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Legal Requirements for New Business Owners

Featured image by Romain Dancre on Unsplash

Are you preparing to launch a new business? Aside from developing your business idea, it’s also essential to consider the legal requirements for starting a business. Here we address this topic.


Small businesses play a vital role in the economy of the United States. There are currently 33.2 million small businesses in the country. In fact, small businesses make up 99.9 percent of all American firms.

Many small businesses have found significant success in recent years. For this reason, many people aspire to start their own businesses as a primary source of income or to add to it.

Legal Requirements for Small Businesses

Complying with legal and industry requirements offers several benefits to businesses. Doing the paperwork as soon as possible eases the burden. This also allows you to focus more on other business aspects.

Here are some of the major requirements you need to accomplish to cover your new company’s legal bases.

Legal Requirements and Your Business Structure

Deciding your business’s legal structure is one of the first and most important steps when starting a business. Your business structure will determine several things. For example, it will determine how you operate as well as your business’s resources and liabilities.

Here are some common legal structures you can explore for your business:

  • Sole proprietorship
  • Partnership
  • Limited liability company (LLC)
  • Corporation

Licenses and Permits

Different levels of government will often ask for specific legal requirements depending on your industry. For example, on the federal level, you will likely need a permit if your business falls under transportation, agriculture, alcoholic beverage production and sales, broadcasting, and more.

Local governments will also usually require a general business license. Operating a food- or beverage-related business will also require you to procure a food preparation and sanitation permit.

Check with your local and federal government agencies to see what licenses and permits your business needs.

Legal Requirements for Business Insurance

There is always some risk involved with operating a business. No matter your precautions, unexpected incidents may still occur. These can affect your resources, employees, and customer relationships.

Let’s say one of your vehicles gets into an accident. Aside from hiring a car accident lawyer, insuring your vehicle can help you recover some of the material damages.

Different types of insurance can help you safeguard various aspects of your business. Insurance brokers can help you decide on the coverage you need. This may include the following:

  • General liability insurance
  • Product liability insurance
  • Professional liability insurance
  • Workers’ compensation insurance
  • Commercial property insurance
  • Auto liability insurance

Tax Identification Numbers

The U.S. federal government requires most business owners to have a tax identification number called an employer identification number (EIN). The Internal Revenue Service (IRS) uses this number to identify entities required to file business tax returns, among other things.

You can register for an EIN through the IRS website for free. The website also provides relevant information and other requirements about your EIN and other tax-related responsibilities. Other application options include mail and fax.

The Necessity of Compliance with Legal Requirements

Dealing with legal requirements and paperwork can seem daunting and tedious, especially if you’re new to the task. However, they are necessary for starting and running a successful business.

Here are some main reasons one should always consider legal requirements when starting a new business.

Avoiding Legal Liabilities

One of the biggest reasons to pay attention to legal business requirements is to avoid legal trouble. Compliance with legal business requirements in your state or country is essential to avoid facing possible complaints or government action.

Before beginning your business operations, double-check the requirements in your locality to ensure you have everything prepared.


Improving Public Relations

If your business complies with government regulations, you can openly publicize any of your initiatives. There is no fear of legal repercussions since you know most of your operations and business decisions fall under legal guidelines.

You could announce your company policies, such as being an equal-opportunity employer. Following government guidelines on health, safety, and sanitation can also help you attract customers and better-quality employees.

Boosting Business Growth

Government regulations mainly exist to ensure employee and customer safety and well-being. These rules help guarantee employee welfare, general safety, and quality products and services. For this reason, legal compliance can increase the quality of your business operations.

Proper and consistent legal compliance can attract new customers and retain existing ones. People are more likely to support a business that offers good products and services and minimizes harm.

On the other hand, poor compliance can have adverse effects on your business’s reputation, profitability, and growth.

Ensuring Safety

Following government and industry regulations helps ensure customers’ and employees’ safety and welfare.

Workplace safety and anti-discrimination and harassment rules provide a better working environment for your employees. Compliance with these rules can help you retain quality employees and improve productivity. These rules also extend to the safety of your customers.

These legal requirements also help prevent accidents and injuries. They provide clear rules and courses of action during fires, accidents, or natural disasters.

Legal compliance with federal and local government requirements can take quite a bit of work. However, they are essential in avoiding legal trouble, ensuring product and service quality, and protecting employee and customer welfare.

As you prepare to launch your business dream, be sure to bookmark our site and browse our blog often for new articles. We can help you as you travel the road to success.