Starting a new small business can be exciting, but it can also be a lot of work. When it comes to starting a business, there are a lot of legal documents and processes in the beginning. You may be an entrepreneur and be an expert in your field. However, it is completely normal for small business owners to not know a lot about the legalities of business formation. Bowne Barry & Barry, a lawyer in East Brunswick NJ, has years of experience helping small business owners get their businesses started. From the business formation documents to the policy manuals, we are here for you every step of the way. Read on to learn 4 things to consider when starting a small business.
Business Formation Documents
When forming a new business, you must first decide its legal organizational form. Here are some options:
· Sole Proprietorship: Business owner is personally liable for all losses and liabilities.
· Limited Liability Partnership (LLP): Partners have limited liabilities. An LLP must have at least two partners. If you form an LLP, each partner is not responsible for the other partners if they were to commit acts of misconduct or negligence.
· Limited Liability Corporation (LLC): With an LLC, owners are not personally liable for company debts and liabilities. An LLC combines the pass-through taxation of a partnership with the limited liability of a corporation.
· S Corp: This type of corporation gives owners limited liability protection. Income, losses, deductions, and credits are passed through to the shareholders of the company.
· C Corp: A type of corporation that is taxed separately from its owners.
If this seems complicated, not to worry! At Bowne Barry & Barry, we will help you decide which legal business form is best for you and your business. Depending on which one you choose, things like your personality liability, what you pay in taxes, and the paperwork you need to fill out will differ.
Your insurance needs will vary depending on your type of business. However, there are some main types of insurance every business will need. The first type is general liability insurance. This will protect you from issues like bodily injury occurring on site, slander, defending lawsuits, and more. Another type of insurance that all businesses should have is professional liability insurance. This protects you if things like malpractice or negligence occur at your business.
If your business owns property and assets, you will want to get commercial property insurance. This protects you from any type of property loss due to things like fire, storms, vandalism, and more. If your business sells products, you also will need product liability insurance that protects against financial loss if the product were to cause injury or harm to a person using it. Often, small business owners can get all of these insurances bundled under one policy. This makes things a lot easier and can also save money.
Don’t worry about knowing all there is to know about insurance. At Bowne Barry & Barry, we make sure that your business is fully insured with every necessary policy before you get up and running. Rest assured that we make sure you have every policy you need to protect against financial loss in a variety of situations.
Employees vs. Independent Contractors
Another important thing to address when starting a business is whether your staff will be considered employees or independent contractors. There are several key differences between an employee and an independent contractor. First, an employee is covered by multiple employment and labor laws. This is at the state and federal level. An independent contractor is not. When it comes to taxes, the two are treated very differently. An employee will have income taxes, Social Security, and Medicare withheld, while an independent contractor will not. An employee receives a W-4 tax form while an independent contractor receives a W-9. As the employer, you report all the money you pay to your employees on a W-2. For independent contractors, you will report any payments over $600 on a 1099 form.
How you pay the two also differs. The employee will be paid at an hourly rate or a salary. They will get paid each pay period, whether that is once every two weeks or once a month. An independent contractor on the other hand, can get paid a variety of ways. Some are paid hourly, daily, or weekly, but others are paid a specific full amount once the project is completed. There are pros and cons to both hiring employees and hiring independent contractors. Your lawyer at Bowne Barry & Barry will help you weigh these pros and cons and decide what is best for your business.
A policy manual, also known as an employee handbook, is a very important thing to create when starting a business. The Department of Labor does not require businesses to have a policy manual, but they do require businesses to inform employees of their rights. A policy manual is a great place to do this. In addition to listing out their rights (ex: vacation days, sick days, etc.), you also need to lay out the rules so that there is no confusion in the future.
For example, if you have a rule that an employee will be let go if they are late to work 3 times, put this in the manual. That way if the time comes when someone breaks this rule, there is a set penalty that both the employer and employee understand. It is crucial to have this manual looked over by an attorney. At Bowne Barry & Barry, we will look over your policy manual to make sure your language is clear, makes sense, and won’t cause legal troubles down the road.Starting a new business is both exciting and intimidating.
A Lawyer in East Brunswick NJ
At Bowne Barry & Barry, a lawyer in East Brunswick NJ, we want you to focus on the exciting parts while we help with anything in the legal realm. Whether this is helping you file for corporation status or helping to design a policy manual, we are here for you every step of the way. Contact us today to learn more about the service we provide and how we can help you get your small business started.