Legal Aspects of Starting your BusinessIn a business start-up, there are various legal responsibilities you should be aware of, to protect your business and avoid costly penalties. Many of the steps involve filing forms and keeping records that you can take care of yourself. Even if you intend to consult an attorney, you can reduce the cost of legal consulting by reading books that guide you through the process, or by looking at a few Web sites.
Following are some considerations you may have regarding the legal aspects of starting or running a business. Listed are books, agencies and links to Web sites that can give you information and assistance. In many cases, the links will allow you to download forms and file the necessary applications. Check out FedForms.gov for "one stop shopping" to find commonly used forms for many federal agencies. Consulting a lawyer is an expensive proposition, but many aspects of starting and running a business are complex, and it may be worth the cost. It can actually save you money in the long run to have well-written contracts, and be in compliance with the law.
It is helpful to use a lawyer to set up the legal structure of the business, draw up employment contracts, close on real estate purchases, and obtain patents or trademarks, and to handle other transactions that involve large sums of money or binding agreements.
Before engaging a lawyer or meeting with one, you might look through one of the many books that outline the legal requirements involved in running a business. These books will help you gather the information and documents a lawyer may need to review. Or they may show you how to do simple transactions yourself. Check the Electronic Catalog for titles dealing with small business and law. If you decide to engage a lawyer, here are some helpful resources:
- NFIB's "Helpful Tips for Hiring a Lawyer" offers sound advice to small business owners.
- Martindale-Hubbell Law Directory, available in the Business Library is a multivolume directory of lawyers in the U.S., organized geographically by law firm, with an alphabetic listing of individual lawyers in the blue pages. The company also maintains a useful Web site, www.martindale.com, that allows you to search by specialty and location.
- The American Bar Association's Website is a wonderful resource. It has a lawyer referral service plus information on handling legal matters yourself.
- The Findlaw Web site has a very detailed listing of legal specialties to choose from.
- LawHelp helps low-income New Yorkers find free legal services. This organization does not focus on business issues, but offers assistance in many areas such as taxes, disability and workers' rights that may be of interest.
There are many ways a business venture may be structured. The diferent types of businesses are distinguished by the number of people who own the business, the personal liability of the owners, the tax advantages and the simplicity in forming the entity. The three general legal classifications are sole proprietorship, partnership and corporation.
The easiest form of organization to form is the sole proprietorship. It can be initiated by simply starting to do business. Partnerships and corporations are more involved and there are a number of variations for each, such as S Corporations and Limited Liability Corporations (LLC).
The Business Library has numerous books that review the various legal structures you may adopt to form an enterprise. Check the Electronic Catalog using keywords such as "start" and "small business."
A number of Web sites have helpful guides for selecting the form of your company:
- Findlaw's Small Business site has a good explanation of "Incorporation, "Legal Structures, and Business Formation."
- Business Filings Incorporated has a comparison table that outlines the characteristics of different legal business structures.
- Business.Gov is the U.S. governments's site legal and regulatory issues, as well as services just for businesses. This page offers information on choosing a structure for your business.
Once you have selected a legal structure for you business, you need to file papers with the right government entity. If you are incorporating, you might have a lawyer help you with this, or you could refer to one of the Business Library's books that guide you through the process. If you are registering as a sole proprietor or partnership, you are encouraged to consult a SCORE representative at the Business Library to review the steps involved.
Following are links straight to the government agencies that handle incorporations and registrations:
Even if you do not intend to incorporate, but still would like to do business using a name other than your own, you need to register your business. The form to file, Form X-201, is referred to as a "DBA" (doing business as) and it must be filed with the county clerk. In Brooklyn (Kings County) the county clerk is in the State Supreme Court Building at 360 Adams Street, RM 189, Brooklyn, NY 11201, 718-443-9012.
Almost every business requires a license of some sort, and some may require more than one. You may also need a professional license or accreditation for yourself or your employees, depending on your field (e.g., beauticians, electricians and other professionals need to be personally licensed).
The State and City of New York, as well as the federal government, issue licenses and permits. For instance, an employment agency needs a license from the New York City Consumers Affairs Department and a restaurant needs permits from the NYC Department of Health, while a real estate broker is licensed by New York State. Listed below are the addresses and Web sites for regulatory agencies at each level of government, as well as a description of the type of licenses they require. The New York City Greenbook, which can be found at all Brooklyn Public Libraries, also lists a large number of licenses and the agencies that issues them. In all cases it is essential to obtain the proper license or permit before you start up to avoid any penalties.
Most small businesses do not require a federal permit to operate unless they are engaged in the following services: investment advice, alcohol or tobacco sales and manufacture, broadcasting, preparing meat products, dealing in firearms, or manufacturing drugs.
For quick information on federal licenses, Business.gov has a section on There is also information on regulations that relate to hiring and managing employees under the section on Employment Law.
The IRS site, www.irs.gov, provides more details and forms online. You may also get forms from the IRS Taxpayer Education office in Brooklyn at 625 Fulton Street, 6th Floor, or at IRS offices in Manhattan at 110 West 44th Street or 290 Broadway.
There are 36 different agencies in New York State that issue more than 1,200 types of business permits. Both businesses and occupations are licensed by the state. Your business may require a permit to operate (for example, a preschool), while you or your employees also need professional certification (a teacher's certificate).
For a comprehensive list and easily accessible information, use the New York State Small Business site. This site not only outlines the various types of permits, from environmental requirements to day care licenses, it also provides direct access to the agencies that issue the permits.
