Things You Should Know When Starting Your Business
Business: Every year, thousands of companies are formed in the United States. In fact, about 266K companies were formed in the last quarter of 2019.
But when you’re starting a company, it’s important to know the different legal requirements to get started.
Here are the most important ones:
1. Business Name Registration
To start your business, you first need to register the business name. This needs to be done with the Secretary of the State’s office.
2. Legal Entity Selection
Once you’ve registered your business name, you need to select a legal entity for it. It’s important to select the right one as each entity type has different features.
Some of the popular ones that you can choose from are:
- Limited Liability Company (LLC)
- Sole Proprietorship
- Non-Profit Organization (NGO)
3. Do State Filings
After you’ve selected your legal entity, you need to complete your state filings depending on the type of entity.
For example, LLCs need to file Articles of Organization. Similarly, Corporations need to file the Articles of Incorporation.
4. Apply for a Federal EIN (Tax ID)
After you’ve done your state filings, you need to get a federal Employer Identification Number (EIN).
This is necessary to open a bank account, earn and report income, sign contracts, and to hire employees. It acts like a social security number for your business.
5. Create Agreements and Contracts
Once you’ve got all the things in place, you need to start creating legally binding contracts and agreements.
It ensures that at a later stage, if any conflict arises, it’ll be addressed through the agreements. Some of the agreements that you should consider creating are:
- Operating agreements for LLCs
- Corporate bylaws for Corporations
- Employment agreements
- Confidentiality agreements
6. Open a Bank Account
Finally, the last step in establishing your business is that of opening a bank account for your business. Doing this helps to legally separate your personal finances from those of your business.
To create your bank account, you’ll need to submit:
- Federal EIN
- Business license
- State formation documents
For further information on the various steps that you need to follow to set up your business, check out this infographic designed by GovDocFiling.
Brett Shapiro is a co-owner of GovDocFiling. He had an entrepreneurial spirit since he was young. He started GovDocFiling, a simple resource center that takes care of the mundane, yet critical, formation documentation for any new business entity.