This article is Part 2 in our series on Starting a Small Business. Here, we’ll take a deeper dive into small business record-keeping, gathering employee information, and minimizing risks. First time researching legal support for your new venture? Start with Part 1 >>
Whitehurst, Blackburn & Warren partner Bruce Warren has more than forty-six years of experience working with small business clients. Hiring an attorney to assist with your small business needs can be advantageous in every stage. From creating and starting a new business (which we’ll talk more about here), to growing and navigating your business trajectory, to even exiting your business when it’s time to pass the baton. Legal counsel is crucial every step of the way.
Record-Keeping
“Once you have determined the best business structure for your venture, you must file for authorization with the state to do business under a specific name,” attorney Bruce Warren explains.
In Georgia, you can register a domestic limited liability corporation (LLC) online or by mail. According to the Georgia Secretary of State, once your filing is reviewed and approved, a Certificate of Organization will be issued for your entity.
In addition to your authorization to do business, Warren suggests keeping a copy of your bylaws and tax ID number, also known as an Employer Identification Number (EIN), on file as well. He also recommends utilizing a bookkeeping system to record business transactions and upload bank statements.
“You can purchase bookkeeping software, but I also think it’s best to consult an accounting professional who can give advice on tax rules,” Warren adds.
Staying on top of monthly transactions helps you budget more accurately, stay prepared to file taxes, and remain compliant with the law.
Another consideration for recording-keeping applies when a company must have a license.
“Businesses who have licensing requirements like plumbers and electricians can choose to hold licenses individually or through the corporation; however, they must register the license number that is associated with the business when requesting a permit for specific tasks,” says Warren.
Gathering and Filing Employee Information
After you have obtained your business authorization and your EIN, you are ready to hire your first employee. What documents are essential in the hiring process?
“You must set up records for withholding taxes,” says Warren.
There are two documents that your employees should complete: federal income tax withholding and your state withholding form. The Form W-4 (Employee’s Withholding Certificate) asks the employee how much federal income tax to withhold from their pay. This form is submitted to the IRS. The state withholding form in Georgia is the G-4.
“Furthermore, employees who report to work on a regular basis at a specific time and complete specific tasks as outlined by their supervisor are required to fill out a W-2 Form,” Warren continues.
To complicate the conversation further, aW-2 employee is different from a 1099 worker.
“A 1099 is not a regular employee. 1099 workers are independent contractors, and their work is typically performed on a project basis. They determine when they work, what they do, how they do it, and don’t require supervision,” explains Warren.
Ensuring you are reporting your employees under the correct IRS code is imperative says Warren: “If your business is audited and the IRS discovers that you have incorrectly classified a regular employee as a 1099 worker, tax penalties can be applied."
Law Suits and Minimizing Risks
The details of running a successful small business are endless, but it is crucial not to overlook your risk of being sued.
“Negligence and other torts are two common classifications for lawsuits against small businesses,” Warren says.
The primary difference between negligence and most other torts is that negligence happens when someone isn't careful enough to fulfill the necessary standard of care. A tort occurs when someone fails to complete a task properly or at all.
“If you fail to finish the task or do the job well, your business can be sued for breach of contract,” he adds.
Furthermore, purchasing a liability policy can protect a business.
“Every business owner should get one,” states Warren. “You should also use ordinary care. Do the work properly, screen and hire honest employees, check their history, don't put people behind the wheel with bad driving records.”
But even the most careful employers make mistakes. So, what happens if you do get sued?
“If the suit relates to damage caused (tort) and you have insurance, you should immediately notify your insurance provider. Your insurance company will take over the case,” Warren says. If the suit is regarding inferior quality or incomplete work, Warren urges that you consult an attorney. The same advice also applies if
you haven’t been paid: “If you, the business owner, have trouble collecting money for the services rendered, you should contact a lawyer,” he advises.
Contact Us
Starting a new business venture is an exciting ride! But it can be worrisome, too. WBW can help you launch your successful small business while offering peace of mind. Let us be your advocate.
Call us at 229-226-2161 to schedule a free consultation with Bruce Warren or another member of the WBW legal team.
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