The Permits Assistance Kit on the Governor's Office of Regulatory Reform (GORR) Permit Database is particularly useful. Use the alphabetic list to find the type of business you have, answer pertinent questions and then obtain a complete description of the regulatory issues that affect your business. If you need to contact GORR's offices directly, write or call: Governor's Office of Regulatory Reform, P.O. Box 2107, Albany, NY 12220-0107, or call 518-486-3292 or 800-342-3464.
The Business Library also has books such Starting and Operating a Business in New York that discuss licensing in New York State.
The place to start looking for New York City licenses and permits is the New York City Web site where you can get information on a variety of different types of licenses from building codes to taxi medallions. Under the Business Section of The Department of Consumer Affairs site, click on "Does Your Business Need a License?" to find information on obtaining a license from the city. You can also download the application forms for various licenses from this site. New York City's Business Solutions Centers also can help. Check out the Licenses and Permits page of their web site to get tips and assistance.
Restaurants and businesses that handle food must comply with the NYC Department of Health's regulations. New York City produces a brochure, "New York City Restaurant Business Guide." You can find it on the shelf in the Business Library or on the city's Web site. The Department of Health, Division of Permits, is at 42 Broadway, 9th Floor, New York, NY 10004, 212-487-4371.
Every business must pay income tax on its profits, but there are other tax liabilities that you should be aware of when you are starting out. Good record keeping and bookkeeping are invaluable, and actually can save you time and money. Almost every business owner will also tell you that you should consult a bookkeeper or an accountant regularly. There are, of course, many books that explain accounting systems and outline ways to save taxes. You can find these books in the Electronic Catalog. And there are many websites that offer information, tips and news of changes in tax codes. Here are two:
About.com's Small Business Site
Yahoo Finance's Tax Center
The following is a list of the most common types of taxes businesses pay, along with the government agency that collects them. When starting out, you should make sure to file the appropriate reports.
NEW YORK CITY TAXES: A sole proprietor or partnership in NYC must pay an Unincorporated Business Tax, while corporations pay a General Corporation Tax (GCT). Other examples of taxes imposed by NYC are sales tax, commercial rent or real estate tax, and alcoholic beverage sales tax. A good list of NYC business taxes can be found on the New York City's Finance Department's website. The Taxpayer Assistance Center for the NYC Department of Finance is at 25 Elm Place in Brooklyn, 718-935-6739.
NEW YORK STATE TAXES: If you are selling goods, it is mandatory that an application be made for a Certificate of Authority (Resale Certificate). Use form DTF-17, Publication 750. You can apply online, via The Sales Tax Index. Select "Online Application for Registration as a Sales Tax Vendor" or contact the New York State Department of Taxation and Finance at 800-462-8100 to order forms or 800-972-1233 for business tax information. For information on all other NY State taxes refer to the Business Taxpayers Page; you can keep up with changes in tax laws by reviewing the "News and Features" page. Or go to "Forms and Instructions" online to get copies of the forms you need.
FEDERAL TAXES: In general, a business must pay federal taxes on its income and you must also pay self-employment tax on the income you receive from your business. In addition, there are tax obligations related to your employees. Every business should obtain a Federal ID number (Employer Identification Number or EIN) by filling out IRS Form SS-4. Use the IRS Tax Information For Businesses site to get an explanation of this and other federal taxes. To get copies of the tax forms, click on "Forms and Publications." For information about the latest changes in the tax code, check out the Tax Changes for Business page on the IRS site. For more information online you can use the IRS' Small Business site. Navigate the sidebar on the left to find "Forms & Publications" and "Where to File."
The taxes you must pay and the forms you must file depend on the legal structure of your business. The IRS Tax Guide for Small Business, found in the Business Library, can help you determine what taxes apply to your business. Additional recommended reading includes U.S. Master Tax Guide by Commerce ClearingHouse and Tax Savvy for Small Business by Fred Daily.Writing a Contract
You will find that you need to record many business transactions and agreements. You may want to draw up an employee contract, a bill of sale, a rental agreement or any number of documents. There are many standard forms and contracts that can be adapted to suit your particular needs.
Books with sample forms can be found by checking the Electronic Catalog for titles such as J.K. Lasser's Legal and Corporation Forms for the Smaller Business or The Small Business Legal Kit. In the reference collection of the Business Library you will also find Gould's Legal Forms & Procedures Handbook as well as a number of law books such as West's Legal Forms. You should still consult an attorney and an accountant in many instances, but these standard forms can be a starting place and in many cases they will allow you to complete a transaction yourself.
Web sites also offer information or sample forms online, sometimes for a fee:
A trademark is a word, phrase or symbol that identifies your product or your company. A patent is granted to an inventor to exclude others from making, using or selling his or her invention. It lasts 17 years. Applications for both patents and trademarks are submitted to the U.S. Patent and Trademark Office. It is extremely beneficial to consult a patent attorney before proceeding.
To learn the basics, start with one of the many books in the Business Library that is devoted to the topic. Another essential source is the U.S. Patent and Trademark Office Web site. Additionally FindLaw and Business.gov have information on their sites listed under "Intellectual Property."
To conduct a patent search yourself, that is to determine if a patent has already been granted for an invention such as yours, a good place to start is New York Public Library's Science Business and Industry Library at 188 34th Street in Manhattan, 212-592-7000. If you wish to copyright a song, book, play or other creative work, the applications are handled by the Library of Congress. The web site is particularly helpful. The Business Library has sample applications for the different creative forms.
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