What Do Startups and Entrepreneurs Needs to Know About Employment Law


Startups and entrepreneurs face an uphill battle in establishing their business. Regardless of how good an idea or service you have to offer, there is a great deal that must go into the design and establishment of a business to ensure its success. According to Forbes, 9 out of every ten startups fail, and in many cases, the final blow is dealt even before the company launches. Of the 10% of startups that succeed and grow into successful businesses, there are commonalities. One of the most important common characteristics is attention to detail. Knowing how to get your business off to a good start is an efficient way to ensure its success, so what do you need to know?

  • Necessary Tax Forms

Anyone who is opening a business must file with the IRS to receive an employer identification number. An EIN is a number that the IRS will use to identify your businesses and the employees that are working for your company. This will track taxes, wages, and other valuable information about your business with the IRS, banks, and other companies. Each state has different rules and regulations about reporting and may have different form submission requirements. To avoid penalties and fees, it is best to speak with a lawyer well-versed in the employment law in the state where your business is incorporated.

  • Workers’ Compensation and Insurance

In many states, a business that has more than one employee is required to carry workers’ compensation insurance. In some cases, a business can choose to carry private insurance for injury claims by employees. In the state of Texas, workers’ compensation insurance is optional but is thought as necessary for any business looking to avoid litigation for injuries incurred on the job, or because of tasks related to an employee’s scope of work.

  • Protecting your Intellectual Property

Startups are almost always based on an idea, and because of this, your intellectual property is likely to be your business’ most valuable asset, and you’ll need to know what type of protection you’ll need to ensure your idea and research isn’t pirated by a competitive company. Copyright is protection offered to creative work. While copyright is often associated with written works, it also extends to computer codes. Trademarks are used to protect branding, including the name of the company and any logos that are used. Patents can be filed to protect inventions or innovative ideas, and finally trade secret protection laws aim to protect confidential business information, which may include research and design elements.

  • Establishing the Employment Relationship

In the United States, most employees are hired on an “at-will” basis. At will employment allows the employer or employee to end the relationship at any point. Neither the employer or the employee are required to state a reason for termination. The employer, however, can not dismiss an employee for discriminatory reasons, as outlined by Title IV and other employment law regulations.

A startup may choose to employ an individual at-will or as an independent contractor. In Texas, one of the most common mistakes startups make is hiring contractors that should actually be classified as employees. 

While the statistics may seem sobering and grim, not every startup is destined to fail. After all, 10 percent of businesses are successful, and their success is attributed to more than just luck. Attention to detail, investment in the company employment law help, and a deep understanding of the business landscape can set a business on track for success. Be mindful to follow employment law and other regulations, and to never stop learning about the aspects it takes to turn a small business into a robust enterprise. 

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