Business Management, Growth, and Related Legal Concerns
To run a business effectively, its owners need to understand certain issues that may arise and their options for addressing them. Some common areas of concern include hiring people to work for the business, paying taxes as required, keeping licenses and permits current, and making sure that the business has the assets required to run smoothly. When a business reaches the end of its life, its owners will want to know how to sell or close it in a way that protects their interests as thoroughly as possible. This section discusses each of these issues and others in more detail.
Employee Relations
Before you hire employees for your business, you will need to establish payroll. You also will need to determine whether a certain worker will be classified as an employee or an independent contractor, which can have substantial financial and tax implications. Businesses must provide their employees with certain benefits, and they often choose to provide additional benefits to boost morale and attract talented individuals. Management also needs to make sure that they comply with federal, state, and local labor and employment laws to avoid liability down the road.
Taxes and Financing
Some of the most technical, complicated issues that a business owner may face involve paying taxes to federal and state governments. You will need to pay taxes on the income of the business each year. However, deductions may be available to reduce your overall tax obligations. The taxes that you owe will depend on the type of business structure that you have chosen and the state in which the business operates. A business also will need to withhold taxes from the paychecks of employees to comply with federal laws.
You may want to consider several potential sources of financing for your business, such as banks, investors, or crowdfunding. Each of these options will have advantages and disadvantages that you will want to weigh in view of the risks that you are willing to undertake and your overall business plan. Getting outside funding requires having a short-term and long-term vision of your business that will convince others to make loans or investments.
Legal Compliance
Once you have formed your business, you still need to comply with certain internal requirements and government rules. These will depend in part on the business form that you choose. Certain types of businesses, such as corporations and LLCs, are subject to stricter requirements than certain other types of businesses, such as sole proprietorships. Many businesses need federal and state licenses and permits to operate in a certain industry. These often need to be renewed over time, or sometimes a change to your business or existing law may require getting a new license or permit.
Assets and Equipment
A business will need certain types of assets to operate effectively. While some of these assets are intangible, such as goodwill or intellectual property, other assets have a tangible form, such as equipment or real estate. The question of whether to buy or lease a certain business asset is not always easily answered. There are advantages and disadvantages of each option, as well as situations that may better suit a purchase or a lease.
Emergency Planning
Business owners hope that their business never needs to recover from a disaster, such as a hurricane, earthquake, tornado, or flood. However, they should be aware that they may have several sources of financial aid if needed. One option is to purchase insurance to protect your business from risks that are foreseeable in your region. If a disaster strikes, moreover, the Federal Emergency Management Agency (FEMA) and other federal agencies can provide assistance to small businesses, and the IRS may offer tax breaks to facilitate their recovery.
Selling or Closing a Business
You will want to devise a smart exit strategy for a business that is underperforming or accumulating significant debt. While bankruptcy is a last resort, you may be able to sell a business that is struggling to someone who feels that they can turn it around. This may allow you to transfer its liabilities to the new owner. The sale agreement will provide the way in which ownership is transferred and document all of the assets and liabilities of the business so that both sides understand their obligations. Alternatively, you may be able to close the business and reach an agreement with creditors that allows you to avoid bankruptcy while paying off part of what you owe.
