Following the processes required to keep your company “legitimate” — both legally and in the eyes of your consumers — will help you to prevent future legal problems or penalties.
Furthermore, making your company genuine may help ensure that the public always regards you as a trustworthy, reputable, and respectable organization.
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Steps to Making Your Company Legal
Making your company legal requires just a few simple actions. These stages are as follows:
Choosing an appealing business name
Selecting the Best Business Structure
Obtaining a formal business address
Obtaining a Business Telephone Service
Obtaining an Employer Identification Number (EIN)
Obtaining needed licenses and permissions
Establishing a business bank account
These standards will not only assist guarantee that your company meets all of its state and federal regulations, but they will also help you project dependability to your clients and possible partners.
Find a Marketing-Friendly Company Name
Choosing a business name is one of the most essential choices you will make when starting your own company.
This is due to your company’s name:
Is your company your customers’ initial point of contact?
Is a key component of your brand’s image
Can hinder your development if selected wrong (for example, if it does not represent the nature of the items or services you will market in the future).
Overall, your company name should be brief, distinctive, and “indicative” of your brand’s professionalism and skill.
Select the Best Business Structure
Each company entity form has advantages and disadvantages. A sole proprietorship structure will provide you with much more freedom in terms of how you manage and conduct your business on a daily basis.
It will also have lower starting expenses and paperwork when it is first set up. A corporation, on the other hand, may be more suited to your unique company objectives due to its enhanced legitimacy and financing choices.
A limited liability corporation (LLC) is a popular “best of both worlds” choice because it offers the management freedom and tax-through taxes of a sole proprietorship while also enabling its owners to benefit from limited personal responsibility under the law.
Obtain a Legal Business Address
Having a business address can boost your trust with customers and make your company seem more real – particularly if you offer the bulk of your goods or services remotely.
An formal company address may also bring practical advantages, as it will allow you to receive official paperwork and other communications at that location.
Purchase a Business Phone Service
Hiring a third-party company phone service allows you to devote your time to essential management and development choices rather than worrying about how to handle incoming and outgoing calls.
Top-tier business phone services may also provide businesses:
Apps for video conferencing on iOS and Android
Software for group communications and document sharing
SMS and calls are unlimited.
Request an EIN
According to the Internal Revenue Service (IRS), you must get an EIN if your company:
For tax reasons, is it organized as a partnership or a corporation?
Employs personnel
Files tax returns relating to excise and employment, as well as alcohol, guns, and tobacco.
Withholds taxes from earnings paid to non-resident foreigners.
If your company is engaged in any of the following activities, you may need to register for an EIN.
Various sorts of trusts
Estates
Not-for-profit organizations
Cooperatives of farmers
Mortgage investment conduits for real estate (REMIC)
Administrators of plans
Even if you don’t technically need an EIN (for example, if you’re a sole proprietorship or single-member LLC with no workers), some advantages of having one suggest that you should register for one even if you aren’t legally required to.
Apply for all necessary business licenses and permits.
To function in their native state, most firms will need to get some kind of license.
Determining the precise license required to operate in your state is often rather hard, since it pertains to your unique business and specificities.
You may be required to apply for municipal, county, state, and/or federal business licenses.
It is important to ensure that you have all of the necessary licenses to operate lawfully as a business entity in your state in order to prevent any penalties or restrictive measures in the future.
Local Permits and Licenses
The following are the most popular local business licenses for small businesses:
Local business operating license: This is one of the most “basic” forms of operating licenses that allows owners to do business in their home state. You will most likely need to apply via your local or municipal administration.
Zoning and land use permit: Your state’s zoning agency will normally have to confirm that the address of your company conforms with the appropriate zoning rules in the region. If you are beginning a sort of company that has already operated in your region, you may probably skip this stage.
If your neighborhood is not designated for your particular company, you will need to apply for a conditional use permit, which may be a long process.
Health licenses and permissions: If your company involves customers’ health (for example, a fitness club or a restaurant), you may need to secure particular health licenses or permits in order to operate legally.
Because the standards for these vary greatly depending on your region, you should check with your local government office ahead of time to discover the health permits that you will need.
Environmental licenses, signage licenses, fire department permissions, and construction permits are examples of less typical municipal licenses and permits.
State Permits and Licenses
You may additionally need extra state-level licensing permits:
State business operating license: This is often used to monitor a company’s income so that taxes may be calculated correctly. Specific government entities or the Secretary of State often grant state business licenses.
Sellers’ licenses: Depending on your sector, they are often designated for enterprises selling weapons, fuel, wine, lottery tickets, or anything else that would likely need more control.
Occupational licenses: To operate lawfully in the great majority of US states, firms in specific occupations must get an occupational license. Among them include, but are not limited to:
Lawyers and Accountants
Physicians
Insurance Brokers for Mechanics
Federal Permits and Licenses
While most small firms are exempt from obtaining federal licenses, they may be required to do so if they operate in a federally regulated field.
Among these industries are:
Aviation, Agriculture, Wildlife, Maritime Transportation, and Logistics
It is important to note that in order to function legally in the United States, home-based enterprises will need to get a permission or license.
Typically, home-based company owners will just need to get a home occupation permit to demonstrate that their firm is not causing any adverse externalities – but this will depend on your state of operation.
Establish a Business Bank Account
Where your company is formed, having a separate bank account for it is a legal necessity since it is regarded a distinct financial entity to yourself under the law.
Even if it is not a legal need, company owners should register a separate bank account since it may allow them to:
Maintain complete financial records.
Make a distinction between their personal and commercial assets.
Obtain financial advantages (e.g., annual interest)
Have expanded access to business financing and company loans