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How to Start a Small Business at Home Legally - List of Legal Requirements for Start-ups

Updated: Apr 3, 2022



Being an Entrepreneur does not mean renting office space or shop.

Most people would love to own a business, but it’s easier said than done.


You may already have a great business idea, maybe you already have a team too, and who knows maybe the timing for your great idea is perfect.


You might think you have cleared everything, well, I think there is still one more thing missing from the checklist and that is all the legal requirements involved in starting a business.


This easy-to-follow guide is intended to help you legally start your business. I will assume that you are completely getting started setting up a real business or service regardless of what you intend to sell and regardless of who you want to sell to (your audience/customer).


I think it’s easier to understand how business works if you understand what entrepreneurship is.



What is Entrepreneurship and Who is an Entrepreneur?

Entrepreneurship simply means being willing to take financial risks in hope of profits by offering a product/service (starting a business) and doing the job right.


An Entrepreneur is defined as anyone who founds or organizes a business, then continues to be an active participant in the operation of that business. In other words, an entrepreneur is anyone who launches and continues to run their own company.

Another definition of an Entrepreneur from the Orbelo Blog emphasizes the willingness to take risks — According to James Sandoval, Founder, and CEO of Measure Match: “Being an entrepreneur means diving headlong into a [likely very risky] venture of your own making, working hard, long hours, often alone, to carve out a path to success and never, ever giving up.”


To avoid giving up so soon, you need to define your goals and live up to them. Plus you need to keep investing in yourself, whether consulting from a mentor, joining an online business degree program from an accredited institution, or business college. Below are entrepreneur books to read.



Books to read (or listen to on audiobook):

  • Start with Why by Simon Sinek (Buy from Amazon | Listen to AudioBook)

  • Good to Great by James C. Collins (Buy from Amazon | AudioBook)

  • The Lean Startup by Eric Rie (Buy from Amazon | Listen to AudioBook)

What Are the Legal Requirements for Starting a Business?

When starting a new business venture, you have to be sure you are complying with all the legal obligations of running a small business or startup before it becomes a huge company and you can’t keep track of the records.


You might ask, But Mugabi, What is the role of legal requirements in starting a business? Well, first of all, you don’t want to get in trouble with the local council and the government.


These legal requirements for new businesses and startups range from financial regulations, tax obligations, and employment laws like worker’s compensation claims.

That’s also where insurance companies come in to assist with Asset and risk management. Especially if you are using company vehicles, you might need to compare vehicle insurance, get auto insurance quotes from various automotive vendors to make sure you get the cheapest auto insurance possible.


Now with the digital world, you can just buy car insurance online. It doesn’t necessarily have to be vehicle accidents, medical services too, need to be considered.


Hiring a good lawyer or law firm would be one of the solutions to your endless legal issues, asset management, and business protection from the unexpected.

With that said, let’s go ahead and set up our company legally.



1. Creating an LLC or Corporation.

An LLC, (Limited liability company) is a business structure that offers limited liability protection and pass-through taxation. As with corporations, the LLC legally exists as a separate entity from its owners. Therefore, owners cannot typically be held personally responsible for the business debts and liabilities.


Part of the legal requirements for your business is your company or organization's legal structure. This may depend on how big you want to go and maybe what you plan to offer.


But most companies go with LLC, probably because it offers the most benefits as far as asset protection and insurance are concerned. Plus an LLC gives you wide possibilities to expand your business when the right time comes.


However, there is a number of other factors including the advantages and disadvantages of owning an LLC that we might not discuss today.


To set up your LLC, all you need to do first is:



Choose a State in Which to Form Your LLC and Get a Name for your Business.

Once you know where you want to set up your business, you need to give it a name. To do that, I recommend you first search for the name on Google, YouTube, and all other Social Media marketing channels to be sure it’s not taken yet.


This step helps you find out if or whether the social media username or handle is still available online, just in case you plan to take the business online as it is a norm these days or as you should do given the situation all around the world.


Depending on your country, there are various procedures to getting or Registering your business name successfully.


Some of this include:

  1. Certified copies of Memorandum of Articles of Association/Charter/ Constitution and Certificate from the country of origin duly witnessed.

  2. Registration forms:

  • Form 24 — Particulars of Directors and Secretary

  • Form 25 — List of Names and Address of Persons Resident in your country of origin authorized to accept service on behalf of the company.

  • Form 26 — Physical Address and Principle Office of Company.



