First Steps to Starting a Small Business
Hello my name is Steven Jayson I’m a Managing Member of the Jayson Law Group LLC. Today is going be the first in a multi-part series about the legal aspects of starting a small business in New Jersey but before we do that I would just like to read a quick disclaimer about this video:
This video is offer for educational purposes only. The views and opinions expressed in this video were that at my own and do not represent the firm as a whole and lastly the statements made by me today do not constitute legal advice this is not a solicitation for business and there is no attorney-client relationship that is formed by these videos. Furthermore should you decide to form your own business you are advised to seek the advice of Legal Counsel.
Steps before starting your business
So today we’re going to talk about the steps before starting your business. When I meet with clients I always tell them that there are two people that you need to speak with. One is your attorney and the second is your accountant and the reason for this is because they’re both going to be able to offer you advice on the type a business entity you should be forming but from two different perspectives. One from a legal perspective and one from a tax perspective.
Whatever the case may be, having both of these people give you advice is going to help you start the business correctly and can help you avoid problems later on that can become very expensive a should litigation get involved. The other reason to speak with both an accountant and attorney is part of any governing agreement of a business typically includes language that allows for the review of the books. Whether you have partners – that’s standard language. If you’re starting your business on your own but you want to grow and & add partners, that’s going to be a requirement most likely that the partner will want to happen should they want to join your business. The attorney can help you draft that language that’s in the agreement to protect your business and the account will help you set up your books so that, when that time comes, they’re clean and it’s not an expensive process.
Understanding stat-up costs
Another reason to speak with both an accountant and an attorney is there certain start-up costs to forming a business and an accountant can help you decide how much of that should be for a capital expenditure and how much should be a loan you are making to the business that the business that the business will pay you back. And there may be tax benefits to drafting a one way or another and the attorney can help draft the documents so that it’s an arm’s length transaction between the business and yourself to protect you and the business.
For a couple more things before we end today’s video in New Jersey you must register your business at least 15 days before you open it. When you do register business you must register for taxes both through the state and federally and lastly anytime you hire a new employee you must notify both the state and the federal government.
That is it for today. Moving forward we’re going to look at other types of business entities.
What Should You Do Before You Start a Small Business?
Before your company opens its doors to the public, there are two people you should consult with for professional advice: an attorney, and an accountant. But why is it important to seek input from both, and not simply one or the other? There are three good reasons:
- Attorneys and accountants each offer you a unique perspective: the former from a legal standpoint, and the latter from a taxation standpoint. While the advice given by accountants and lawyers often overlaps, having the benefit of both inputs gives you a more complete and comprehensive picture. That means you have a better chance of catching potential problems before they develop, and in turn, a better chance of avoiding litigation or other costly problems later down the road.
- When it comes to an operating agreement, each can contribute differently. Your attorney can help you draft the language of this agreement to best protect the business from liability and other pitfalls, while your accountant can help ensure neat, accurate bookkeeping and financial records.
- There are start-up costs associated with opening a business. From the financial side, your accountant can help you maximize your tax benefits by determining how much funding should go toward a capital expenditure, and how much should be a loan that you make to the business, with the expectation that the business will pay you back later. From the legal side, your lawyer will help you prepare the document so that it is an arm’s length transaction, which will help protect both the business and yourself. (An arm’s length transaction means that the buyer and seller act independently of one another, which can help allow each party to act in its own best interests, rather than being influenced to make unfavorable decisions.)
Beyond the importance of consulting with both an attorney and an accountant, what are some other considerations to keep in mind?
- Timing — Be sure to plan ahead. In New Jersey, you must register your business no fewer than 15 days prior to opening.
- Taxes — You must register for both state and federal taxes. Once again, this is an area where an accountant can be of service.
- Employment — If or when you add employees to your company, you must promptly notify both the state and federal government.
If you are thinking about starting a business in New Jersey, an experienced attorney can guide you through the process and help keep you compliant with the law. To arrange for a consultation, call The Jayson Law Group LLC at (908) 258-0621 today.
