The 7 Basic Legal Requirements for Starting a Business in 2022

So you're ready to start your business. What do you need to make it official?
Whether you plan to operate your business in Pennsylvania, New Jersey, or Delaware, you must go through a state process to formally recognize your business under the law.
Why bother going through this process at all?

• A legal business entity protects you and your business partners from liabilities such as debts and lawsuits. A business shields your personal assets from getting seized by creditors if something goes wrong or if your venture fails.
  
• You can get certain legal benefits (including tax benefits) from operating as a business entity. Your business may be eligible for state stimulus programs.
  
• A registered business gives you legitimacy under both the law and the public view.
  

In just 7 steps you can have your business up and running under the law.
What Are the Basic Legal Requirements to Start a Business?Even though these are the “basics” of creating a legal business, getting the help of a business lawyer can make a huge difference in the success of your venture. Because these are the basics, they’re also the foundations upon which you’re building your entire business.
You want the foundations of your business to be as strong as possible, engineered to weather the stormy markets and the trials of business partnership. The best way to ensure this is to get the help of a local business attorney who knows the business laws in your state.
1. Choose Your Business StructureWhen it comes to how to structure a business, you've got options.
The following business structures give you the least legal protection:

• If you go into business by yourself without legal paperwork, you automatically establish a sole proprietorship where you are not shielded from liability.
  
• If you go into business with a partner without any legal paperwork, you automatically establish a general partnership where you each share full liability.
  

You have greater protection and more options with:

• A Limited Liability Company (LLC), which limits your personal liability and risk. Meanwhile, members of the LLC enjoy a flexible partnership structure with tax benefits. LLCs have simple filing requirements but you should have an operating agreement.
  
• A Corporation (C-corp or S-corp) limiting each business owner’s liability to only the amount they’ve invested in the company. Depending on the type of corporation you choose, you may pay corporate tax income or be eligible for pass-through taxation.
  

Every business venture is different. Your business lawyer can help you pick which structure is the most advantageous for you to maximize your potential and future growth.
2. Register Your Business Name as a Legal EntityOnce you choose the structure for your business, you must file the appropriate paperwork. This part of the process includes registering your official business name with the state, whether that’s Delaware, New Jersey, or Pennsylvania. The requirements may vary between states.
If you do business under multiple names, you can also legally register your various trade names and assumed names as DBAs, or “doing business as.”
Can You Start a Business Without Registering It?You can – see the section above about sole proprietorships and general partnerships.
However, if you don’t actually register your business, you open yourself up to a lot of risk and liability. Not to mention, if you fail to register your business name, someone else could take it.
3. Get an EIN (Employer Identification Number)Any business with employees will have to get an EIN, otherwise known as an Employer Identification Number. This is a 9-digit federal tax identification number.
EINs are free from the IRS website. Sole proprietors and single-member LLCs with no employees do not have to get an EIN – the single owner can use their social security number on paperwork instead. But an EIN helps keep your social security number private.
4. Get All the Necessary Permits and LicensesDepending on the type of business you operate and the industry you're in, you may need additional permits and licenses to begin operations. Construction companies, startups, tech companies, restaurants, and even certain retail businesses need permits.
Operating your business without the proper permits could expose you to fees, penalties, or even civil or criminal charges. But running your business is already a full-time job – you don't have the time or expertise to go into all of the legal requirements on top of everything else you do. That's where a business attorney comes in – to make sure your company stays in compliance.
5. Pay State and Local Tax RequirementsSome states and localities have additional tax requirements for business entities, such as annual tax filings. Missing these filings could lead to fees and penalties piling up over time.
6. Get Insurance for Your BusinessAlmost every type of business comes with some level of risk. Even in a simple store, customers may fall and get injured. Without insurance, you could be stuck paying the bill.
Your business attorney can go through your operations and identify areas of risk that should be covered by insurance in order to best protect your company. General liability insurance tends to be the bare minimum, covering property damage and personal injuries. But you may also need product or professional liability insurance, commercial property insurance, workers’ compensation insurance, or auto liability insurance if your company operates vehicles.
7. Protect Your Brand and Intellectual PropertyFinally – you must take steps to protect your brand and intellectual property.
Market recognition doesn’t come easy. Customer trust is hard to build and even harder to get back if you lose it. You don't want to pour your heart and soul into building a brand or product just to have it stolen from you by competitors, copycats, or counterfeits.
Your intellectual property or brand name may be or eventually become your company’s most valuable asset. Your lawyer can help you protect this asset and keep your market advantage by filing for the necessary copyrights, trademarks, or patents.
Your Next Steps After Business RegistrationRegistering your business makes your venture official. But the legal requirements don’t stop there. Compliance is a regular part of keeping your company healthy in the eyes of the law. Compliance becomes even more critical if you have employees.
The best next step is to make sure you outsource your legal compliance to a business lawyer who can keep all of your paperwork and legal requirements up to date.