Starting a business is surprisingly much easier and simpler than many non-entrepreneurs imagine. But just because it is relatively simple to start a business, that doesn’t mean that it is necessarily easy to set up a business properly. What many first-time business owners end up discovering is that setting up a business is easy, but they end up making a lot of legal mistakes that can seriously impact their success. With a little bit of research and planning, you can avoid these mistakes with your first business. Here are three legal mistakes first time business owners make and how you can avoid them.
Failing to Register
The first legal mistake that many first-time business owners make is not registering and licensing their business. Unless you are going to be doing business under your own name and as a sole proprietor, then you are almost always going to need to register your business. Registering your business simply announces to the government the name of your business, allowing you to sign contracts, make bank accounts, and do business under the name of your business. Licenses, on the other hand, are legal permission to operate. Different states, cities, and counties have different regulations on licenses, and what types of businesses need what licenses. Make sure you have it all squared away before starting business.
Choosing the Wrong Structure
The next legal mistake that many first-time business owners make is choosing the wrong business structure for their business. Structuring your business properly is one of the most important things that you need to do as a business owner. Your structure type will determine how you are taxed and what level of personal liability you have to your business debts and lawsuits. An LLC is the most popular type of business entity. An LLC offers limited liability protection so that your personal assets are at least somewhat protected.
Not Having Insurance
The final mistake that many first-time business owners make is not having business insurance. While business insurance, especially for very small businesses, may not be a legal requirement, it can protect you from the law and is always a good idea. Business insurance helps to protect your business from lawsuits and other issues that might come up, and help your business stand up to these issues. Don’t do business without business insurance.
Running a business is never easy, especially if it is your first time. But you don’t have to make the same mistakes that most first timers make. Simply follow this advice, and you will be prepared to avoid the costly legal mistakes that many first-time business owners make.
Check out this article on how to prepare for the worst at your business!