What legal matters do I need to consider?
To insure that you are operating a legal business, check with your local and state authorities to notify them of the nature of your business and learn if there are any permits needed. Most small businesses do not need a special permit, but some do. Your local city or county zoning board can help steer you in the right direction.
For tax laws, contact an office of the Internal Revenue Service for booklets and guides. The IRS will give you a free “New Business Kit”. Their Publication 334 also has a lot of useful information about small business tax matters.
Some businesses require special authorization from state agencies before they can conduct business. Certain health facilities, transportation businesses, businesses dealing in dangerous chemicals, food processors, and others must check with the appropriate state agency for permission to do business.
If you will be employing others in your business, the state Employment Commission can advise you of laws pertaining to the hiring, employment and pay of workers. There are also Federal laws in this area, but the state agency can advise you of these also.
In addition, almost everything that you will be doing in your business has a legal implication. Leases, contracts, credit, banking, equipment ownership, real estate – all have legal aspects which should be understood. Establishing and maintaining a relationship with a lawyer is a good business practice. When you need a lawyer to review one of these matters, you will have that specialist available. It is far better to use lawyers to keep you out of legal trouble than to wait to use them after you are in trouble.
Should I hire a lawyer?
In using lawyers, it is important to keep in mind that lawyers work with the law. They are usually not business people and often do not understand business issues. They should not be used for business advice unless they have clear competence to offer that kind of advice.
Since lawyers are expensive, especially for small businesses, they are usually hired with care and consideration to their expense compared with their benefit. If the business owner understands the law in certain areas, a lawyer is usually not needed. An example might be contracts. If the business owner is familiar with contracts and contract law, the expense of a lawyer to draft a simple contract is probably not needed. On the other hand, if the business owner is uncertain, the review of the draft contract by a lawyer will be money well spent. Once a contract is signed by you, it is usually too late to fix problems. The law assumes that you have read and understand a contract before you sign it.
What do I do to set up a legal business?
Then get your tax information from the IRS and employment law information from the State Employment Commission.
Good advice is to use a business advisor, such as an SBDC or S.C.O.R.E. chapter, or a lawyer or accountant to guide you along.
Do I need a lawyer to incorporate my business?
Should I use a lawyer to draw up a contract or a lease?
Some contracts and leases are drafted in terms not easily understood by lay people. Words often have a different meaning in the law than in common usage. A lawyer can alert you to these differences. A lawyer can also help you understand the exact nature of what you are agreeing to. You may think you are agreeing to one thing, but the language of the contract or lease may mean something different. Sadly, some legal instruments are purposefully drafted to confuse or mislead the reader.
What are the legal forms of business organization?
What form of business organization should I pick?
Do I need any permits?
Where do I get a tax number?
If you have employees, you must get an Employer’s Identification Number issued by the Texas Workforce Commission. Contact the TWC at 512-463-2731 or visit your local office of the TWC. Ask for the forms needed to obtain your employer’s identification number.
Sales Tax Number are issued by the Comptroller of Public Accounts, Austin, TX. Call 1-800-252-5555 to order an application form, or ask for the field office located closest to you.
Why do I need a Federal Tax ID number?
What regulations apply to my business?
On the Internet, look at www.business.gov, which is the site for the U.S. Business Advisor. This is a resource offering access to information from dozens of government agencies and departments. It gives plain language guidance about federal regulations and compliance issues.
Often, direct contact with the governmental agency or department concerned is advised because they are current with information and are usually set up to offer quick assistance to small businesses asking for information. Many have prepared packets of information they will send to you free.
How will my business profits be taxed?
They are taxed directly to you if you operate as a sole proprietor, a partnership, or an S-corporation. They are not taxed directly to you if you have a C-corporation. The C-corporation is considered by the tax laws as a separate person and is taxed under special rules that apply to C-corporations. The profits made by a C-corporation are not included in your personal income tax return. Only the money you receive from the corporation in the form of salaries and dividends are taxed to you personally.
What can I expense in my business to save taxes?
The above quick answer is a generalization and oversimplification, for the tax laws relating to business expenses are complex. IRS Publication 334, the Tax Booklet for Small Business, is a good source of information about what is permitted in the way of business expense.
Different businesses and different industries have different rules relating to expenses. What is allowed for some businesses are not allowed for others. It is important that you understand the rules for your particular business. CPA’s, tax lawyers, the IRS, and other advisors are good sources of information on this subject.
Should I use a Certified Public Accountant (CPA) to do my taxes?
Can I prepare my own tax returns?
A residual benefit of doing your own taxes is what you learn about your business and the tax codes. This knowledge is useful in your decision making throughout the year.
Can I hire my children or relatives and get a tax deduction?
Can I buy a new car in my business and get a tax deduction?
If I operate my business from my home, what can I deduct from my taxes?
In addition, under certain circumstances you can also deduct a portion of your home expenses – that portion that relates to business use. There are some strict rules for this and you should know what they are before attempting to take any deduction for home office or home business use expense. Consult IRS Publication 334, the IRS, a CPA, a tax lawyer, or some other source familiar with these rules.