With a seemingly infinite number of legal regulations to abide by, starting up a new business for the first time can be daunting for entrepreneurs. As well as working on your assertiveness skills and jumping in to the new business world with both feet, federal, state, and local government agencies set certain requirements so that they can regulate professional industries to protect consumers and prevent fraud. The more you know about the process before you begin, the better prepared you will be to jump through all those legal hoops. A number of these legally enforced regulations require the business owner to pay additional fees that will need to be budgeted into opening expenses.
Application for Registration of Name:
Chances are one of the first things you thought about when planning your new enterprise was what you would call it. You’ll need to reserve and register your name with the state(s) in which you plan to do business so that it can be recognized officially. In some states, such as New Jersey, applicants must list three potential names in case another entity has already registered their top choice. Whoever submits and signs the application will have ownership of the reserved name. These applications are also used to transfer business names to new owners or enterprises. The exact fee varies, but is oftentimes around $25 to $50.
States require any individuals or businesses to obtain a seller’s permit if they intend to sell or lease merchandise, cars, or any other tangible personal property. The permit allows the entity to sell items as retail or wholesale. Those applying for a withstanding business should apply for a regular permit whereas those planning to operate a seasonal business, like a fireworks stand, can apply for a temporary permit that will be valid for 90 days.
Request for Tax Clearance:
A tax clearance is a review of financial records to determine if an entity is compliant with all state tax laws. If your enterprise will have employees that require you to withhold taxes, you will have to request a tax clearance to ensure you are trustworthy enough to submit the necessary financial reports accurately. Business owners must meet certain obligations under state law that require them to file tax returns on time and with the correct payment amount, and tax clearances help ensure this in advance.
Virtually all industries require new professionals to purchase a surety bond before issuing them a business license to operate within the state. Surety bonds act as a preventative measure to ensure that professionals will follow all licensing and industry regulations applicable to their positions. There are thousands of surety bonds available, and their costs vary based on the state’s regulations for the industry and specific profession. For example, due to the nature of their work, a contractor getting a surety bond in California for a multi-million dollar construction project will pay a much higher fee than used auto dealer in Missouri who doesn’t do high volume sales.
If you’re going into business with a friend or other industry professional, there are a number of steps that you will need to complete in order to operate legally within any given state. Depending on the nature of your partnership, i.e. limited partnership or limited liability partnership, you will need to meet different requirements. Establishing a partnership for your business can be beneficial, but only if you do so in congruence with the law.