The Legal Side of Starting a Business: Navigating Business Law and Your Options
Starting a business can be a thrilling and rewarding undertaking. But, the legal side of starting—and running—a business isn’t always straightforward. In this article, we take a look at some of the key issues to consider when navigating business law, so you can get set up to achieve success.
What is Business Law?
Business law is designed to govern the interactions between businesses and other parties, including other businesses, government agencies, and individuals. Put simply, it provides business owners with a thorough legal framework which sets out the rights, responsibilities, and obligations of each party.
Why is Business Law Important?
Put simply, creating a solid legal foundation for your business is essential for success. Creating a limited liability company (LLC) or other legal entity allows you to have complete control of your business, protect you and your business from legal liability, and raise funds when necessary. Following business law also helps to ensure that you have all the necessary resources and compliance obligations met, so you can concentrate on growing your business without worrying about potential legal problems.
Types of Business Structures and Choosing the Right One
When establishing your business, it’s important to choose the right business structure. This will affect everything from how your business is taxed to the level of personal and business liability you’ll face.
The most common business structures to choose from include:
• Sole proprietorship: Sole proprietorships are the most basic and most common type of business entities. In this structure, the business owner has complete authority and total responsibility over the business.
• Partnership: A business owned by two or more people; this structure eliminates the personal liability of each of its owners and allows profits and losses to be shared between them.
• LLC: A limited liability company offers the same benefits as a partnership and is the most common business structure for small businesses.
• Corporation: Corporations provide the most legal protection from personal liability, but may be difficult to set up and require more administrative and financial work.
Understanding Your Tax Obligations
Taxation is an essential part of running a successful business. Different business structures have varying tax requirements and implications, so it’s important to understand these before you set up your business.
In general, larger businesses tend to be more closely scrutinized by the tax office in terms of compliance and accuracy, so it is important to put processes and systems in place to ensure the correct information is submitted consistently. The information required on tax returns and other documents will differ depending on your business structure, so do make sure you research this thoroughly before proceeding.
Elements of an Effective Business Plan
A smart business plan is an essential tool for entrepreneurs, as it lays out your roadmap for success. This document will guide your decisions for years to come, so time invested at the beginning is critical for success.
When creating a business plan, you will need to cover several critical elements, including:
• Business Overview: An overview of your business and its goals, including a mission statement to explain what your business strives to achieve.
• Market Analysis: A detailed look at the market you will be targeting and the trends in this sector.
• Competitor Analysis: Identifying potential competitors and deciding how you will stand out from them.
• Products & Services: A clear explanation of what you’ll be offering and how it fits into the market.
• Operations & Production: Understanding your costs, revenue, target market, and how long it’ll take for your business to become profitable.
• Sales & Marketing: A clear plan to ensure your products and services reach your target market.
• Financial Overview: A detailed financial plan should include an income statement, balance sheet, and projections for your business.
Navigating Business Law with an Attorney
When navigating business law, working with an experienced business law attorney is essential to ensure that you’re not missing any hidden issues or obstacles. They will be able to assist with the various legal issues that may come up, from setting up a business entity to dealing with a lawsuit.
Additionally, selecting a suitable lawyer or legal team can be just as crucial as setting up a business entity. Your attorney should be knowledgeable in the area of business law, as well as confidential, creative, and a good listener.
Having an attorney representing your business will also put you in a stronger legal position should a dispute arise and require a court case.
Business Law Resources
If you’re looking for further resources to help you navigate business law, the Library of Congress offers some helpful resources, including:
• The U.S. Small Business Administration (SBA) provides guidance and resources to business owners on topics such as accounting and taxes.
• The Journal of Business Law provides robust legal scholarship from practitioners, business leaders, and academics on a wide range of topics.
• The Harvard Business Law Review is a great resource for business law topics, with articles from leading scholars and practitioners.
• The Association of Corporate Counsel (ACC): ACC is an invaluable resource for those looking for advice on the legal side of starting a business.
• The Business Law Section of the American Bar Association is an excellent source of information for getting up to speed on the latest developments in business law.
• The National Federation of Small Businesses offers resources specifically tailored to small businesses, as well as free hotline services.
Understanding the legal side of starting a business can be daunting, but taking the time to research and create a strong legal foundation will help to avoid potential issues down the line. Working with an experienced business law attorney is key to getting your business set up the right way, while the resources listed above can help to stay informed on the latest changes to business law. By taking the time to understand business law and create a solid legal foundation, you’ll be able to concentrate on the exciting side of launching a business.
