Health and safety requirements. If your state has a version of the federal Occupational Safety and Health Act (OSHA), your business may need to meet certain mandated health and safety requirements.

Tax requirements for employers. A business with employees or independent contractors has a number of tax requirements. You will have to:

• get an employer ID from state (and federal) tax authorities
• withhold income taxes and employment taxes (Social Security/Medicare or "FICA") from the paychecks of employees
• possibly withhold other items, such as payments for disability insurance
• report these figures (to the employee, the state, and the IRS), and
• pay the withheld taxes to the tax authorities.

If you hire independent contractors, you need to report contract payments annually on a Form 1099, which goes to the contractor and to the government.

Don't forget to pay the taxes you withhold. Many small businesses get into big trouble by failing to pay the employment taxes after their cash flow hits a dry spell.

Environmental Regulations

Many small businesses need to think about what they must do to avoid contaminating the environment. You may need a special permit (and do more record keeping) if any of the following apply to your business:

• Your equipment vents emissions into the air.
• You need to discharge or store waste water.
• Your business involves or produces hazardous wastes.

Environmental regulation isn't limited to manufacturers. Small businesses, such as stained glass makers, dry cleaners, and photo processors, need to know how to dispose of the dangerous metals or chemicals used in their work.

Helpful State Websites Your state's Small Business Development Center (SBDC) or other agency may offer a "one-stop shopping" website that advises you on the licenses and permits you need for your particular type of business. For instance, California offers a website (www.calgold.ca.gov) that will provide you with a list of all federal, state, and local permits you need for your particular business. The Small Business Administration maintains a list of SBDCs at www.sba.gov/sbdc.

For more information on state, local, and federal requirements for small businesses, as well as everything else you need to know to start your own business, get Legal Guide for Starting and Running a Small Business, by Fred Steingold (Nolo).