Anyone who dreams about turning their passions into a profitable venture might want to consider a few things before diving in. You may have already thought of a place to set it up, the equipment to be used, and the staff to run it. This is all well and good, but you must first conform to what the law permits in the location you intend to operate. It is important to satisfy legal requisites, as well as know what employees are lawfully entitled to prior to establishing a business.
Deciding Business Types
There are basically three general types of businesses: sole proprietorship, partnership, and corporate.
Legally, a sole proprietorship is the most simple to set up, as it only has one owner who pays personal income taxes based on the income and losses of the business. This type of business can operate under a separate name or that of its owner.
A partnership requires at least two individuals running the business. They would be personally liable according to their share, in case of business losses should the partnership as an entity fail to satisfy its obligations.
Corporations have a legal personality separate and distinct from its shareholders. It requires at least five incorporators to start and will have its own set of by-laws that govern its operations. Because it is an artificial person, it may sue and be sued in a court of law. Its liabilities extend only up to that of the corporation and not into the personal assets of its shareholders.
Make Sure of the Paperwork
After deciding the type of structure your business will have, it is time for its registration. This makes it possible to have a business name by which the general public can use to identify it from others, and will be used to help avoid confusion with similar businesses. The exception is if you will be operating under your own name. This will make it unnecessary to register the business separately because it can already be known through your personal name.
The corresponding business permits and licenses are needed to complete its registration requirements. This process must be accomplished before it starts operating. Examples are fire & safety, health & sanitary, and sign permits. The requisite licenses are usually required for those who sell liquor, issue sales tax, and for the right to operate in the city where the business is located. The absence of any of these essential documents might cause the closure or temporary cessation of business operations by the government agency concerned.
Know Your Country’s Labor Laws
Every business big or small will require employees to run it. It can be just yourself, one other person, or many individuals to help make your vision come true. In line with this, it is important to know what they are entitled to and how you may legally compensate them for their services. Aside from their salary, this may also be comprised of paid or unpaid leaves, legally mandated holidays, overtime pay, night differential pay, maternal or paternal leaves, and other benefits. You should likewise know the basic taxes that apply to your employees and your business. This will help you understand your potential operational expenses before and after taxes.