorporate Your Business or Form an LLC

    Forming an LLC or corporation is an essential step to protect your personal assets (such as your personal property or your child’s college fund) from any liabilities of the company. Each business structure has its own advantages and disadvantages, depending on your specific circumstances. Three popular options are: the LLC (great for small businesses that want legal protection, but minimal formality), S Corporation (great for small businesses that can qualify), or C Corporation (for companies who plan to seek funding from a VC or go public).

  • Get Federal Tax ID Number

    To distinguish your business as a separate legal entity, you’ll need to obtain a Federal Tax Identification Number, also referred to as an Employer Identification Number (EIN). Issued by the IRS, the tax ID number is similar to your personal social security number and allows the IRS to track your company’s transactions. If you’re a sole proprietor, you’re not obligated to get a Tax ID number, but it’s still good practice as you won’t have to provide your personal social security number for business matters.

  • Learn about employee laws

    Your legal obligations as an employer begin as soon as you hire your first employee. You should spend time with an employment law professional to fully understand your obligations for these (and other) procedures: federal and state payroll and withholding taxes, self-employment taxes, anti-discrimination laws, OSHA regulations, unemployment insurance, workers’ compensation rules, and wage and hour requirements.

  • Obtain business permits and licenses

    Depending on your business type and physical location, you may be required to have one or more business licenses or permits from the state, local or even federal level. Such licenses include: a general business operation license, zoning and land use permits, sales tax license, health department permits, and occupational or professional licenses.

  • File for trademark protection

    You’re not actually required by law to register a trademark. Using a name instantly gives you common law rights as an owner, even without formal registration. Since you’ve spent untold hours brainstorming the ideal name, and you’ll be putting even more effort into cultivating name recognition, you should consider registering your trademark for proper legal protection.

  • Open a bank account to build business credit

    When you rely on your personal credit to fund your business, your personal mortgage, auto loan and personal credit cards all affect your ability to qualify for a business loan. Using business credit separates your personal activities from that of the business. To begin building your business credit, you should open a bank account in the name of your company, and the account should show a cash flow capable of taking on a business loan.

If you are a start-up owner or have plans of becoming one, we at TheGongzuo.com are eager to assist you. Our experts will provide you guidance regarding your financial or legal matters. Do contact us today!

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How to Better Manage Cash Flow in Small Business?

Cash flow is one of the most critical components of success for a small or mid-sized business. Many a profitable business on paper has ended up in bankruptcy because the amount of cash coming in doesn’t compare with the amount of cash going out. Most business owners don’t truly have a handle on their cash flow.

How to improve cash flow?

  1. Collect receivables – Speed up the receipts and processing of receivables by requesting customers for electronic funds transfer. If they plan to pay by check, ask customers to preauthorize checks so that banks can draw against their accounts at timed intervals. You can also try offering discounts to customers if they pay bills quickly.
  2. Tighten customers’ credit requirements – Businesses often have to extend credit to customers, particularly when starting out or growing. But you have to do your research beforehand to determine the risk of extending credit to each customer. You should do a research and check reports on health of individual customer’s business and whether or not they are having cash flow problems.
  3. Increase your sales – If you need more cash, it seems like a no brainer to go out and try to attract new customers or sell additional goods or services to your existing customers. Selling more to existing customers is cheaper and you may be able to do this by analysing what they’re buying and why – information that may even lead you to increase your profit margin and, hopefully, generate more cash.
  4. Offer discounts – One option to increasing cash flow is to offer your customers discounts if they pay early. While this practice may impact your profit margin, it may help your management of cash flow by offering incentives to customers to make payments earlier than billing cycles typically require.
  5. Secure loans – Short-term cash flow problems may sometimes necessitate a business taking out a loan from a financial institution. Some possible types are credit lines or equity loans. Most of the time this type of borrowing accomplishes its goals, although during the financial crisis banks may cancel credit lines.
  6. Measure cash flow frequently – Ask yourself two questions to get a sense about whether your cash flow is under control or not – “What is my cash balance right now?” and “What do I expect my cash balance to be six months from now?”
  7. Prepare backup plan – No matter how much effort you put into perfecting your forecast, unexpected obstacles can throw your plans out the window. For this reason, you need to have a contingency plan for when money is tight to ensure your business is kept running.
  8. Don’t under-price your product/service – It can be tempting to lower your prices in order to offer your clients the best deal and stay competitive. Be careful not to under-price your products or services though. Make sure you are bringing in a healthy profit margin.

Cash flow is important for all businesses, but it is critical for start-ups.  If you cannot manage your cash flow within the first year, you will likely not survive the second year. Register for free at TheGongzuo.com to stay afloat with the help of our investors and financial advisors. Our experts will guide you shape your actions going forward.

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