Despite what you may get taught about the free market in undergraduate economics, everything in the real business world takes place within a framework established by governments at several levels, local, state, and federal. >> In fact, it's almost impossible to start a business without falling under one set of rules or another, and guess what? You're the one that's responsible for knowing what they are. >> As for the types of enterprises most prone to government regulation, these are the ones that affect either public safety or the environment. So, if you are manufacturing anything, transporting people, making food, or selling anything people ingest, expect to spend a lot of time talking to the folks downtown. >> And here's a big caution flag. Failing to have right permit or license can mean being shut down, fined, or possibly even going to jail. So, check out those rules and regulations beforehand. Now, here's another interesting place the government gets involved in your budding business, what the name of your business is and who actually runs it. Here are the ideas that customers and others have a right to know who might be lurking behind the shingle you hang. If you're doing business under the name, Sarah's Cupcakes, that's all find and good. But even if your name is Sarah, you're going to have to file what's called a DBA, or a "doing business as" form, usually with the county and publish and announcement in a local paper, record or online. The broader point is this, it's your job to figure out what regulations you will have to abide by if you start a new business. Another way your enterprise will interact with the government, is through the taxes you will have to pay. I know Alex has covered this topic in some detail. But let me share with you a personal story that makes an important point about understanding your tax obligations. When I was in high school, I launched a business developing video games that continued into college. One of the clients I had found had a demand for a very large volume of very simple games, and I couldn't keep up with the programming myself. Being the enterprising entrepreneur I am, I rounded up all the kids in the neighborhood and taught them to code games. We wrote a lot of games and generated more than $50,000 in sales. And I paid my apprentice software engineers cash for their work. As it turns out, there was a lot of tax paperwork I should've done to handle this correctly, but I had not bothered to research. So it was that I soon found myself sitting in my shorts and sandles squirming uncomfortably in a stuffy government office, while a bespeckled IRS auditor in an intimidating suit browsed through a shoe box of hopelessly confused notes about cash payments to programmers to young to be legally hired. To his credit, and perhaps to counter Reagan's pessimism, the auditor looked across at the nervous teenage entrepreneur and said, everything seems to be in order here, Mr. Autrey. But with emphasis, he also added, do not let this happen again. >> I think this tax story offers up a pretty good segue to the whole subject of employees. When you pay other people to do work for you, you are opening yourself up to a whole nest of new regulations, liabilities and taxes. In some cases, you maybe able to pay folks cash or the equivalent in an agreed rate and send them on their way. However, if this amount exceeds a certain limit in the United States, the last time I checked it was still under $1,000. The American Internal Revenue Service requires you to send these contract workers a 1099 form at the end of the year to insure that they don't skip out on paying their taxes. The other possibility is you actually hire some people as employees. However once you do that, you are exposed to a lot more rules involving how they are paid, how much they are paid, the number of hours they can work, when they get breaks and a whole lot more. Of course all of this is too complex to review here. But before you hire any employees, research all of these rules. Key tip here is, talk to an accountant. And now on a similar note, let's finish up this part of the lesson and talk a bit about the various legal forms you can choose for your business. This is gonna vary widely depending on what country you live in. >> But here's the big point. How you organize your enterprise in a legal structure will have a big impact, both on your own personal liability, should something go wrong, and the level of taxes you may have to pay. >> So check out this angle carefully. And if you're in the United States and your business has any potential for generating liability, you may wanna consider the safety of either a regular corporation or a limited liability corporation, the so-called LLC. >> Now, when you're ready, please move on to Part 3 of this lesson. [MUSIC]
