Business & Career Library

Small Business Guides: Tax & Legal Aspects of Starting your Business

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In a business start-up, there are various legal responsibilities you should be aware of, to protect your business and avoid costly penalties. Many of the steps involve filing forms and keeping records that you can take care of yourself. Even if you intend to consult an attorney, you can reduce the cost of legal consulting by reading books that guide you through the process, or by looking at a few websites.

Following are some considerations you may have regarding the legal aspects of starting or running a business. Listed are books, agencies and links to websites that can give you information and assistance. In many cases, the links will allow you to download forms and file the necessary applications. Check out FedForms.gov for "one stop shopping" to find commonly used forms for many federal agencies.

Finding a Lawyer

It is helpful to use a lawyer to set up the legal structure of the business, draw up employment contracts, close on real estate purchases, and obtain patents or trademarks, and handle other transactions that involve large sums of money or binding agreements.

Before engaging a lawyer or meeting with one, you might look through one of the many books that outline the legal requirements involved in running a business. These books will help you gather the information and documents a lawyer may need to review. Or they may show you how to do simple transactions yourself. Check the Library Catalog for titles dealing with small business and law. If you decide to engage a lawyer, here are some helpful resources:

  • Neighborhood Entrepreneur Law Center in conjunction with the Small Business Development Center at NYC College of Technology, offers probono legal clinics. If you have a legal question or concern relating to your business, contact a business counselor at SBDC who will recommend you meet with an attorney one-on-one - for free. Many of these legal clinics take place at the Business Library. Call SBDC at 718-797-0187.
  • Brooklyn Law Incubator & Policy Clinic at Brooklyn Law School works with start up companies that have legal concerns that relate to new technologies, particularly internet and communications technologies.
  • Martindale-Hubbell Law Directory, available in the Business Library, is a multivolume directory of lawyers in the U.S., organized geographically by law firm, with an alphabetic listing of individual lawyers in the blue pages. The company also maintains a useful website, www.martindale.com, which allows you to search by specialty and location.
  • The American Bar Association is a wonderful resource. It has a lawyer referral service plus information on handling legal matters yourself.
  • Findlaw has a very detailed listing of legal specialties to choose from.
  • LawHelp helps low-income New Yorkers find free legal services. This organization does not focus on business issues, but offers assistance in many areas such as taxes, disability and workers' rights that may be of interest.
Selecting the Legal Structure of Your Business

There are many ways a business venture may be structured. The diferent types of businesses are distinguished by the number of people who own the business, the personal liability of the owners, the tax advantages and the simplicity in forming the entity. The three general legal classifications are sole proprietorship, partnership and corporation.

The easiest form of organization to form is the sole proprietorship. It can be initiated by simply starting to do business. Partnerships and corporations are more involved and there are a number of variations for each, such as S Corporations and Limited Liability Corporations (LLC). The Business Library has numerous books that review the various legal structures you may adopt to form an enterprise. Check the Library Catalog for legal guides to starting a small business.

A number of websites have helpful guides for selecting the form of your company:

  • Findlaw's Small Business site has a good explanation of "Incorporation, "Legal Structures, and Business Formation."
  • Harbor Business Compliance provides a comprehensive guide on how to start a business in New York.
  • Business Filings Incorporated has a comparison table that outlines the characteristics of different legal business structures.
  • Business.gov is the U.S. governments's site for legal and regulatory issues, as well as services just for businesses. This page offers information on choosing a structure for your business.
Registering a Business

Once you have selected a legal structure for you business, you need to file papers with the right government entity. If you are incorporating, you might have a lawyer help you with this, or you could refer to one of the Business Library's books that guide you through the process. If you are registering as a sole proprietor or partnership, you are encouraged to consult a SCORE representative at the Business Library to review the steps involved.

Following are links straight to the government agencies that handle incorporations and registrations:

  • New York State's site is a great place to start. Select either "Small Business" or "Resource Center" from the grey column to your left.
  • New York State's Corporation and Business Entity Database allows you to search for any business incorporated, currently or previously, in New York State. This is a good way to determine if your business name is already being used.
  • New York City Department of Small Business Services has Business Solution Centers throughout the city where you can consult with a representative about setting up your business. Use the website to locate Centers found in all five boroughs.

Even if you do not intend to incorporate, but still would like to do business using a name other than your own, you need to register your business. The form to file, Form X-201, is referred to as a "DBA" (doing business as) and it must be filed with the county clerk. In Brooklyn (Kings County) the county clerk is in the State Supreme Court Building at 360 Adams Street, RM 189, Brooklyn, NY 11201, 347.404.9750.

Licenses and Regulations Needed to Operate a Business

Almost every business requires a license of some sort, and some may require more than one. You may also need a professional license or accreditation for yourself or your employees, depending on your field (e.g., beauticians, electricians and other professionals need to be personally licensed).

The State and City of New York, as well as the federal government, issue licenses and permits. For instance, an employment agency needs a license from the New York City Consumers Affairs Department and a restaurant needs permits from the NYC Department of Health, while a real estate broker is licensed by New York State. Listed below are the addresses and websites for regulatory agencies at each level of government, as well as a description of the type of licenses they require. The New York City Green Book, which can be found at all Brooklyn Public Libraries, also lists a large number of licenses and the agencies that issues them. In all cases it is essential to obtain the proper license or permit before you start up to avoid any penalties.

Federal Regulations

Most small businesses do not require a federal permit to operate unless they are engaged in the following services: investment advice, alcohol or tobacco sales and manufacture, broadcasting, preparing meat products, dealing in firearms, or manufacturing drugs.

