What Every Business Owner Needs to Know About Legal Compliance

The number of small businesses in the US hovers around 32.5 million with new businesses opening all the time. Some of the people opening these businesses come out of a business background or picked up an MBA.

With the Internet and e-commerce democratizing business ownership, though, many people end up starting a business with no formal business training.

While you can start a company and run it successfully with no formal training, it’s very easy for you to trip over legal compliance issues. Not sure what legal compliance applies to you? Keep reading for an overview of what you should know.

LLC Formation

While a lot of small businesses function as sole proprietorships, businesses with employees typically run as limited liability companies or LLCs. An LLC is a legal structure that integrates the financial pass-through of the sole proprietorship with the asset shielding you get from a corporation.

Most states allow the formation of LLCs, although some apply limits to certain kinds of businesses. However, you must register your LLC with the state government. If you don’t register the business, it doesn’t exist in the eyes of your state.

Business Licenses and Permits

There are a wide variety of businesses that don’t require a license from the city or state. For example, many freelancers don’t need a license.

Even so, you should carefully investigate the state and local regulations for your industry. Operating without a license can prove a very costly or even criminal mistake if you need one for your business. You may also need permits to operate certain kinds of businesses.

Some heavily regulated industries, such as alcohol production, may also require that you secure licenses and permits from the federal government in addition to any local licenses and permits.


As a general rule, state governments mandate that small businesses carry certain kinds of insurance. The most common example is workers’ compensation insurance for any business with employees.

Most states also apply insurance rules to specific kinds of industries. For example, most states require general contractors to carry a minimum amount of liability insurance before issuing a license.

Again, make sure you investigate any relevant insurance requirements for your type of business.

Employee Rights

Employees enjoy certain rights under state and federal laws. These rights can prove tricky for business owners to understand completely. If you’re concerned about protecting employee rights, you can use outsourced HR services to help you make sure you stay in compliance.

Legal Compliance and You

Legal compliance often feels like a maze of bureaucracy for new business owners. Yet, maintaining that compliance is of vital importance to your business’s long-term health.

In many cases, it boils down to making sure you submit the right paperwork to the right people. That typically gets you past LLC formation, as well as licensing and permitting processes. Beyond that, it’s often about making sure you have proper insurance and protect employee rights.

Looking for more business tips? Check out some of the other posts over in our Business section.

James Jackson

James Jackson is passionate about exploring the latest advancements in technology and sharing his insights with the world. From AI and blockchain to cybersecurity and IoT, James Jackson strive to deliver informative and engaging content that empowers readers to navigate the ever-evolving tech landscape. Join me on this exciting journey of discovery!
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Murtaza Ali

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