Four Legal Requirements to Consider When Starting a Business


A lot of people dream of starting their own business at some point. The idea of starting a business sounds exciting but setting up a successful business in the competitive market is easier said than done. Companies that are led by inexperienced people who are not familiar with legal requirements are more susceptible to failure.

That’s why the experts recommend never starting a business without thorough research and preparation. So, you ensure your business is adequately protected from the outset.

Here are some essential legal requirements that you can consider to give your business a successful start.

1Create a Business Structure

As a new business owner, one of the most essential decisions you will have to make is choosing the right structure for your start-up. The business structure you will choose will affect personal liability, the amount of tax you will pay, and control over the business operations. It also affects the growth potential of your business.

So, before you make any decision about business structure –bear in mind all the advantages and disadvantages of each structure.

2Shareholder Agreement

If you are setting up your business with co-founders, you will need a shareholder agreement. Creating a shareholder agreement will cover the following considerations:

  • How often directors and shareholders will meet
  • What decisions directors and shareholders can make for business
  • How the dividends will be paid
  • The decision when selling the company

To create a good shareholder agreement, you will need to hire a professional who is an expert in the corporate and commercial law, such as the Corporate & Commercial law – Holding Redlich. The shareholder agreement will set out the role of each business partner and the terms and conditions for starting a business.

3Protect Your Assets

When making a mark on your business, it’s crucial for you to protect your assets. The success of your business depends on how you intend to keep your personal assets away from the business.

No business owner plans to fail, but the truth of the matter is that many companies collapse when struggling to earn a good profit. Even those who are successful find themselves as a victim of an unjust lawsuit, which will eat their money, time, and energy.

To avoid ending your business along with your personal financial security, it’s imperative to form a strategy and business structure that will protect your personal assets. For example, if you choose an LLC (Limited Liability Company), you will limit the access to damage coming to your personal finances.

If a customer sues your business after receiving a faulty product – they won’t be able to reach your personal finances or bank.

4Ensure the Need to Publicize Your Business

Depending on your location and where you are planning to form your business, you may face extra challenges when forming an LLC or similar business entity.

Some states require you to publicize the news about your business start-up. You can post this news in the local newspaper. If you fail to attempt this step, it can result in a stiff fine or a refusal on the behalf of state authorities.

For instance, if you are forming your business in New York or Nebraska, you may need to pay special attention to this aspect.


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