Starting a Business
Thinking of going into business for yourself? There are, of
course, many questions to be answered before you launch your
business. First, you must decide whether you have the experience,
skill, business know-how and sheer stamina it may take to be
successful. You must decide what that business will be, where it
will be located, whether you will start from scratch or buy a
going business, how much capital you will need, and so on.
Preparation of a thorough business plan is very important in
obtaining financing. And, finally, there are many legal questions
to be answered, some of which are covered in this pamphlet. For
full information on how local, state and federal laws would
affect your business, you should consult your attorney at an
early stage.
Organization Of Business
The types of business organization that will be used by
you is entirely your choice. There are four basic types of
business organizations:
1. Sole proprietorship
2. Partnership
3. Corporation
4. Limited liability company
Before choosing the type of organization, you will be wise
to contact your attorney and/or accountant. The importance of
professional assistance will become readily apparent because
the type of organization you choose for your business
involves a great many considerations which can be brought to
your attention by your professional counselor. Some of the
questions that you will want to consider concern tax
advantages, organizational expenses, control of the business,
expansion of the business, perpetuation of the business and
personal liability resulting from the business. This is not a
complete list, but should assist you in your choice of
business organization type and in obtaining professional
assistance before starting your business.
Selecting A Business Name
You may conduct your business under your own name, the
names of your partners or business associates, or under an
assumed name. When consulting your attorney, inquire as to
whether or not the name you choose must be registered with an
official with the city, county, or state government. You
should remember not to choose a name that is the same or
deceptively similar to the name of another business or you
may face legal action. You may be able to obtain protection
for the exclusive use of your business name.
License To Do Business
A license must be obtained from the state for certain
businesses, such as retail and service establishments, beauty
shops, private employment agencies, and small loan companies,
to name only a few. It may be necessary to obtain a state or
local license for your business and again you should consult
with your attorney to determine whether or not a license is
necessary. If your business is home-based, certain
restrictions may apply.
Tax Laws
As you well know, tax consequences will result from your
operation of business. State, local, and possibly federal
taxes will be imposed upon you business and to determine
which of the above taxes will apply to you, how much you will
have to pay, and the most advantageous type of business from
a tax standpoint, it will again be necessary for you to seek
professional counsel and advice from your attorney and/or
accountant. You may be further required to obtain state and
federal account numbers and authority for collection,
reporting and payment of sales and employee taxes.
Employee Relations
Anyone hiring employee may not discriminate against any
applicant because of race, color, religion, or national
origin, and, with certain exceptions, may not refuse to hire
a person solely because of that person's age or sex. Also,
the law regulates the employment and working conditions and
hours of minors especially, and of all employees generally.
You may be required to pay minimum wages and overtime as
established by law.
As an employer you will find it advantageous to cover any
liability toward your employees with insurance. The type,
amount, and extent of coverage necessary for your business to
protect you, your employees, your business property, and
other liability situations should be discussed fully with
your qualified insurance broker.
Securities Laws
Any time you sell stock, most types of notes or other
interests in your business to family, friends or other
investors, federal and state securities laws apply. Such
sales must be registered under those laws unless an exemption
is available. To qualify for some exemptions, you may need to
file documents with governmental agencies either before or
after a sale is completed. Failure to comply with federal or
state securities laws can result in personal liability. The
effect of securities laws should be discussed with your
lawyer.
Franchise Agreements
If your new business will enter into a franchise
agreement, it is important that you have your lawyer review
the franchise agreement and the franchise disclosure
documents before you sign the agreement. Franchise agreements
typically impose very significant financial and legal
obligations upon the franchise. Your lawyer may be able to
help you modify the franchise agreement to make it more
favorable to you.
Obtain Professional Counsel
Do not hesitate to obtain professional counsel. Good
advice can make the difference between success and failure.
Here are some of the ways in which professional advisors can
be of assistance to you:
YOUR LAWYER: He or she can help you choose the type
of business organization that best suits your needs and
objectives; advise you as to local, state, and federal
regulations which affect your business; obtain licenses and
permits; prepare or review contracts; resolve tax questions;
assist in obtaining financing and give practical advice on
many business problems. Your Will or other estate plan should
be revised by your lawyer to include your new business
interests.
YOUR BANKER: He or she can point out possible
sources of capital including a mortgage on your home or other
property, commercial bank loans, credit from suppliers of
equipment and merchandise, financing of receivables by a
factoring company, a Small Business Administration loan and
other sources.
YOUR ACCOUNTANT: He or she can help set up and
supervise procedures for keeping payroll, tax and other
business records.
YOUR INSURANCE BROKER: He or she can advise you as
to the types and amounts of insurance you should carry to
protect yourself and your business against loss.
The local Chamber of Commerce, or, in Chicago, the Chicago
Association of Commerce and Industry, and the Small Business
Administration, a federal agency, also can assist you in the
formative stages of your business and thereafter. State and
local business incentive programs may be available to you;
that availability and qualification requirements for
assistance should be thoroughly examined at the outset of any
new or expanding business endeavor. You should determine
whether your business qualifies for minority-owned or
female-owed business certification.
Improve Your Odds
The odds are against the eventual success of any new
business. The majority of new businesses fail for a variety
of reasons. Those reasons range from lack of market to
inadequate organization. The cost of failure is always high,
if not in dollars, then is disappointment and personal
disillusionment, not to mention long hours and hard work.
Your attorney and other professional advisors cannot
guarantee your success; but they can help improve your odds.
© 2007, Illinois State Bar Association. If you have questions about
the application of the law in a particular case, consult your
lawyer. The law is constantly changing. Information on
www.ISBALawyer.com (or any site to which we link) does not
constitute legal advice.
| 