Starting a business means taking on one of the most personally consuming projects you may ever do. This means that some mistakes – financial or legal ones especially – can have lasting consequences. Make absolutely sure that nothing you do could get you into legal trouble.

Keep Business Finances Separate

Businesses are subject to lots of government scrutiny, especially from the IRS. This is because they can sometimes be used as a method of laundering money, committing fraud, or carrying out other forms of financial crime. First and foremost, to avoid accidentally committing a crime, you need to keep your personal finances and business finances separate. Your business can act as a source of income for you, after all of your payments, taxes, and fees have been fulfilled. Anything else could be illegal. For example, mixing your business and personal finances could result in confusion when deducting business expenses. The IRS could then choose to audit you, and either fine you or imprison you if they find discrepancies.

Follow Labor Laws

You may think that simply following the law would be an easy enough decision for most business owners. But many – with or without malicious intent – try to cut corners when it comes to labor laws to squeeze more profits out of their employees. Be carefully aware of which laws apply to you and your business. Make sure that all employees are given the breaks, accommodations, and benefits that you are legally required to give. Make sure that you follow the legal agreements you’ve made with them upon hiring, and that you avoid even small mistakes. For example, misclassifying employees can result in tax issues at your business.

Insurance

Getting proper insurance can truly be a lifesaver for your business. Situations where customers, employees, or others suffer from an accident on your commercial property, can result in litigation. Even if you don’t have a commercial property, there are many ways in which people can hold you legally liable in some way. Insurance provides financial backing for litigation brought against you. Look into the best business insurances to know exactly which kinds of coverage would be relevant to you.

Starting a business is, in many ways, like jumping through a million little legal hoops. There are many, many things you need to legally, logistically, and financially prepare for, and some mistakes can be extremely costly. It’s best to prepare thoroughly beforehand to know what you’re up against.

Check out this article on what to do when making major changes to your business!