Are you passionate about marketing and dreaming of starting your own marketing business? If so, you’re in the right place! Creating a marketing business can be an exciting and rewarding venture, but ensuring you’re on the right side of the law from the get-go is essential.
In this comprehensive guide, we’ll walk you through the steps to legally start a marketing business, covering everything from choosing a business structure to obtaining the necessary licenses and permits.
Market Research and Business Plan
Before diving into the legal aspects of starting a marketing business, laying a solid foundation is crucial. Begin by conducting thorough market research to identify your target audience, competition, and the specific marketing services you want to offer. This research will help you refine your business idea and create a business plan that outlines your goals, strategies, and financial projections.
Choose a Business Structure Like an LLC
Choosing a suitable business structure is one of the first legal decisions you’ll need to make when starting your marketing business. The most common options for small businesses include sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Each has advantages and disadvantages, so you want to select the one that aligns with your business goals and provides the liability protection you need.
For many marketing professionals, forming an LLC is an attractive choice because it offers a balance of personal liability protection and flexibility. LLCs also tend to have more straightforward administrative requirements compared to corporations.
Register Your LLC with the Secretary of State
Once you’ve decided on a business structure, it’s time to choose and register your business name. Make sure your chosen name is unique and not already in use by another company in your state. Most states require you to perform a name availability search and register your business name with the appropriate state agency, often the Secretary of State’s office.
Create an Operating Agreement (for LLCs)
If you’ve chosen to structure your marketing business as an LLC, drafting an operating agreement is highly recommended. While this step is not always legally required, an operating agreement outlines your business’s management structure, ownership percentages, and operational procedures. This document can be invaluable in preventing disputes and ensuring a clear understanding among members.
Obtain an Employer Identification Number (EIN)
An Employer Identification Number (EIN) — also commonly known as a Federal Tax Identification Number — is necessary if you plan to hire employees or operate your marketing business as anything other than a sole proprietorship. Even if you don’t intend to hire employees immediately, having an EIN is a good practice as it separates your business’s finances from your personal ones and may be required when opening a business bank account.
You can obtain an EIN from the Internal Revenue Service (IRS) online or by completing Form SS-4. Once you’ve received your EIN, store it in a safe place, as you’ll need it for tax filing purposes later.
Register for State and Local Taxes
Depending on your location and business activities, you may be required to register for state and local taxes, typically including sales tax, use tax, and any other applicable taxes. Failure to register for and remit these taxes can result in penalties and legal troubles. Check with your state and local tax authorities to determine your tax obligations.
Obtain Necessary Business Licenses and Permits
Most marketing businesses will need certain licenses and permits to operate legally. The specific requirements vary by location, so it’s essential to research the regulations in your city, county, and state. Common licenses and permits that marketing businesses may need include:
- Business License: A business license is a basic requirement in many jurisdictions and authorizes your business to operate within a specific area.
- Home Occupation Permit: If you plan to run your marketing business from home, you may need a home occupation permit.
- Sales Tax Permit: If your marketing services involve the sale of tangible goods or certain digital products, you’ll likely need a sales tax permit.
- Professional Licenses: Depending on the nature of your marketing services, you may require specialized professional licenses or certifications.
- Zoning Permits: Ensure your business location complies with local zoning regulations, mainly if you operate from a commercial property.
Set up a Business Bank Account
Separating your business finances from your personal finances is crucial for legal and financial reasons. To do this, open a business bank account in your business’s name. Doing so will help you maintain clean and precise financial records, streamline tax reporting, and shield your personal assets in case of legal issues.
Agreements with Clients and Workers
Obtain Business Insurance
Protecting your marketing business with the right insurance coverage is a wise investment. Depending on your specific circumstances, you may need different types of insurance, including:
- General Liability Insurance: This insurance covers accidents, injuries, and property damage related to your business operations.
- Professional Liability Insurance: This coverage offers protection from claims of negligence or mistakes in your marketing services. This insurance is also called Errors and Omissions Insurance.
- Business Property Insurance: This insurance covers damage to or loss of business property due to theft, natural disasters, and other covered events.
- Inventory Insurance: If you sell products as part of your marketing services, inventory insurance can provide coverage for losses due to theft or damage.
- Commercial Auto Insurance: If you use a vehicle for business purposes, commercial auto insurance is necessary to keep your vehicles and employees safe.
- Workers’ Compensation Insurance: If you have employees, this insurance provides coverage for work-related injuries or illnesses.
With various insurance options available, it’s best to consult an insurance professional to determine the most suitable coverage for your marketing business.
Comply With Advertising and Marketing Regulations
As a marketing business, you must be aware of advertising and marketing regulations to avoid potential legal issues. These regulations can vary depending on your industry, location, and the types of marketing services you offer. Some common considerations include:
- Truth in Advertising: You must ensure that your marketing materials and statements are accurate and not deceptive.
- Data Privacy Laws: You must comply with data protection and privacy laws when handling customer data.
- Unsolicited Calls: Depending on your location, there may be limitations on calling consumers without their prior consent.
- Endorsements: If you use testimonials or endorsements in your marketing materials, make sure those statements are verifiable.
- Industry-specific Regulations: Some industries — such as healthcare and finance — have specific advertising and marketing rules that you must follow.
Consult with legal counsel or regulatory authorities to ensure compliance with relevant advertising and marketing laws.
Starting a marketing business can be fulfilling and profitable, but it’s essential to navigate the legal aspects correctly from the beginning. By following these steps and seeking legal advice when needed, you can ensure that your marketing business is set up in full compliance with the law. With the right legal foundation, you can focus on what you do best — helping your clients succeed through effective marketing strategies and campaigns.
If you need legal templates or counsel for your marketing business, Drafted Legal offers customizable documents tailored to the marketing industry. We have the expertise and tools to help you start a marketing business. Or contact a business lawyer for personalized legal advice from this award winning attorney.