Starting a Business

Business people shaking hands in officeAmerica is a capitalist society; everyone can operate a business. He or she can do so with little fear of government interference, unlike in some countries. However, there are laws and regulations.

Anyone can operate any type of business – for example, a sole proprietorship, a partnership, or a corporation. But starting a business is not exactly simple. So, people should acquire help and training from business professionals; map out a written plan for their business; decide how their business will be legally structured; acquire enough funds to start their business; and select the location for their business.

Starting a business involves a ton of legal and financial matters. Entrepreneurs have to acquire special professional licenses and complete licensing procedures.  They receive their licenses from state governments, not the federal government, and state governments give professional licenses to either individual entrepreneurs or to their business.

Licensing procedures differ from state to state. However, generally speaking, licensing procedures require applicants to demonstrate to the license issuers that they have professional training and/or pass tests (such as bar exams for law licenses and the Medical Licensing Examination for medical licenses). Some procedures dictate that applicants must have been in their professions under more seasoned practitioners for a certain period of time before receiving their licenses.  Some licenses last for a certain period of time before they expire, and to keep their licenses some professionals must complete continued education assessments specific to their professions.

In addition,   retail professionals must have sales tax licenses in order to conduct sales, even those of tax-exempt products, and obtain sales taxes from customers.  Businesses that sell both products and services must separate their product sales from their service sales because service sales generally are not taxed. Furthermore, business owners usually must register with state treasury or revenue departments and often file other business taxes.

Moreover, the type of business individuals start also is important. If it is a corporation, limited liability company, or limited partnership, the owners must submit organizational filings to state corporations departments, and if business ownership is shared among managers and investors but the investors do not participate in day-to-day management, the managers must follow state and federal guidelines for securities. However, if the business is a partnership or sole proprietorship, state law may not require any formal registration. An oral or unofficial agreement between two or more individuals automatically forms a partnership. As a result, no official written agreement is legally required, but a written agreement among partners is extremely beneficial, as it serves a recordkeeping function in case of any disputes.

The law also requires that entrepreneurs register the official name of their business with the appropriate county clerk who then places it on the books. As a result, other entrepreneurs often cannot use the same business name.

Entrepreneurs also have employer responsibilities upon starting a business and hiring employees.  For example, they must register with the state labor department and abide by health and safety regulations if they have employees. Moreover, if business owners have employees or use independent contractors, they must fulfill various tax obligations.  For instance, they may have to obtain employer identifications from both state and federal tax officials; not include income taxes, employment taxes, and/or disability insurance payments in their employees’ paychecks; share their tax and insurance figures with their employees, the state government, and the Internal Revenue Service (IRS); and submit the excluded taxes to state and federal tax officials. If they use independent contractors, they must submit a yearly contract payment report to both the contractors and the government. And, they should remember to pay the excluded taxes because if they do not, they may become unable to pay employment taxes, due to cash flow problems.

If you are starting or thinking about starting a business, remember:  It is better to have an attorney to assist you in the startup processes than to do it alone. He or she can be a great ally. If you have questions about America’s business and related laws, talk to a lawyer. For more information and to have your questions answered, contact Nashville Business Attorney Perry A. Craft.

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