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5 Tips For Keeping Your Business Legally Compliant

Guest Post | Oct 26, 2022

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Everyone wants to grow their small business. Before you can concentrate on acquiring customers or clients, however, you must first be sure that your company is completely legally compliant. If there is any question about your business’s legitimacy, you should handle such matters before opening your doors for the first time.

All states have their own separate rules, as do local areas, and there are also trade regulations to abide by. You will have to heed these laws and rules or else you risk liability or you may have to face penalties or pay fines. That is why you should keep the following five tips in mind in order to keep your business legally compliant.

1. Check On Your Certificate Of Good Standing

Each state has its own document that states that a company is cleared to conduct business within its boundaries. This is typically called a “Certificate of Good Standing,” and it shares with the public that your business is in complete compliance with all laws.

It is important to have this document handy. Most lenders, and representatives from other states, will most likely require the information that this one certificate represents when you are conducting business with them. Having it with you simply saves time. Plus, in some areas, you may be fined or penalized for not having your own copy on hand at your business’s primary location.

2. Pick The Business Structure That’s Best For Your Needs

This is something that is critical for you to decide well before you begin operating. As a matter of fact, you will certainly need this information well in advance of applying for a small business loan or any other type of outside financing.

You have several options, such as becoming a sole proprietorship, a partnership, a limited liability company (LLC), or a corporation. Establishing a sole proprietorship means that you are in business alone and that you and your company share all assets, debt, and liability. This is also true of partnerships, though the assets, debt, and liability are split among two or more partners.

A corporation is a completely separate legal entity from those who run it. Officers and a board of directors will be in charge. An LLC is a hybrid between a sole proprietorship/partnership and a corporation. It is owned by its members like the former and these members are protected from liability like the latter.

3. Get A Surety Bond To Guarantee Trust

Surety bonds are simply contractual agreements drafted between three exclusive parties that are made to guarantee that work is completed or to ensure integrity and honesty from business owners.

The bond is usually purchased by a small business owner from a surety company to ensure clients and customers that they will get the product or services that they are paying for. If the business owner defaults on their promises, the surety company will reimburse the end client and you will need to pay them back in kind.

The type of surety bonds that your business will require is completely dependent on the state that you live in and the type of business that you are running. Almost all licensed professionals and contractors are required to carry one, so you will need to check your local laws to verify whether or not one is required.

Surety bonds encourage companies to remain legally compliant by respecting and fulfilling any guaranteed contractual obligations. Thankfully, while it may seem extraneous, clients and customers tend to flock to a bonded business because they know that they can trust it to put its money where its proverbial mouth is.

For example, all states require motor vehicle dealers to be bonded to prevent misconduct and protect the general public. The motor vehicle or MVD bonds, as they're referred to, will hold the dealer responsible for any financial or legal losses that a customer accumulated specifically due to the fault of the dealer, whether or not these losses were intentional.

When the dealer violates the terms of the bond contract, the customer can make a claim against the surety bond, and it will pay out to make the consumer whole again. Afterward, the motor vehicle dealership will have to pay the surety company back for the claim because it is legally responsible.

Surety bonds are so crucial to how many businesses are run that some states will not grant business licenses to those that cannot prove that they have them.

4. Obtain Proper Licensing And Register Your Company With The State

It is required that some companies obtain permits and special licenses in order to conduct business in their local areas. This usually refers to hospitality businesses, such as bars and restaurants, but each state has its own regulations to follow, so it is best to do your research before your opening day.

Also, Articles of Incorporation should be filed by corporations with the state, while comparable Articles of Organization should be filed by LLCs. Sole proprietors and partnerships should file a “Doing Business As” name (DBA) with the state if the company name differs from the owner’s or owners’ name(s).

5. Keep On Top Of Changing Legislation

While you may have all your requisite paperwork filed and up to date, that doesn’t mean that you should stop paying attention to state business laws and federal and state tax laws. In order to be in total legal compliance, you must be in the know with regard to any changes in the law.

See:  Financial and Legal Requirements When Launching a Company: 4 Facts to Know

For example, if the minimum wage increases or health leave laws change overnight, you could accidentally violate the associated laws if you are unaware of the adjustments. So, keep an eye out for relevant news to stay legally compliant.

There are many things that you will have to do to keep your business legally compliant on all fronts, and these five items are just some of the more important things on the list, so they deserve precedence over all other company obligations. After all, if you are unable to meet your basic legal requirements as a company, the state or town can take away your right to conduct business. This is really not worth the risk, so make sure you have met all your legal commitments ahead of time.


NCFA Jan 2018 resize - 5 Tips For Keeping Your Business Legally CompliantThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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