The Legal Requirements to Starting a Business in 2021

Around 10.5 million jobs were created between 2000 and 2019, accounting for 65.1% of the net new jobs created since 2000, this is according to the Bureau of Labor Statistics’ Business Employment Dynamics report. Many people aspire to start their own businesses, but succeeding in the commercial marketplace is a different kettle of fish. Companies led by business owners unfamiliar with the legal requirements may be facing an increased risk of failure. 

General Liability Insurance 

One of the most common of all business insurance policies, general liability insurance protects companies from the financial burden of claims arising from personal injury, bodily injury or property damage. Often businesses are required to carry a general liability insurance policy in order to participate in basic operations. If a business sold a product that is defective and harmed the user, general liability insurance could help prevent that business from closing their doors while reworking their entire manufacturing and/or logistics process.

Protecting Personal Assets

When starting a new business, entrepreneurs often favour the LLC. It’s a more formal business structure than the partnership or sole proprietorship. This business structure offers protection to the owner from personal liability for any of the debts that a business may incur. This is because the LLC separates the entrepreneurs’ business activities from their personal assets. When it comes to business assets, the LLC does not provide protection. This resource takes a comprehensive look at LLC insurance. 

Check if you should publicize the company 

Some states and cities have requirements that business owners should publicize news about company formation. This is normally done by posting a statement in the local newspaper, for instance. Failing to take this step could result in fines or even refusal on behalf of state authorities to recognize the new business. Arizona, Nebraska and New York are known to have newspaper publication requirements. 

Insure Your Workers

Business owners, especially those with more than five employees, are legally required to insure their workers in most states. Worker’s compensation insurance for those who are injured on the job and incapable of providing for themselves is mostly required. Novice business owners may attempt to cut down on the costs associated with running a company by mitigating their insurance rates, however skimping on worker’s compensation could have unfavorable consequences. While some small businesses may be exempt, it is advisable to stay abreast of state requirements. 


Trademark  and copyright violations can have serious consequences. If an entrepreneur launches a new company and starts to advertise without checking if the name is not already taken, the company owner may open themselves up to receiving a cease and desist form or subpoena in the mail. This unfortunate situation can be easily avoided by registering the company name with the U.S.Patent and Trademark Office.

Federal Taxes 

In order to remain on the right side of the law it would be wise for business owners to address the issue of how they’ll be paying federal taxes. When starting an LLC the owner will need to apply for an EIN if it has any employees or if it is required to file certain excise taxes. The IRS uses the EIN to keep track of tax returns. 

Some Industries Need Licensing

Certain industries, such as the medical industry, require one to obtain a license before commencing with business practices. Should a business be caught operating without a license, it may be forced to cease operations. Normally, once the licenses are attained, the business is free to reopen. In some instances a mandatory probationary period would apply. In other instances the city may refuse to grant a license to the business, so it is important to check licensing requirements before opening for business. 

A note on registered agents

Most states require the LLC to have a registered agent . This agent can be a professional service, oneself, or a colleague given that state criteria are met. Besides receiving official mail on behalf of the business, registered agents help to keep businesses compliant by remaining up to date paperwork. Paperwork from the state and federal government, tax forms and legal notices all falls within the registered agent’s realm of responsibility. 

A Few Final Words

Failing to meet legal requirements may result in piercing of the corporate veil. ‘Corporate veil’ is the legal distinction between an LLC or corporation and the owners. In the event that a business fails to be compliant, a court may decide that the corporate veil has been pierced, potentially rendering business owners personally accountable for the debts or legal wrongdoings of the company. 

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