For quick information on federal licenses, as well as links to state and local information, consult Business.gov's Licenses and Permits. There is also information on regulations that relate to hiring and managing employees under the section on Employment and Labor Law.

The IRS site, www.irs.gov, provides more details and forms online. You may also get forms from the IRS Taxpayer Education office in Brooklyn at 625 Fulton Street, 6th Floor, or at IRS offices in Manhattan at 110 West 44th Street or 290 Broadway.

State Regulations

There are 36 different agencies in New York State that issue more than 1,200 types of business permits. Both businesses and occupations are licensed by the state. Your business may require a permit to operate (for example, a preschool), while you or your employees also need professional certification (a teacher's certificate).

New York State's Online Permit Assistance and Licensing website, OPAL, is particularly useful. Use the alphabetic list to find the type of business you have, answer pertinent questions and then obtain a complete description of the regulatory issues that affect your business. OPAL is a service provided by the Governor's Office of Regulatory Reform (GORR). Permit and licensing questions can also be answered by phone (518.474.8275 or 800.342.3464) or email (permits@gorr.state.ny.us).

City Regulations

The place to start looking for New York City licenses and permits is the New York City website, where you can get information on a variety of different types of licenses from building codes to taxi medallions. Under the Business Section of The Department of Consumer Affairs site, click on "Does Your Business Need a License?" to find information on obtaining a license from the city. You can also download the application forms for various licenses from this site. New York City's Business Solutions Centers also can help. Check out their Navigating Government & Regulations guide.

Restaurants and businesses that handle food must comply with the NYC Department of Health's regulations. New York City produces a brochure, New York City Restaurant Business Guide. The Department of Health, Division of Permits, is at 42 Broadway, 9th Floor, New York, NY 10004, 212-487-4371.

Filing Taxes

Every business must pay income tax on its profits, but there are other tax liabilities that you should be aware of when you are starting out. Good record keeping and bookkeeping are invaluable, and actually can save you time and money. Almost every business owner will also tell you that you should consult a bookkeeper or an accountant regularly. There are, of course, many books that explain accounting systems and outline ways to save taxes. You can find these books in the Library Catalog. And there are many websites that offer information, tips and news of changes in tax codes. Here are two:

 

 

The following is a list of the most common types of taxes businesses pay, along with the government agency that collects them. When starting out, you should make sure to file the appropriate reports.

NEW YORK CITY TAXES: A sole proprietor or partnership in NYC must pay an Unincorporated Business Tax, while corporations pay a General Corporation Tax (GCT). Other examples of taxes imposed by NYC are sales tax, commercial rent or real estate tax, and alcoholic beverage sales tax. A good list of NYC business taxes can be found on New York City's Department of Finance website.

NEW YORK STATE TAXES: If you are selling goods, it is mandatory that an application be made for a Certificate of Authority (Resale Certificate). Use form DTF-17, Publication 750. You can apply online, via OPAL (Online Permit Assistance and Licensing). Click on "Online Application" in column to left, once list comes up, you then click on the blue arrow pointing to "Taxation and Finance, Dept of". The listing opens and you choose "Certificate of Authority to Collect Sales Tax". Or go to "Forms and Instructions" online to get copies of the forms you need.

FEDERAL TAXES: In general, a business must pay federal taxes on its income and you must also pay self-employment tax on the income you receive from your business. In addition, there are tax obligations related to your employees. Every business should obtain a Federal ID number (Employer Identification Number or EIN) by filling out IRS Form SS-4. Use the IRS Tax Information for Businesses site to get an explanation of this and other federal taxes. To get copies of the tax forms, click on "Forms and Publications."  For more information online you can use the IRS Small Business and Self-Employed One-Stop Resource.

The taxes you must pay and the forms you must file depend on the legal structure of your business. The IRS Tax Guide for Small Business, found in the Business Library, can help you determine what taxes apply to your business. Additional recommended reading includes U.S. Master Tax Guide by Commerce ClearingHouse and Tax Savvy for Small Business by Fred Daily.

Writing Contracts

You will find that you need to record many business transactions and agreements. You may want to draw up an employee contract, a bill of sale, a rental agreement or any number of documents. There are many standard forms and contracts that can be adapted to suit your particular needs.

Books with sample forms can be found by checking the Library Catalog for titles such as Legal Forms for Starting & Running a Small Business or Working for Yourself: Law & Taxes for Independent Contractors, Freelancers & Consultants. In the reference collection of the Business Library you will also find Legal Forms & Procedures Handbook of New York as well as a number of law books such as West's Legal Forms. You should still consult an attorney and an accountant in many instances, but these standard forms can be a starting place; in many cases they will allow you to complete a transaction yourself.

Websites also offer information or sample forms online, sometimes for a fee:

Applying for Patents, Trademarks or Copyrights

A trademark is a word, phrase or symbol that identifies your product or your company. A patent is granted to an inventor to exclude others from making, using or selling his or her invention. It lasts 17 years. Applications for both patents and trademarks are submitted to the U.S. Patent and Trademark Office. It is extremely beneficial to consult a patent attorney before proceeding.

To learn the basics, start with one of the many books in the Business Library that are devoted to the topic. Another essential source is the U.S. Patent and Trademark Office. Additionally FindLaw and Business.gov have information on their sites listed under "Intellectual Property."

To conduct a patent search yourself - that is, to determine if a patent has already been granted for an invention such as yours - a good place to start is New York Public Library's Science Business and Industry Library at 188 Madison Avenue at 34th Street in Manhattan, 212-592-7000. If you wish to copyright a song, book, play or other creative work, the applications are handled by the U.S. Copyright Office.

Other Small Business Guides: