How to Legally Start a Business – 8 Steps

Today, I want to talk to you on how to legally start your business. This might be a home-based business, that might be something else, but these are the eight things that you need to do. So pay attention!

All right. There’s so many people that are out there starting home-based businesses these days and a lot of them, frankly, are probably doing it wrong. Today, I want to kind of debunk some of the things that you need to think about if you’re first starting out with your home-based business. This might be everything from an e-commerce business, to a blog, to a YouTube channel you’re starting and hoping to make money from, to a consulting business, to maybe you were working for a company and then you decided to stop working, and you went home and you’re trying to figure out something else that you want to do to make money.

Whatever it is, today I want to talk to you about taking that idea that you have for that business and what you need to do legally to protect that idea and how to build it into something truly special that can help earn income for you and your family and so that hopefully you don’t have to go back to that nine-to-five job, because if you’re watching this video, chances are, you probably don’t want to be at that nine-to-five job if you’re already there. Am I right about that?

Legally Start a Business Step #1 – Pick a Name for your Business

First thing you need to do when you’re starting out your business is, I know this is going to sound stupid, but you have to pick a name for your business. This is the most important thing when you’re just getting started. Especially if you’re trying to build a brand, you might want to come up with something unique or different.

I’ve used this example before, but the woman that started Spanx, she came up with that name. She did all the things that she knew to do to protect that business name before she actually launched it to the public. So, first thing you got to do before you start protecting the name is you got to come up with a name, so that’s number one.

When you’re starting to think about coming up for a name, one of the things you may want to think about doing is doing a search of all the online platforms to make sure that nobody else is using that name. So you’re going to search Google. You’re going to search the US Patent and Trademark Office website. You want to do a search on Facebook. You want to do a search on all the social media platforms that are out there.

And you want to make sure that the name that you’re choosing for your business is actually available so that you can use that name. Then you could start claiming all those properties as well, all those online properties.

The other great place you want to check is every state has a Secretary of State. I know you shouldn’t be confusing this with the Secretary of the State of the United States on a federal level. Every state has a Secretary of State, and that Secretary of State is typically responsible for managing the corporate records for that state. So you want to check their website. They usually have an online database, regardless of what state you’re in, and make sure that the name you’re choosing is not already taken in that state, in the state where you live, or in the state where you’re going to be doing business if you’re overseas or something.

Assuming that your name is available, you want to go ahead and register as a DBA. That’s a Doing Business As in your state. The reason you want to do that is so that when it comes time to actually form an LLC, or a corporation, or something else that you want to do, that name will be reserved, and nobody else would have come in and taking it.

The other thing you may want to think about doing is filing what’s called an Intent to Use Application with the US Patent and Trademark Office. Now, you can’t actually get a trademark until you’re actually using a name, or the logo, or whatever it is in commerce. In other words, that you’re selling products with that name. You can’t register a trademark until you’re doing that.

So if at this point, since you’re only in the exploratory stage, and you’re just coming up with the name, you may want to think about if you came up with something that’s really great, you want to go ahead and register that with the US Patent and Trademark Office. You’re going to file what’s called an Intent to Use Application that’s going to tell them that you intend to use this name in commerce in the future, and you’re basically reserving that name.

Legally Start a Business Step #2 – Open a Business Bank Account

Number two, you want to go ahead and open up your business bank account. This is really important because this is how you’re going to keep track of all your business expenses and any income you may earn. At this point, you don’t need to go ahead and apply for an employer identification number with the IRS just yet. And you can open up this business bank account in your name with the DBA that you’re using and just use your own personal social security card. You just tell the bank you’re opening up as a sole proprietorship. So you can go ahead and do that now before you’ve actually formed an LLC or a corporate entity.

Then what you want to do is you want to deposit some of your own personal money into that bank account, and you can use that bank account. Then you can do a debit card and you can use that to pay for all of the supplies, web properties, get your blog started, whatever you need to do. You can invest in the business personally, and then you can use that money to basically pay for all your startup costs, whatever those might be.

You can also use that account to start receiving things like affiliate sales from share sale, or Amazon affiliates, or wherever you might be getting affiliate sales from. You can deposit that money into that account so that’s a great way to do that.

Legally Start a Business Step #3 – Incorporate Your Business

Number three is you want to go ahead and incorporate your business. Now this you’re going to do after you’ve actually validated your idea, after you’re actually starting to earn some revenue from the business. Then at that point, you want to go ahead and incorporate the business.

