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Running a Business: Legal FAQ

Do I need a license / permit to open my business?

That depends on what type of business you own. Many businesses do not need any special licenses or permits in order to operate their businesses. However, some businesses that engage in certain trades or professions may need special licenses. For example, certain professionals such as doctors, lawyers, teachers and accountants need special licenses, issued by appropriate state agencies, in order to engage in the practice of their profession. Also, some businesses that engage in certain types of commerce such as alcohol or firearms may need special licenses in order to operate.

I want to do business online.  Do I need to charge state sales tax?

Currently, an online seller has to charge sales tax if that seller has a physical location in the state where the online customer is located. It does not matter what type of physical location the seller has in the customer’s state. For example, if you have a warehouse in Pennsylvania, headquarters in Delaware and stores in New York, Florida and California then you need to charge sales tax to all of your buyers from Pennsylvania, Delaware, New York, Florida and California. However, that seller would not need to charge sales tax to a customer from Arizona.
That said, there is a movement to crack down on this often perceived “loophole” and online business, both new and established, should be prepared to possibly start charging state sales tax to all online customers in the future.

Do I need to develop terms and conditions for my business website?

Yes, creating and posting terms and conditions for your website is probably a good idea. However, it is important that you think carefully about those terms and conditions and, if possible, have an attorney review the terms and conditions before you post them. This is especially important if you are offering anything for sale on your website. An attorney can help you draft terms and conditions that will benefit you should a dispute arise over a transaction on your website. The terms and conditions can, for example, include a choice of jurisdiction clause that allows you to choose your local jurisdiction for all legal disputes which arise from your website.

How can I collect money that is owed to me by my customers?

It is can be difficult and frustrating to have money that is legally owed to you by customers and not have the customers pay on time. After sending an initial bill and not receiving payment you should follow up with an additional bill marked “Overdue.” Additionally, you should call the customer and remind them of the overdue bill. It is important that you record all of your attempts to collect money from your customers so be sure to make note of the date, time and outcome of each phone call and bill. If your actions still do not result in a paid bill then you may need to hire a collection agency or file a claim in small claims court. Prior to contacting a collection agency or filing a lawsuit, however, you must carefully read the terms of the contract or agreement between you and your customer to ensure that you are pursuing your money in the manner in which you both agreed to prior to the dispute.

Do I Need a Taxpayer Identification Number for my Business?

A taxpayer identification number (TIN) is a number used by the Internal Revenue Service (IRS) to identify people and companies. Most companies need to file with the IRS to receive an Employer Identification Number (EIN). Those who do not need an EIN typically use their social security number unless they fall under a limited exception to the general rule. A business needs to obtain an EIN if the business has any employees, if it operates as any type of corporation or partnership, if it has to file special tax returns for employment, excise or alcohol, tobacco and firearms or if it is involved with certain types of organizations such as estates or non-profit organizations.

What benefits must I legally provide to my employees?

The type of benefits which an employer must provide to his or her employees depends on the number of people employed by the company and the state(s) in which the company does business. Private employers typically must pay social security taxes for employees and maintain unemployment and workers compensation insurance for employees. Some states also require employers to carry disability insurance for their employees. The Family and Medical Leave Act provides that certain employers with more than 50 employees must provide 12 weeks of unpaid leave in a 12 month period for certain employees who are caring for a new child or a sick relative. COBRA benefits which provide for temporary continuation of health care coverage when an employee is terminated must also be provided in certain situations.

How often do I need to pay business taxes?

If you operate a business then you will need to pay your federal and state income taxes and your self employment tax at least annually and likely more often than that. If a business expects to owe $1,000 or more in taxes at the end of the year then the business needs to file quarterly tax returns.  Other types of taxes such as business entity taxes and excise taxes must also be paid according to the schedule determined by your state taxing authority.

Do I need business insurance?

Most businesses need some kind of insurance coverage. The type of coverage varies from business to business and many companies need more than one type of insurance policy. For example, professionals, such as doctors and lawyers, usually must have malpractice insurance. Businesses that operate vehicles must have motor vehicle insurance. Many businesses also need property insurance to protect against things such as fires or natural disasters. Since most businesses can benefit from insurance and some businesses are required to have insurance, it is important for every business owner to speak with a qualified insurance agent to review the different types of insurance available and which types make sense for a particular business.

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