Starting a business is a major part of the ‘American dream’ for many people. Being self-employed, creating jobs, and providing value to your niche is a great way to earn financial security, and create a great life for yourself. However, starting a small business is not always sunshine and rainbows.
Starting a small business is often far more difficult than just creating an idea, and a logo, and trying to make something of it. Small business owners often drastically underestimate the legalities and tax issues that face them before starting their business.
Common Legal and Tax Issues Small Businesses Face
No one ever wants to think of the worst when starting a small business. After all, this is your dream becoming reality–why would you want to think of doom and gloom? Well, the harsh reality is that there is a legal side to owning a small business that every small business owner should take into consideration before opening their business altogether. Here are just a few common issues small businesses should prepare and plan for:
Educated Yourself On Required Licenses
Every state has different laws on licensing and what is required to be licensed; but every state does have licensing laws, no matter what. If you do not take caution and prepare yourself with proper licensing, you could be hit with massive fines that could financially destroy your business before it even starts. Always consult a lawyer, or your local licensing office to better understand what licensing you need.
Be Aware Of Misclassifications
Misclassification of your business can lead to legal, and tax related issues if you aren’t careful. In many states, corporate entities need to be classified according to their business type, and field. In addition, employees often need to be classified depending on their employee agreements.
Misclassification of any kind can lead to issues relating to your taxes, and your operation of business within the law. Small business owners should always be careful to classify their employees and business correctly.
Trademarks Should Be Discussed With A Lawyer
Trademarks are one of the most common legal issues that small businesses face. It’s a good idea to contact a trademark lawyer before launching your business name, product names, or logos. You never know what might be trademarked and violating trademarks could ruin a small business.
Make Sure Your Bookkeeping Is Perfect
One quick way to face penalties from the IRS is through poor bookkeeping. If you do not properly track your expenses, revenue, sales, income, wages, etc. You can be faced with massive auditing issues come tax time. This can become disastrous for those who aren’t well prepared for these sorts of issues.
These are just a few ways that small businesses can quickly fold if they are not preparing in advance. It can be the early death of any small business if they are faced with legal fees, penalty fees, and the like very early on in the start-up process. Always make sure that you have covered all of your bases, before launching your small business. Future you will be grateful for it, and your business will have a more solid foundation to grow on.