Starting a business involves several crucial steps to ensure you’re set up correctly from the beginning. This guide provides an overview of the key legal requirements and considerations.
Leverage Available Resources
Before diving in, take advantage of the many free resources designed to help entrepreneurs. You can find valuable information from:
- The Small Business Administration (SBA): Visit their website at www.sba.gov for comprehensive guides and tools.
- Your State and Local Government Websites: These sites offer specific details on regulations and requirements in your area.
- Your Local Chamber of Commerce: Often a great source for local business insights and networking opportunities.
- Business Professionals: Don’t hesitate to consult with business attorneys and accountants for expert advice.
Designate a Registered Agent
A Registered Agent is a vital point of contact for your business. This individual or entity is officially designated to receive legal documents, government notices, and other essential communications on behalf of your company. They act as a crucial link between your business and state authorities.
Your Registered Agent must have a physical street address (not a P.O. Box). This can be:
- Yourself
- Your attorney
- Your accountant
- A professional registered agent service
If you choose an individual, ensure you have their written consent. Selecting a reliable Registered Agent is critical to ensure you don’t miss important legal or governmental correspondence.
Choose Your Business Structure Wisely
One of the most significant decisions you’ll make is choosing the right legal structure for your business. Common structures include:
- Sole Proprietorship
- Partnership
- Limited Liability Company (LLC)
- Corporation
Each structure has distinct implications for personal risk, administrative workload, capital requirements, and taxation. On our website, you’ll find a detailed breakdown of each structure type, including their definitions, pros, and cons, along with a dedicated video for more in-depth information.
We strongly recommend consulting with a professional before making this decision. Reclassifying or dissolving certain business structures can be complex and costly if not done correctly from the start.
Making It Official: Registration and Identification
Once you’ve decided on your structure, it’s time to make your business official.
- Business Name Registration: Begin by checking the availability of your desired business name. Our website provides more detailed information on this process. After confirming availability, you’ll register your business name with the state and receive your finalized paperwork.
- Tax Identification Number (TIN): Most businesses will need an Employer Identification Number (EIN) from the IRS. This unique nine-digit number is crucial for tax purposes and identifies your business to the IRS. While a sole proprietorship or a disregarded entity might be able to use your Social Security Number in some situations, an EIN is typically required as your business grows and for tax filings like the W-9 form for your vendors. Understanding how your business structure impacts your taxation is essential.
- Governing Documents: Depending on your chosen structure, you’ll need foundational documents that outline ownership, operations, and critical procedures:
- Articles of Organization (for LLCs)
- Articles of Incorporation (for Corporations)
- Partnership Agreement (for Partnerships)
These documents address vital questions such as:
- Who owns what portion of the company?
- How will the company dissolve if needed?
- What happens if an owner wants to sell their share or passes away?
- How will disagreements among owners be handled?
- Who has authority over financial matters and bank accounts?
Having these clear agreements in place from day one can prevent significant issues down the road.
Obtain Necessary Licenses and Permits
Depending on your industry and location, you may need specific licenses and permits to legally operate your business. These are often required to ensure compliance with health, safety, and operational standards. Examples include:
- General Business Licenses
- Controlled Item Permits
- Fire Code Permits
- Safety Certifications
Our website provides a brief list of common license types. Obtaining these is crucial, and you’ll typically receive Regulatory ID numbers once approved.
Set Up Business Banking and Accounting Systems
Separating your personal and business finances is paramount for legal compliance and accurate financial tracking.
- Dedicated Business Bank Account: As soon as you have your official business registration paperwork, open a separate business bank account. This is the single most important step for maintaining clear financial records and protecting your personal assets.
- Accounting Systems: Establish an accounting system to track income and expenses. Our website lists common business banking account types and accounting software options that can help you manage your finances efficiently.
Key Required Paperwork
When setting up your business, you’ll generally need the following documents:
- Certificate of Formation (from your state)
- Certificate of Account Status / Certificate of Good Standing (may be required for certain operations)
- EIN Letter (from the IRS)
- IRS Form W-9 (for vendors)
- Articles of Organization/Incorporation/Partnership Agreement
- Non-expired, government-issued photo IDs (for all required individuals under the organizing documents)
Other Important Considerations
Beyond the initial setup, consider these additional aspects for your business’s long-term success:
- Business Insurance: Protect your assets and mitigate risks.
- Legal Counsel: Ongoing legal advice can be invaluable.
- Intellectual Property: Consider patents, trademarks, and copyrights for your unique creations.
- Branding and Marketing: Develop professional logos and marketing materials.
- Funding: Explore options for loans and investors if needed.
A Note on “Free” Services
Many services advertise “free” business setup, often only charging state fees. However, remember that no business operates for truly free; they benefit in other ways, such as cross-selling additional services.
It’s essential to understand exactly what you’re getting and the actual cost of comprehensive setup. While it is possible to navigate all these steps yourself, it requires significant research and attention to detail.
Setting up your business incorrectly can lead to substantial costs down the line—often 2 to 10 times what it would have cost to do it right the first time. Havins Business Services specializes in ensuring your business is established correctly, saving you time, stress, and potential future expenses.