What You Need to Know Before Starting a Business

Here’s How to Start a Business – LLC, Corp, or Sole Proprietor

As an aspiring business owner, it is essential to understand the fundamentals of business law. Starting a business involves several legal considerations, from registering your business with the government to understanding local zoning laws. It is essential to be aware of the various aspects of the law that could affect your business operations. This article will provide an overview of what you need to know before starting a business and discuss the most pertinent legal matters related to launching and running a successful enterprise.

Understand the Legal Structure of Your Business

When starting a business, it is essential to understand the legal structure of your enterprise, and it is the foundation on which all other aspects of your company are built. Knowing the various designs available and their benefits and drawbacks will make it easier to select the right one.

Sole Proprietorship

One of the most common types of business organization is a sole proprietorship. This structure provides complete ownership and control over your business; however, there can be some drawbacks because personal assets may be at risk in a lawsuit or other proceedings against the business owner.


Another famous organizational structure is a partnership where two or more individuals share ownership and business responsibilities. Although this can be beneficial regarding sharing costs, profits, and losses must also be split between partners, which could create potential issues.

When setting up any partnership, it’s essential to consider all aspects, including ownership rights, tax implications, liability protection, and financial organization. Ensuring all agreements in writing is necessary to solidify mutual understanding about each partner’s role within the company and distribute profits equally among all partners involved.

Limited liability company (LLC)

A limited liability company (LLC) is a famous legal structure for businesses in the United States. An LLC provides business owners with personal liability protection, tax flexibility, and other benefits. Entrepreneurs need to understand how an LLC works so they can choose the best legal structure for their business.


A corporation is a legal structure of your business that provides protection from personal liability and offers many tax benefits. It is an independent legal entity owned by shareholders, who can be individuals or other companies. Establishing a corporation requires filing paperwork with the state where you plan to do business.

Forming a corporate entity for your business can come with certain advantages, such as limited liability protection for owners, transferable ownership interests, tax benefits, and increased credibility in the eyes of clients and suppliers. However, managing a corporation also requires additional administrative tasks such as holding a board or annual shareholder meetings plus filing documents with the state each year to stay compliant with state regulations.

Nonprofit Organization

The most common form of legal structure used by nonprofits is forming a corporation. This allows the organization to acquire property, borrow money and pursue legal action if necessary. Additionally, it limits the personal liability of those founding members in the Articles of Incorporation document filed with their state government when creating their nonprofit corporation. Nonprofits can be structured as unincorporated associations or limited liability companies (LLCs).

Tax Implications

for tax purposes, businesses have four primary legal structures: Sole Proprietorship, Partnership, Corporation, and Limited Liability Company (LLC).

  • If you choose a Sole Proprietorship for your business, you will be personally liable for all debts incurred by the company. Any profits earned from the business will be subject to self-employment taxes.
  • A Partnership works similarly; however, each partner is jointly liable for the partnership’s debts and must pay self-employment taxes based on their earnings.
  • Corporations are separate entities from their owners and offer some protection against lawsuits or other liabilities incurred by the corporation.

Considerations for Making a Choice

As an entrepreneur, one of the most important decisions you can make is the legal structure of your business. This will influence how you operate and the financial obligations you’ll have. When choosing a business legal structure, there are several considerations to keep in mind.

First, consider which type best suits your goals and needs as a business owner. Do you plan on taking out loans? Are partnerships involved? Knowing strictly what liabilities and responsibilities come with each entity type can help make this decision easier. Second, research applicable taxation regulations for potential legal structures that align with your business plans. When selecting, consider any additional taxes or filing requirements associated with specific entities.

Finally, consulting with attorneys or tax professionals specializing in corporate law is essential if you’re unsure about the right choice for your business.

