How to Keep Your Small Business Legally Compliant

How to Increase Your Business Return on Investment

When starting your small business, it’s easy to overlook your business’s compliance because of being overwhelmed with getting your first projects up and running and finding your first clients. It is important that you know and understand the constantly changing laws, policies, and regulations regarding business operations and legally comply to guarantee the continued operation of your business.

Decide On the Best Business Structure

The first legal compliance you need to meet as a small business owner is to choose your company’s business structure. Depending on the goals and size of your company you can choose to structure your business as a:

  • Sole proprietorship: This business structure entails that you and your business are one entity in terms of legalities and taxes and that only you are responsible for your business’s liability and taxes.
  • Partnership: Your business’s ownership is shared between you and your business partners in this business structure, as well as the workload, profits, and legal liabilities.
  • Limited Liability Company: With an LCC, you and your business partners are protected from personal liability over your company in that, in case your business is sued or goes bankrupt, your personal assets are shielded from litigation and seizure.
  • Corporation: Structuring your business as a corporation is the best way to isolate it from your personal ownership and that of your partners and achieve comprehensive liability protection, including the advantage of separate taxation on your company’s profits.

An appropriate business structure like having an LLC in Pennsylvania offers you legal protection that you would otherwise be susceptible to as a sole proprietorship.

Obtain Appropriate Business Permits and Licenses

You need to register your small business with a unique name and apply for relevant business licenses and permits with your local licensors that suit your business depending on your industry. Some of the licenses and permits you can look into for your business include:

  • A local license and permit
  • A state permit
  • A federal license

You can research the business requirements you need to accomplish to remain legally compliant at your state’s small business administration website to ensure that you meet the deadline to ensure that you meet the deadline for fulfilling all of your business’s legal obligations.

Once you obtain your licensing forms, you need to ensure that you file them in a safe place for future use along with other important business documents like your annual reports. A great tip to ensure you have your paperwork even if the physical ones get destroyed or lost, is by keeping digital copies that you can access from the cloud anytime.

This hack can help you keep your important documents organized and make it easier for you to submit necessary documents to authorities without having to comb through multiple file cabinets.

Obtain the Right Business Insurance

Insuring your business can help you safeguard your company against the risk of liability losses and protect your personal assets as well. Some of the common necessary business insurance include:

  • General liability insurance
  • Errors and omissions insurance
  • Product liability insurance
  • Commercial property insurance

Getting the correct insurance for your business entails going over the various policies and their terms with your insurance company and picking the best insurance covers that cater to your business’s insurance needs.


Each state has its own set of business laws to abide by, and ensuring that your small business fully complies can protect you from losing your business or corporation rights and being penalized with hefty non-compliance penalties.

It’s smart to have a certificate of good standing for your business that shows that you are cleared by the state to run your business because it can open opportunities for you to apply for business loans, conduct substantial financial transactions with your bank, and potentially attract high-yield investors.

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