Easy steps to make your small business legal

Are you just starting your small business? Or has covid finally given you the kick in the butt you needed to make your business (actually) legal?

We know how hard it is for small (and big!) business owners to navigate the legal aspects and administration of their businesses. Here are some easy steps to make your small business legal

Create a business structure

Do you know the differences between a sole proprietorship, LLC, and corporation? Not many people do! Here are some pros and cons and a basic overview of each of these three business structures and how to create them.

Sole proprietorship - is simply a business owned and operated by a single person. The benefits of a sole proprietorship are that it is easy to create, many states don't require that you register your business name (although we still suggest that you do!). Plus the business owner can receive all of the business profits directly and are taxed on these profits as individuals. Yay for no separate tax returns!!

So, why doesn't every business operate this way if it's so easy? One of the huge drawbacks of this business structure is that if you as the owner are sued, you can be held personally liable. This means a court can take your personal assets (house, car, personal bank account) to pay for a lawsuit or business debt.

A sole proprietorship can be a great option when you're first starting out, because it's a very inexpensive and simple business structure. We suggest that if you choose this structure, you look into additional liability insurance, register a DBA, and make sure you're confident in your contracts.

LLC - Simply put, an LLC is a business structure that classifies your business as separate from you personally, and has the potential to prevent a court from using your personal assets to pay off business debts or judgments. An LLC is generally an easier and less expensive business to create than a corporation. And LLCs allow profits to flow directly to the owners, who can choose to get taxed on them as individuals or as a corporation.

The cons of this business structure are the startup cost (usually starting around $100), additional paperwork, annual filings and fees.

Corporation - Generally speaking, a corporation is a separate business entity that's created for liability protection.

Corporations are a much more formal business structure, which require A LOT of extra paperwork and admin upkeep. Depending on the type of corporation, you might also be taxed TWICE!

Whichever structure you choose, make sure you understand the requirements of your state!

Register your business name

There are SO many benefits to registering your business with your State. Besides creating another level of trust with your clients, some business structures actually require registration.

Even if you operate as a sole proprietorship, you should generally register a Doing Business As or "DBA" with your State if:

- Your business name is different than your actual name (or is a combination of your actual name + services i.e. Jessica Smith Photography)

- You want to open a bank account in your business name

- You want to take the first step in protecting your business name and stop others from using it in your State

Register for a business tax license

Business tax license requirements vary by state, and you should make sure that you're following yours! I've heard so many horror stories about small businesses not paying state business taxes and having to pay thousands and thousands of dollars in fines.

You can skip that headache by reading up on your State's requirements and registering for a business tax license (and, you know, actually paying the taxes too).

Create your business contracts

You should have a library of solid business contracts. Yes, CONTRACTS, as in multiple.

Make sure that you have a contract to cover every aspect of your small business, not just for your clients. Do you think you'll use a virtual assistant at some point in the future? Or are you currently working with one? Make sure you have a clear and legally binding independent contractor contract.

Are you a photographer who relies on styled shoots for content? Consider using a styled shoot contract to prevent any miscommunication or frustration about posting, tagging, credit, or publishing rights.

Do you have multiple levels of service that you offer? Don't just go in and butcher a form contract you downloaded, change some words, and call it a day. Make sure you have a specific, lawyer-approved, contract for each service you offer.

For more information on templates, addendum, and sample clauses, contact Colby at wandererweddings@gmail.com.


Wanderer Weddings is not a law firm, and nothing in this blog is intended to be interpreted as legal advice. Although Colby is a lawyer, she is not your lawyer. Please consult a lawyer in your State for State-specific legal advice.