Register Your Business and Obtain Licenses and Permits

Registering your business and obtaining the necessary licenses and permits is essential in getting your business up and running. Knowing what types of licenses and permits you will need to run a successful operation is necessary. Depending on the type of business you are starting, some of the most common requirements include registering with your state, obtaining a federal tax ID number, filing for any relevant local or state business taxes, and requesting additional permits that may be required for specific types of businesses.

Before registering your business or applying for any licenses or permits, it’s helpful to research what exactly is required to operate within your state legally. This can be an overwhelming process, but there are several resources available online that can provide advice on how to go about completing this process correctly.

If you plan to open a business in Texas, you must register your business with the state and obtain the necessary licenses and permits. This process may seem daunting initially, but ensuring your company operates legally is essential. The Texas Secretary of State handles all the paperwork necessary to register a new business, and you can do this online or by mail. Once your company has been registered, you must obtain appropriate licenses and permits from other government agencies.

For example, if you are opening a restaurant in Texas, you’ll need to get a permit from the health department. If you are starting a retail shop or store that sells goods or services, you will likely need an occupational license or seller’s permit issued by the local county tax assessor-collector’s office.

Consider Tax Implications Before Starting a Business

Starting a business in Texas comes with a range of legal and financial obligations, including taxes. It’s essential to consider the tax implications of your venture before you launch, as it can significantly impact your business’s success.

When starting a business in Texas, one crucial factor is the type of entity you choose for taxation purposes. Depending on the structure—which could be anything from a sole proprietorship to S-Corp—you’ll enjoy different liability protection and taxation benefits. Additionally, each entity requires its own set of paperwork and annual compliance requirements that must be met to remain compliant with state regulations.

Knowing which forms must be filed and when they are due is also essential to preparing for tax season.

Protect Your Business with Contracts, Insurance, and Trademarks

When protecting your business, contracts, insurance, and trademarks are essential elements that should not be overlooked. Agreements provide a framework for setting expectations and outlining responsibilities between companies and their partners or employees. Insurance offers protection from financial loss due to unforeseen circumstances or events. Trademarks help protect brand identity by giving exclusive rights to use the name or logo associated with the business.

Taking the time to research, understand and properly execute these protections can make all the difference in your business’s success. It is essential to consult with an attorney if you are unsure of how best to go about setting up contracts or acquiring insurance coverage for your small business. Additionally, obtaining a trademark requires applying with the United States Patent & Trademark Office (USPTO).

Comply With Employment Laws When Hiring Staff

A successful business requires following all relevant laws and regulations, especially regarding the hiring process. As a new business, understanding and abiding by employment laws are integral to establishing yourself as a dependable employer. Failure to comply with these laws can seriously affect your company and its employees.

It is essential to be aware of all federal, state, local, and sometimes international laws that apply when hiring staff. These may include minimum wage requirements, equal opportunity rules, paid leave policies, etc. Employers must also comply with government-mandated labor requirements such as workers’ compensation coverage or drug testing procedures.

To mitigate any potential legal issues related to the hiring process, businesses should create job postings that list relevant qualifications without relying on discriminatory language or assumptions about age or gender identity.

Resolve Disputes with Customers Quickly and Efficiently

When starting a new business, it’s essential to ensure customer satisfaction. One way to do this is by resolving disputes quickly and efficiently.

This doesn’t mean giving in to the customer’s demands immediately; it means finding a middle ground upon which both parties can agree. This approach creates a win-win situation and helps build positive customer relationships. It also shows that your business values their feedback and is willing to take action to resolve any issues they may have.

Overall, resolving disputes quickly and efficiently ensures customer loyalty and strengthens your relationship with them in the long run. This enables you to maintain a good reputation among current customers and potential clients looking for reliable services from trustworthy businesses.

Small Business Resources:

Applicable Laws:

Texas Business Resources:


Starting a business requires hard work, dedication, and research to succeed. Understanding the different aspects of running a business, such as registering with the necessary government agencies, setting up an accounting system, and creating a marketing plan, is essential. Additionally, having enough capital to cover start-up costs and maintain your operations for at least six months to one year is critical.

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