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March 10, 2017

The 5 Legal Documents Businesses Need When Getting Started

Legal Documents for Businesses

Starting a business can be one of the most exciting decisions you make, but setting up your business in a safe and legal way is one of the most important parts of this initial process. While the types of legal documents for starting a business can vary depending on the industry, below are the six main documents most businesses need when getting started.

BUSINESS LICENSE

Acquiring a business license is not a task you should put off. Without a proper business license, you could be charged pricey fees and your business might not even be protected legally. License and permit requirements vary from state to state, so do some research regarding which kind of business license your business requires first. Remember to renew your business license every year in the county your office is in—the fees will depend on your revenue.

ARTICLES OF INCORPORATION OR ORGANIZATION

There are multiple ways to structure your business. Organizational structures can range from a sole proprietorship to partnerships, limited liability to corporations and sub-chapters. For more information on the specifics of each structure, please see my LinkedIn article “What Business Structure is Right for You?”, detailing the types of business organizations.

If you run an LLC, which is one the most popular type of business entities, you want to invest in an operating agreement. This document is the agreement among owners, that pertains to financial and managerial duties, who owns what percentages, and what should happen if one of the owners decides to leave.

EMPLOYER IDENTIFICATION NUMBER

For-Profit businesses and nonprofits will need to acquire Employee Identification Numbers ( EIN numbers) for tax purposes. This number is applied to businesses in the same way that social security numbers are applied to individuals.  The easiest way to acquire these tax ID numbers is online at IRS.gov or to seek a tax professional. When the proper form is complete, the IRS can provide an immediate letter via email with the assigned Employee Identification Number.

PROFESSIONAL LICENSES

Professional licenses differ based on the type of trade practiced by the business. These licenses are also dependent on the state in which the business will operate. For example, child-care providers, carpenters and plumbing businesses require specific licenses to operate. But certain states also require massage therapists to get a license. A quick call to your state’s business services office will clarify which licenses or permits are required to operate.

LOCAL LICENSES

Some counties and cities require separate permits to conduct commercial activity. For example, some cities in the US have control of liquor licenses within the proximity of certain communities or areas. You will need to check with the county clerk in the locality of the new business, to determine if any additional licenses or local regulations are required. Many local governments also require sales-tax permits. This is based on the sale of specific goods and services. The county clerk will be able to provide the specifics on which permits are needed for these taxes.

If you are thinking about starting a business, there are several things to consider: who you will be partnering with, the yearly cost and how many people the business can initially hire, the organizational structure of the business, legal liability, tax implications, and which licenses you need to operate. As a new business, you may want to seek funding eventually, or maybe even lease out an office. Because some of these processes may require these documents, you want to make sure you invest the time and money into getting them developed.

 

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