Business Law

Starting a Retail Business

Many people who want to go into business for themselves consider opening a retail store. Although it may seem, at first glance, to be a relatively easy process, there are actually many legal steps that must be taken before you hire your first employee and open your doors to new customers. An experienced small business attorney can help guide you through obtaining legal permits, licenses and business requirements in your town, county and state.

Choose your legal structure and tax status: There are many ways to structure your new business, each with its own advantages and disadvantages. Your choice of structures will depend on:

  • How man people will have ownership in the business
  • How concerned about protecting your personal assets if your business gets sued
  • How much you expect to pay in taxes

Name Your Business: You may already have a distinctive, clever name in mind for your retail operation. But before you start to use it, check to see if it's trademarked, which could prevent you from using it.

Obtain a Tax ID number (Employer Identification Number or EIN): If you plan to have employees, or operate your business as a corporation or partnership, then you'll need to obtain a federal EIN from the Internal Revenue Service and a state EIN. Similar to a Social Security number, the EIN is used to identify business entities, such as corporations. The EIN is used on everything from filing tax returns to employee W-2 forms. You may have to supply the EIN when buying materials for your business if state and local laws exempt such purchases from sales taxes.

If you are a sole proprietor with no employees or you have an LLC with a single owner who does not need to file employment tax returns, then you don't need an EIN and can use your Social Security number.

Open a business checking account and apply for credit: As your business starts to spend and earn money, you'll need a business checking account, and you may also want to apply for credit in your business's name. Just as you build a credit history for yourself, your business can build a credit history. The better your business's credit the easier it'll be borrowing money in the future. Be aware that you may have to agree to personally cosign loans for your business or agree to be responsible for other credit accounts until your business builds a positive credit rating.

Lease or buy real estate: If you plan to have a physical location for your retail business, then you'll need to find a place in which to operate. Many municipalities have zoning requirements governing how property can be used. Check with your local government or real estate agent to learn whether zoning ordinances apply in your area, and which zones permit retail operations. This helps narrow your search for an appropriate location. A local real estate lawyer can help negotiate and review the contract to lease or purchase the property.

Obtain the necessary licenses and permits: After you've found a location for your retail business, you'll then need to obtain the necessary licenses and permits to operate your business. Depending on your town, county and state laws, you may be required to obtain some or all of the following licenses and permits:

  • Resale license or sales tax license
  • City and/or county business license or permit
  • "Doing Business As" (DBA) registration
  • Fire department permit
  • Sign permit
  • Health department license
  • Alcohol license or permit

Review wage and hour requirements: Before investing money in any business, it's important to have a business plan and create a realistic budget for your company. As part of that plan, decide how many employees your business requires and budget appropriately for their salaries, taxes and benefits. It's important to ensure that you're paying wages that meet or exceed the federal and state minimum wage laws.

You should also understand how each employee's status determines if you're required to pay them overtime..

Create an employee handbook: Before your first employee shows up for work, consider creating an employee handbook that spells out company policies and procedures. This ensures that all employees are treated consistently and can protect your business if an employee sues.

Questions for Your Attorney

  • Do you have experience working with small businesses?
  • Are you familiar with the legal requirements to do business in my town, county and state?
  • Do you handle real estate transactions and employment issues, or can you recommend an attorney who does that type of work?
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