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The Basics of Business Law

Understanding the basics of business law is very crucial for your business, especially if you’re just starting. Sufficient knowledge will help you avoid going through the same struggles that small businesses accidentally had to go through with the law. Check out these things that will help keep you out of court proceedings:

First of all, you should determine which of these three will be your business’ startup: sole proprietor, corporation, or limited liability company. You should understand that differing legal structures also mean that companies will be provided with different legal protections.
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Sole proprietorship means the business may have a different name than its owner but the sole owner will still be responsible for everything related to the company. While it is the most convenient business form to start with, it is also a difficult one since the law will hold the owner responsible for any legal action held against the company, including debts and financial issues.

A corporation, on the other hand, is composed of people who act as an entity and acquire money for their capital through selling company share stocks. A stockholder owns part of the company through shares. While being a partial company owner in a corporation is a good thing, this business form may allow for potential tax consequences.

A limited liability company does not work with selling stocks and this business formation requires the company to raise its own capital; it also pays a smaller amount in overall taxes.

Basic knowledge of business law will eventually assist you in the process of determining which business formation you should take on for your advantage.

It is very important to come up with a legal agreement between you and the co-owners to make sure that everyone will benefit from the business. In co-owned companies, there are so many things you need to discuss with the others including how the breakdown of ownership percentages should be presented, the responsibilities of the members, and how ownership stakes should be distributed among remaining board members in the case that a founding members gets removed from his post or decides to opt out. A corporation should also determine the price per share.

One of the most significant facets of business law is tax. Knowledge about your company’s tax obligations will help you keep away from possible problems as you go through the things you need for the fiscal year. Taxes are inevitable and you should be fully aware of the form of tax you will pay to either the nation, state, or other social entities, so you won’t find yourself in some sort of a business law dilemma in the future. It is also good that you know the requirements that you need to accomplish for the state. Knowing and fully understanding the things that your company is responsible for will be an advantage not just for you but for other members of the entity.

Entrepreneurs should be conscious of the possible risks that come with opening a new business, especially if the business also involves other people. Understanding even just the basics of business law will prove to be helpful in the future since this will allow you to have a clear picture of your legal and tax obligations. Many startup owners are drawn to the wrong notion that legalities will start introducing themselves as the company grows, but once there are too many things going on, legal issues might be unintentionally ignored. Knowledge will most likely give you an edge over hectic situations. Make sure to consult with your attorney regarding things you may find difficult to understand.

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