Legal Issues FAQs

• Do I need a lawyer to start a business?
• Should I use a lawyer to draw up a contract or a lease?
• What are the differences in organizational structure and what legal structure should I choose?
• What kind of registration and licenses are generally required to start my business?
• How do I register my small business?
• How different does my business name have to be?
• How do I determine if the name I choose is okay to use?
• Do I need to obtain a Federal Identification Number?
• What are patents?
• What are trademarks and service marks?
• What is a copyright?

Do I need a lawyer to start a business?

No, but it's wise to get the best advice possible when you're starting out. An attorney is one source of the expertise you'll need to draw on.

Should I use a lawyer to draw up a contract or a lease?

Yes, if you do not feel confident of what you are agreeing to or if you want a legal review of the terms and conditions. The time for the lawyer is before you sign it, not after.

What are the differences in organizational structure and what legal structure should I choose?

There are three principal kinds of business structures: the Sole Proprietorship, the Partnership, and the Corporation. A brief description of each type is provided below:

• Sole Proprietorship: a sole proprietorship is probably the simplest business structure to organize. A sole proprietorship business is owned by one individual (not a married couple) who has complete control of the business. Revenues are considered personal income and are taxed at the owner's personal tax rate.
• Partnership: a partnership involves two or more people conducting a business together. This business structure is also fairly simple to organize, but may be more costly than a sole proprietorship because it requires a separate tax return for each partner.
• Limited Liability Partnership (LLP): in this type of partnership, the liability of each partner can be limited to exclude obligations resulting from professional mistakes made by other partners or malpractice actions against other partners. The partners do, however, continue to share liabilities resulting from all other activities of the partnership.
• Limited Partnership: a Limited Partnership is made up of two or more individuals who jointly own a business. This form of business allows for general partners and limited partners. Limited partners are generally financially liable for debts only to the extent of their investment. They have limited or no control over management of the company. The general partners manage the company and have the greatest potential risk/reward from the operations of the business.
• Corporation: a corporation can be complex and expensive to organize. Legal assistance in setting up a corporation is strongly advised. The corporation is recognized as a completely separate legal entity from the owners. Because a corporation is a separate legal entity, the owners can implement pension, profit sharing, and other benefit programs as incentives for employees.
• Limited Liability Company (LLC): a Limited Liability Company can provide the liability protection of a corporation and the federal tax benefits of a partnership. It is formed in a similar manner as a corporation, although directors are called managers while shareholders are called members. The name of the company must include the words “Limited,” “LLC,” or “Ltd.” In a LLC, the individual members or managers are not personally liable for debts, obligation, or liabilities of the company. Articles of Organization must be filed with the Secretary of State's office.

What kind of registration and licenses are generally required to start my business?

Obviously, there are specific requirements in each state, county and locality, but it is possible to list the kinds of basic licenses and registrations a new business will need:

• Local – a business license from city, town or county, depending on your location, will usually be necessary. In addition, you'll have to meet zoning laws, building codes, and similar regulations.
• State – if your business isn't a corporation and your full name isn't in the name of the business, you'll have to register under what's called a Fictitious Name Registration. You should also file for a Sales and Use tax number. In some lines of business (like restaurants, barbershops, real estate offices) specific licenses are needed.
• Federal – You'll need an Employer's Identification Number (EIN) and a it's a good idea to request the “Going Into Business Tax Kit, from the IRS.”

How do I register my small business?

If you decide to incorporate or become a limited partnership or a limited liability company, you will need to register that entity with the Bureau of Corporations at the office of the Department of State. If you organize your business as a sole proprietorship (a business owned and operated by an individual) or a general partnership, you do not need to register your business entity with the state. However, there may be certain city or town permits/licenses that are required to operate your business.

How different does my business name have to be?

It should be different enough to avoid confusion with other businesses. The reason you use a business name is to help customers identify you. If your name is similar to others, this identification is made difficult. Avoid trouble by picking a name that is unique and different enough not to be confused with another business.

How do I determine if the name I choose is okay to use?

State statute requires that every business enterprise operating under an assumed name must register that name in the city or town in which it is located. This is often called filing a “D/B/a”, which stands for “doing business as;” a nominal fee is typically charged. To determine whether a name you're considering is in use by another corporation, or is protected by a trademark or service mark, you should contact the Bureau of Corporations at (717) 787-1057.

Do I need to obtain a Federal Identification Number?

Sole proprietorships without employees can use the proprietor's social security number as a business identification number, providing he or she uses his or her own name in the business. Using a different name and/or hiring employees requires obtaining a federal identification number from the Internal Revenue Service (Form SS-4, Application for Employer Identification Number).

What are patents?

Patents are protections for inventions and discoveries. a patent is a property right that grants the owner an exclusive right to exclude others for a period of time (usually 20 years) from making, using, offering, selling, or importing anything that utilizes the intellectual property contained in the patent without the permission of the patent owner. Patents are expensive to obtain and generally require the use of an attorney who specializes in this field. In the United States, patents are handled by the U.S. Patent and Trademark Office. Other countries have their own patent systems that apply within their borders.

What are trademarks and service marks?

Trademark and service mark registrations are protections for certain things that distinguish one source from another. This registration allows the holder to exclude others from using its mark, generally for as long as that mark remains in use by the owner. a trademark is a word, phrase, symbol or design, or a combination of words, phrases, symbols or designs, that identifies and distinguishes the source of the goods of one party from those of others. Slogans are registered as service marks. This provides trademark protection to a slogan which uniquely identifies your company or service. In essence, a service mark is the same as a trademark, except that it identifies and distinguishes the source of a service rather than a product. Trademark and service mark registrations are sometimes expensive to obtain and often require the use of an attorney who specializes in this field. In the United States, trademarks and service marks are handled by the U.S. Patent and Trademark Office. In Pennsylvania, call the Pennsylvania Corporation Bureau at (717) 787-1057. They will check to see if the trademark has not already been issued and mail you the required forms and instructions. Other countries have their own mark protection systems that apply within their borders.

What is a copyright?

Copyright is a form of protection provided to the authors of “original works of authorship,” including literary, dramatic, musical, artistic, and certain other intellectual works. a copyright generally gives the owner, for a period of time (usually life of the author + 70 years, or up to 120 years for works for hire) the exclusive right to do and to authorize others to do the following: to reproduce the work, to prepare derivative works based upon the work; to distribute copies of the work to the public, to perform the work publicly, and to display the work publicly. a copyright exists immediately upon creation of a work, however, registering that copyright provides additional protections. Copyright registration is fairly inexpensive and easy to obtain. In the United States, copyright registration is handled by the U.S. Copyright Office.

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