2. Choose a registered agency or law firm to help you prepare an LLC Operating Agreement.

Disclaimer: Please seek legal advice.


When it comes to how to choose a legal advisor, there are many factors to consider when choosing a law firm to represent you and your company.

Choosing a law firm may take several factors into account.


There is no way to know whether a firm is right for your business. What you could do, however, is get a recommendation from family, friends, and business colleagues. Or just go with the firm that offers something in line with your business and is flexible.


When choosing the right lawyer or attorney, you need to consider their:-

  • Credibility — proof of how/whether they can be trusted

  • Expertise —  if they are operating in the area or field of your business

  • Availability — how much time they are giving you (long or short term)

  • Communication—goes hand in hand with availability and flexibility

There are obviously other factors that you should consider when choosing a law firm or attorney to represent your business for the organization, let’s go with those for now.



3. Obtain Business Permits and Licenses.

Now that you have an attorney, I think it’s just right that we looked at how to obtain licenses and permits needed to start a business legally.


When it comes to obtaining permits and licenses, each state or district might have its own rules.


In some areas, you may need to file your agreements or forms with the City Council. If your business is structured as limited liability, partnership, or a corporation, you may have to register your name with the government.


Don't forget that a business name is always unique.


That’s why we start with research as I mentioned earlier, to find out if the business name is still available or taken. If it’s taken you will have to think of another one definitely.

What you need to do:

  • Find out licenses required at state, county, and municipal levels.

  • Visit your country’s department of licensing and regulation website to fill out and complete your application form

  • Include all supporting document requirements and possible fees.

  • Wait for a reply from your government.



The government agency will then check your records and may ask you to provide additional information if necessary. If the information is complete, you will receive the notification email that your License or permit has been approved.


To help you find out if your business needs a license, you probably will need to visit your country’s department of licensing and regulation website for a list of businesses that need specialized permits.


If you need to do business online, once you have your business name registered, go ahead and purchase your domain name to get your online journey (build your website) started. This helps you to secure it so that nobody else can buy your domain.


Depending on what you plan to do, it’s a good idea to learn more about your industry legal documents and requirements to start and license a company.



4. Protect Your Business with Insurance.

Alright, so at the beginning of this post, we looked at LLC and cooperation while trying to start a company in your country, and one of the benefits of having an LLC is protecting yourself and your business assets.


So you see, protecting yourself and your investment, your business, employees, and property against unexpected calamities, is one of the most important things you need to consider before launching your business. Whether it’s an online store, a physical shop, or an office.


You can get this business protection by checking out your state’s insurance service companies (websites/online portals) and having a look at each of their insurance plans to see what fits you.


Protection is not only intended for business asset management, your home can be insured too to avoid the unexpected.


Read more about other insurance terms and get familiar with the language, just like you might want to learn basic website terms if you already own or plan to have a website.



5. Open a Business Bank Account.

Opening an account these days shouldn’t be difficult. I am sure there are many bank institutions that have online portals to help you speed up the process.


Besides, opening an account online is faster and more convenient than standing in a queue of 20 to 50 people waiting for your turn to stand by the bank teller or service manager. It doesn’t matter whether it’s a personal account or business account, online portals can help you speed up the process.


Now, you might be wondering what documents are required to open a business bank account for an online business.


Well, here are just a few:

  • Proof of incorporation for LLC business structures

  • A business license or business name filing paperwork

  • Address verification to help verify a credit card to prevent fraud

  • A tax ID number (TIN)

  • Social security number for sole proprietors

Don’t worry, you are almost there. Once you register your company, secured a legal advisor or attorney, registered a tax identification number, and opened a business bank account, what is left is to launch your business.



Conclusion

There you have it. How to start a company or business legally as an LLC, sole proprietor, cooperation, or non-profit organization.


Basically, the process will be a lot similar for most of the business structures. It’s just the documents that are required and the requirements for opening the company bank account that may differ a bit.


Besides registering your company, obtaining a work permit, registering for taxes, you might also want to get a distinctive mark that certifies your product and helps boost consumer confidence.


You should not forget to get a better understanding of the labor regulations in your country as we mentioned at the beginning of this post.


I hope this was helpful. We haven’t covered everything here, that’s why I have linked to multiple other websites with much more authority in the business and legal field to help you explore more on the topic.


However, if you feel there is something worth adding here that would be beneficial, please let us know in the comments.


Keep consulting experts in your industry and state.


Thank you so much for your time.


Please share this post if you find it helpful.



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