Getting Started Overview
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Overview: Legal
One of the great advantages of being an entrepreneur in the U.S.. is the relative ease of starting a business. Many business people can tell you horror stories of how the government or regulators cost them pain and headache, but trust us, it's a lot easier here than in many other countries, especially those in Europe. Unless you need to get a patent or plan a business in manufacturing, retail, or anything to do with food, pharmaceuticals or chemicals, chances are the government and legal issues will be the least of your concerns—starting out, at least.
The most likely regulation to hit most new companies involves independent contractors. These are people who provide services to multiple companies who can help you provide services on demand after you have sold them to your customers. (See Staffing and Management.). You have to make sure these people in fact are independent contractors and not in reality full-time employees for whom you should be withholding social security taxes, state disability or unemployment insurance.
Contrary to what you might think, you don't have to incorporate right away. If it's just you, and you're not sure you can pull it off, you can simply set up a "dba," meaning "doing business as." This simple piece of state paperwork creates a name for your enterprise you can use to open a bank account to accept checks under the name of your company.
On the tax side, for your first year of doing business this way, you need only file what's called a Schedule C on your Federal tax return, which essentially is a separate accounting of your revenues and deductible expenses related to your small business. Your state will have a similar type of return you can file.
If your business shows signs of taking off, or if you have partners, or wish to raise money, you will have to incorporate and get help sorting out the best options in terms of type of incorporation. There are several types, including: partnerships, LLCs (limited liability companies), a Subchapter S, or C corporation. More on that in the Legal article.
Whatever kind things we have said above about the relative ease of starting a business in the U.S.A. from a legal standpoint, things get increasingly complicated as you grow and lawyers will definitely be part of your budget once you're doing a few million dollars a year in sales.
Even the simplest business will have issues related to contracts with customers, independent contractors (freelancers) or employees, non-disclosure agreements (you may require these, or clients may require these, to discuss matters considered confidential by either party). It's easy to skimp on legal fees, thinking you can do it yourself. Remember another old rule thumb: Your worst lawyer is yourself.
Click on Legal for more articles and resources.
