Writing A Business Plan: Legal Considerations

By on May 16, 2018
The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice - legal information is not the same as legal advice. The information expressed on this site are the opinion of the individual author and may not reflect the opinions of any individual attorney. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this web site or any of the e-mail links contained within the site do not create an attorney-client relationship between FinancialSafetyNet contributors and the user or browser.

Writing your business plan is an exciting step in the startup process. You have gathered all of the information suggested by the templates and you sit down to write. Your head is filled with marketing and sales strategies and financial information. You write your business name and location. Wait…did you check the zoning ordinance for your location? You write up your funding requests. Did you remember to include the costs of licenses and permits? Did you know you need licenses and permits? There are important legal issues that should be addressed during the business planning process and that information should be included in your business plan.

Writing a Business Plan

A well-thought-out, well-written business plan is an essential part of starting a business of any size. The process of writing a business plan can help you clarify your ideas and goals, and create a realistic view of your financial situation. This information is useful for you and your partners, and imperative for potential investors.

A quick Google search on “writing a business plan” will return numerous results for guidelines and templates. Writing the business plan is not a particularly complicated process, but it can be time consuming. It requires you to do a fair amount of market research and number crunching, and, it’s to your benefit to be thorough (think 80/20 rule).

The size and complexity of your business plan ultimately depends on the size and nature of your business. Here is a quick outline of a basic business plan.

  • Executive Summary
  • General Company Description
  • Products and Services
  • Marketing Plans
  • Operational Plans
  • Organization and Management
  • Personal Financial Statement
  • Startup Expenses, Capitalization and Financial Plans
  • Appendices

A business plan projects 3-5 years ahead and outlines the route you intend to take to grow revenues. However, it is so much more than a financial tool. You can also use your business plan to address the legal aspects of starting up your business so when your funding comes in you can hit the ground running. For more information on creating your business roadmap, read FSN’s Start Up 101: Constructing A Small Business Plan.

Legal Considerations

Seek Legal Advice

Entrepreneurs must keep up with new developments in local, state, and federal business law. Laws can change quickly so you must adapt quickly or risk losing competitive advantages. If you are too busy to keep your eye on the legal landscape, hire a qualified business attorney to help you so you can keep doing what you do best—running your business. It is money well spent!

Hiring an attorney with knowledge in your area of business can do more than just keep you updated on changes in the law. They can also help you make informed business decisions. No matter the size of your business, you must conform legally by complying with all applicable licenses, zoning ordinances, and other legal regulations.

Choose Your Legal Business Structure

One of the first issues you should address is choosing the legal structure for your business. This is not a decision to be taken lightly; the structure you choose will have legal and tax implications. You should consider the size and location of your business, risks and liabilities, and your tax requirements. Be sure you are informed about your options and choose the legal structure that best suits your business and financial situation. To learn more, read FSN’s article Business Startups: Choosing A Legal Business Structure.

The legal business structure you choose will determine how much or how little information you need to put into the Organization and Management section of your business plan. This section will ask you about your company’s organization structure, ownership information, and board of directors. This section can be quite simple for sole proprietors and quite complex for corporations.

Obtain Licenses & Permits

Depending on what business you engage in, you may need licenses and permits at the local, state, or federal level. If your business activities are supervised and regulated by a federal agency, such as selling alcohol and firearms, you may need to obtain a federal license or permit. On the other hand, if you own a small artisan bakery, you may only need local and state permits to run your business, and in some cases, only a local permit may be required. Whatever the nature of your business, you need to know what licenses and permits you need to conduct business legally.

This information is available online, but can often be confusing for new business owners. A business attorney or mentor can help you figure out the process for doing business in your state. You should also plan ahead and allow enough time to acquire the licenses and permits; it can take several weeks to months depending on the nature of your business.

Licenses and permits can be quite costly. You may consider including the costs in your funding request. Don’t forget, most license and permits must be renewed annually. Be sure to include those costs in your annual budget.

Obtain Appropriate IRS Forms

If you plan to have employees or do business as a partnership or corporation, you must obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). You can apply for an EIN at no cost online at www.irs.gov . You must also set up records for withholding federal and state taxes, including a Federal Income Tax Withholding form W-4 and a Federal Wage and Tax Statement form W-2. It is a good idea to consult with a tax attorney to ensure your business is set up appropriately in terms of taxation.

Sign Non-Disclosure Agreements

Confidentiality and non-disclosure agreements are essential if you require financing for your business. Before entering into any contracts, it’s a good idea to have your financial institution sign a confidentiality agreement so that your businesses information is kept private. Of course, this also depends on the nature of your business. Small business may not be too concerned about privacy. Larger businesses, however, may be concerned about competitors obtaining information that can be used to their advantage. The more confidential information your business plan contains, the more confidentiality and non-disclosure agreements you will have.

Address Zoning Issues

The location of your business is obviously an important piece of information you will include in your business plan. Selecting a location is not as simple as finding a storefront or office you like and leasing it. It must be zoned for the type of business you plan to operate. Even if a similar business is in operation in that location today, it does not mean the zoning is correct for your business. It’s possible that zoning may have changed and that business filed an exemption that does not apply to you. It’s best to check with your local government before putting anything in writing.

Be sure you research zoning ordinances long before you start doing business, even if your operations will take place entirely in your own home. If you plan to have vendors or customers come to your home, there may be zoning restrictions that prohibit it.

The above legal and taxation requirements may seem overwhelming, but they are important and should not be ignored. Including such information in your business plan will show investors that you have done your homework and that you are a serious business person. It will also help ensure you are doing business legally. Remember, it’s always a good idea to consult with a business attorney, tax professional, or an accountant who can clarify information and help you make sound business decisions.

Take the next step - Let's talk!

Remember to speak with your financial, legal or tax professional for more information about the topics which interest you. Here are a few ways for you to share your ideas, learn more and interact with FinancialSafetyNet members, authors and expert advisors.
Have a question, but don't want to share it with everyone? Contact a financial advisor.
Want to contribute to the conversation publicly? Submit a comment.

Submit A Comment

About Chuck Piecukonis

You must be logged in to post a comment Login

Leave a Reply