8 Legal Steps to set up a New Business
When you set up a new business, it’s important to know the legal steps involved. The laws associated with launching a new business vary by state and can be complex. In Virginia, new business owners must pick a unique name, apply for Virginia licenses and more.
Business law can be tricky, so it’s always a good idea to work with an attorney licensed in your state.
As you get ready to set up a new business, here are the legal steps you need to take:
1. Choose your legal business structure.
To set up a new business, you first need to decide the structure of your business. Your business structure will impact your business taxes, registration requirements, and personal liability. Deciding whether to set up your business as a Stock Corporation, Nonstock Corporation, Limited Liability Company, Professional Limited Liability Company, or any other entity structure is a critical decision which affects legal and tax matters, as well as other critical issues. You should consult with an attorney and tax professional when making these decisions in order to make sure your new business is set up correctly.
2. To set up a New Business, you need to pick a name and register your business.
Picking the perfect name is tricky enough on its own, but there are also legal implications. Once you’ve found a name for your business, you need to make sure nobody else is already using it. First, check whether your state’s secretary of state offers an entity name check tool. If it does, you can use this tool to see what business names are registered in your state. Then, you should conduct a broader trademark search nationwide. This is to help you find out if anyone in the country has trademarked your potential business name.
As soon as you’ve landed on a name with no potential conflicts, you may be able to register your business to protect it. You can usually do this with your secretary of state’s office at the state level. At the federal level, you can protect your business name through a trademark. Once you properly register your business, you can file to get a federal Tax ID and set your business apart as a legal entity. This ID is also known as an Employer Identification Number (EIN). You may also want to claim the domain name for your business, so your website has the name you want. Finally, you might need to file a DBA (Doing Business As) whenever you want to do business under a different name. This may seem complicated, but an experienced attorney can guide you through the process.
3. Get the necessary licenses, insurance and permits.
Once you have a name, you'll need business licenses from federal and state agencies. Federal agencies issue licenses and permits for various industries. These licenses range from agriculture to nuclear energy. States and counties, meanwhile, usually offer licenses and permits for more local activities. These might include construction, retail, or plumbing.
You should also get business insurance specific to the type of business you’re starting. This will protect you from business risks you might not be able to cover on your own.
4. Find a location to set up a new business.
Where you do business will affect how much you pay in business taxes based on the state and city. As you think about where to set up your business, think about your target market. Additionally, think about distribution and inventory. Is the location convenient for both suppliers and customers? Then, think about the rules imposed by different state and local agencies. After all, different regions have different licensing requirements and minimum wage laws. If you want to work out of a physical property, you’ll need to figure out how zoning laws and regulations will affect your business.
If you plan to have a home office, you need to determine the kind of space you need and your IT needs. Keep in mind that if you plan to have customers come to you, check with your city to make sure that is allowed in your neighborhood.
5. Create a business partnership agreement, if necessary.
If you have decided to go into business with a partner, you’ll need to write up a business partnership and/or operating agreement. Partnership agreements are key to protecting your business and each other. This is especially true in the case of disagreements. Your agreement should clarify ownership percentages and the division of profits (and losses). It should also detail each partner’s responsibilities and authority. If one of the partners were to leave the company or die, your agreement should have a provision for that, too. We address that below in succession planning. In a partnership, partners are liable for not only their own actions but also each other’s. That’s why it’s important to have an ironclad agreement, to protect your interests as well as your business. A partnership agreement is something you should have an experienced attorney draft.
6. Protect your business’ intellectual property.
In the early days of starting a business, you need to protect your intellectual property. The last thing you would want is to have a unique idea, only to have it stolen by a competitor because you didn’t protect it. That’s why you should seek out patents, trademarks or copyrights. Some of this will depend on the type of business you’re trying to launch.
7. Know what legal obstacles you might run into.
Many entrepreneurs get carried away starting a new business. So much so, in fact, that they don’t consider what legal hurdles they’ll encounter. As you set up your business, you need to know what you’re getting yourself into. Here are some common issues that new business owners often encounter:
- Choosing a business name that infringes on another business or entity.
- Picking a less-than-ideal legal business structure for their business.
- A partnership agreement that doesn’t clearly define the business relationship.
- Incurring fines after failing to follow tax laws and expectations.
- Overlooking the need to hire an experienced business attorney.
Keep all these legal obstacles in mind and find an attorney who is licensed to practice in your state.
8. Develop a business succession plan.
Many new business owners neglect to develop a succession plan. This is a mistake because this plan is vital for the future of your business. Your current plan might be to run your business your whole life. But one day, you’ll need to transition the ownership to someone else. You might decide to let someone buy your business. Or maybe you’ll pass the ownership to your employees or family members. You also need to decide who’s going to take over your business if you or one of your partners dies. A good succession plan should identify who will succeed you as business owner. It should also outline when you expect to step back from the business. Beyond that, your succession plan should cover tax planning, business value and more. You should work on a succession plan with your business accountant and an experienced attorney.
Click here to read our blog, The Top 4 Legal Considerations of a Business Succession Plan.
Work with a Trusted Legal Firm to set up a New Business
There are many legal steps you must follow to set up a new business properly. These steps may present various obstacles. That's why it’s so important to find an attorney who practices business law in your state. If you’re in Virginia, give Archangel Law Group a call today! Business law is one of our key areas of focus, and we’d be happy to help you get started as a new business owner. We are here to help, and we are here for you!
Archangel Law Group
We are proud to represent clients in legal matters pertaining to Business, Civil Litigation, Family Law, Wills, Trusts & Estates, Criminal Law, and Traffic Court. If you need an attorney who practices business law, Archangel Law Group is here for you. We serve clients in Chesapeake, Virginia Beach, Suffolk, Portsmouth, Norfolk, Newport News, and Hampton. This includes the surrounding counties of Hampton Roads, Virginia. We are here to discuss your specific business plans and answer your questions. Contact our firm at (757) 389-7383 or get in touch with our staff by emailing us.