Home Business Legal Issues

Make Sure Your Home Business Startup Gets the Right Business Legal Advice

Know the home business legal issues you have to deal with for a home business startup. You may need to get business legal advice from experts.

There are a number of legal issues that any online home business should become familiar with during the startup phase. Remember, you are starting a business, and you should operate it like a professional business. Sure, you might fly under the radar a bit until you start making significant amounts of money. But that doesn't mean you don't want to get your home business startup off on the right foot.

By the way, this site makes no attempt to offer any kind of specific home business legal advice. I am not a lawyer. I strive only to familiarize you with relevant business legal issues. What you do with that info is up to you. Be sure you do get legitimate business legal advice from an expert, as needed.

Your Legal Structure

With any new home business startup, one of the most important business legal issues to consider is your legal structure for your business. Most budding entrepreneurs start out as what is known as a sole proprietorship, which basically means that your business is all you. You don't register the business with the government; you don't have to file any special papers... you just start the business. Although this is the easiest business structure, it's also a relatively risky one. Your business is inseparable from your personal financial assets, from both a tax and a liability standpoint.

Another common business structure is the partnership, where one or more people band together to start the business. Again, this structure doesn't require any formal filing or paperwork, and all parties are equally liable for the business. If you decide to go into a partnership, be sure you take the time to thoroughly work through the shared responsibilities and set expectations for all involved.

The two structures above make sense in a business where personal liability isn't a big worry, which is usually true of online home businesses, at least in the early stages.

If you're ready to formalize your business legal structure, then you may want to look into the pros and cons of establishing either a limited liability corporation (LLC) or a corporation (INC). The main benefit of one of these structures is that they are set up to limit your personal liability for business debts and court judgments against the business.

My advice? Consult a lawyer and/or small business accountant if you have questions about what type of legal structure is right for your online home business. That's the best way to get expert business legal advice.

Local Business Permits

As I said above, you may just want to "fly under the radar" while you're in the very early stages of setting up a new home business. With an online home business, your business is generally going to be fairly invisible to the outside world. Chances are, you won't have people coming and going to your house. You'll just be sitting at your desk, working on the computer. So a special local business license is probably not an absolute requirement.

However, if you want to obey the strict letter of the law, then you should check into your local, state or county regulations to find out if you need to register your home business startup, get a business license or any other special permit. If you wish to open a bank account labeled as a business account, it's likely you will need to register your business.

I have to tell you, though... I've been in business for more than 10 years in 3 different states and I've never applied for a license. And I never really felt that got in my way. I set up a separate bank account at ING, but it's just a regular checking/savings account. I keep it separate from my personal funds so I can see better where my money is going. That's the only reason.

Still, you have to decide what's right for you on this and all of the other business legal issues discussed on this page.

Tax Concerns

If you're going to treat your new business as a business, and not a "hobby," then you'll probably need to plan on paying taxes, depending on where you live. And that means, you need to keep careful records of expenses and income, so that you can report on them come tax return time. Learn about basic bookkeeping practices.

And once you do start to earn significant amounts of money, you'll also need to plan on paying estimated quarterly income tax, if you live the United States. The good news is, you may be able to claim the home office tax exemption. So be sure to get reputable tax advice too.

Becoming an Employer

Most online home business people only have one employee... themselves. But, if you do decide to add support staff of some kind, then you'll also need to pay attention to the business legal issues for employers. That means knowing how to calculate payroll and any required payroll taxes, etc.

These are business legal issues that you can't ignore and that can quickly become problematic if you grown quickly. Make sure you know how to handle them.

Trademark Concerns

And finally, if you plan to brand your new online home business with a name, then you do need to investigate whether the name is already trademarked or registered. Don't take this business legal issue lightly, because if you infringe on someone else's trademark — especially if you become successful — they WILL come after you.

I speak from experience... I once registered a domain name something like best-crockpot-recipes.com and Rival (who makes the iconic crockpot slow cooker) sent me a cease and desist letter, saying I wasn't allowed to use the word crockpot, as they'd trademarked it. I continue to see websites all over the Internet that use "crockpot" in their name, but for some reason they singled me out, even though I didn't even have a website up yet.

Another example comes from my resume website. At the behest of a mentor I was working with, I was urged to think of some catchy nickname for myself. He suggested "Resume Queen" and since I stink at thinking up names, I eventually went along with it. I never liked the name and when I was contacted recently by a lawyer representing someone who did like the name and had actually trademarked it, I gladly gave it up. Luckily, I'd only ever used the name on a couple of pages on my site.

So, check out your trademarks! The free Search It tool provides an easy way to do so.

In Summary...

I strongly encourage you not to forget to spend some time addressing home business legal issues for your new home business startup. Get business legal advice from experts, if you need it. Consider this an essential part of planning for you new online home business.