This is an awesome video explaining the differences between the various legal entities you might want to think about. So check that out and that’ll help you figure out which corporate entity you want to use, whether it’s going to be an LLC, a corporation, or something else, maybe a partnership.

Legally Start a Business Step #4 – Check for Necessary License in Your State

All right. Number four, the next thing you want to do is you want to check and make sure you don’t have to get any type of special license in your state, or the locality where you’re living and operating your business. Some states, or cities, or counties, or whatever may require you to get what’s called a privileged license, or a business license, or something like that. Or you may have to register in some other way with your local taxing authority to let them know that you’re operating a business. This is especially true if you’re operating the business out of your home, and you may just need to do that.

Now, chances are that’s not going to be necessary, but for a lot of people, it could be necessary. Let’s say, if you’re doing a coaching business, or you started a gym, or you did something like that, there could be certain health regulations that you would have to follow. For me, as a lawyer, I have to apply for a privileged license each year, and that’s just part of the cost of doing business, so that’s something that you need to do. So you want to make sure that you’ve complied with all the local rules and statutes and whatever where you live, and make sure you’re getting those permits and licenses so that you can actually lawfully run your business. Otherwise, you can get yourself in big trouble.

Legally Start a Business Step #5 – Get Your Contracts in Place

The next thing you want to do is make sure that you get your contracts in place so this is especially important. If you’re going to be bringing on clients, you want to have a client contract. If you’re going to be hiring independent contractors, you want to have a contract for them. If you’re going to be doing a web-based service, you want to make sure you have terms and conditions and a privacy policy on your website. If you’re going to be having some sort of membership program, you want to make sure you have a contract for that. These are all really important things that you’re going to need to incorporate into your business, and so you want to make sure you have these in place.

Hint, my Legal Program will give you access to my membership site that has examples of all these types of contracts in it, and so you may want to check that out.

Legally Start a Business Step #6 – Get an Insurance

All right, the next step is to purchase adequate insurance. Now, this is something that’s really important. It’s something that’s often overlooked, but it’s really not that expensive.

When I started my law practice here, I had to get insurance for that, well, several types of insurance. I have professional liability insurance. That’s the really expensive one. Chances are you won’t need, but you can also get what’s called an umbrella policy or a general liability policy. I have that in place also for the building that I’m renting here in case something would happen to that, or in case somebody would come in here and get hurt in this building. I have a $1 million policy. It’s not that expensive. It’s somewhere between in $300 and $400 a year.

Really not a big deal, but if you’re operating a business where you’re going to have people over to, say, your house or someplace else, or you’re going to be doing work for them, you want to make sure you have some sort of liability policy in place in case you make a mistake. When you hear about people that are bonded and insured, that’s what they mean. They’ve got a bond. They posted bond in case something bad happens, and they’re also insured to cover that.

In North Carolina, if you have more than three full-time employees, you need to get workers’ comp insurance. Other states, the requirements may vary so you want to check that, too, if you have full-time employees. If you just have independent contractors, not a big deal, but be careful because the IRS does look at independent contractors very carefully. If you have somebody as an independent contractor who’s actually an employee, the IRS is not going to look too happily on that, so be very careful about that as well.

Legally Start a Business Step #7 РBuild Your Team

All right. The last step is start to build your professional team. This is where you’re going to start to hire an administrative assistant to help you out with the day-to-day operations of your business. You may want hire a virtual assistant to help you with your website, or your marketing, or social media, or something like that. You might want to think about hiring a local marketing assistant that can help you put on events and network with other people and do seminars and things like that to get the word out about what you do.

I know a lot of us start out and we really want to build this online business, but chances are you can have more than enough business where you are locally when you start out tapping into those local networks and doing a lot of prospecting locally is probably the best way to go about at least bringing dollars in the door initially. It’s something you want to think about, but then start to build your team. As you get busier and busier, you bring on more clients, you’re going to want team members to help you service those clients so that you can do more marketing and bring on even more business.

That’s it for today. Hopefully, you have a great day, folks. If you’ve got a question or something that you need more clarity on, please feel free to leave a comment, and we’d be happy to answer that.

So have a great week, have a great day, and we will talk to you next time.

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Hawthorn Law is a Document Filing Service and CANNOT provide you with any legal or financial advice. The information provided on this website is designed to provide information in regards to the legal aspects of online business. However, it is presented with the understanding that Hawthorn Law is not engaged in rendering legal, accounting or other professional services. If legal advice or other professional assistance is required, the services of a licensed attorney, tax professional or financial advisor should be sought.