Starting a business is exciting and exhilarating, but it can be hard for first-time business owners to know what they need to do after they’ve incorporated or set up a limited liability company.
Here’s a step-by-step guide to keep you on track.
1. Get Documents and Records in Order
After incorporating a business, you’ll need to prepare bylaws that describe how your new corporation will operate. A few states also require you to publish a newspaper notice of your incorporation.
You should set up a corporate minute book and a file or binder where you will keep important corporate documents such as your certificate of incorporation, bylaws, shareholder information and resolutions. Some states require you to file an initial report after incorporation and you will generally need to hold shareholder and director meetings at least once a year.
After forming an LLC, you should prepare an operating agreement and set up a file or binder for your important business records. A handful of states require LLCs to publish notice of their formation, and some states also require LLCs to file initial reports.
The website of the secretary of state in your state is a good source of information about documents you must file after your incorporation or LLC formation.
2. Get an Employer Identification Number
An employer identification number, or EIN, is a number that the Internal Revenue Service uses to identify businesses—sort of like the business version of a Social Security number. Most businesses need an EIN, though solo business owners who don’t have employees or pay excise taxes can use their Social Security Number instead.
You can apply for an EIN for free online at the IRS website and receive the EIN as soon as you’ve finished the application. You can also apply through an online service or by mail or fax.
3. Open a Business Bank Account
A business bank account will help you keep your business finances separate from your personal finances. This makes recordkeeping and tax preparation easier and helps preserve your business’s separate identity.
To open a business bank account, you will need your EIN and the certificate of business formation you received from the state.
Business checking accounts are more likely than personal accounts to have monthly fees, so it can pay to shop around for the best rate.
It’s also a good idea to get a business credit card. A credit card helps your business begin to develop its own credit history.
4. Register Your Business With Your State and Obtain a Seller’s Permit, If Needed
You must register your business with your state’s tax agency so that you will be able to pay any state business taxes, including income, employment and sales taxes. You may also need to obtain a seller’s permit, also known as a resale permit.
A seller’s permit allows you to sell items or services in your state and collect sales tax on those items. It also allows you to buy goods from wholesalers without paying sales tax. Most states require you to obtain a seller’s permit before you make any sales. If you have physical locations or sales representatives in more than one state, you may need to obtain seller’s permits for multiple states.
In many states, you can register your business and apply for a seller’s permit online. Consult the website for your state tax agency for more information.
5. Obtain Local Business Licenses
Depending on the type of business you’re in and where you’re located, you may need business licenses from your city or county. You can contact your local government offices to find out about these requirements and any local taxes you might have to pay.
6. Open a Merchant Account
If you’re planning to take credit cards as payment, you’ll need a way to accept and process those cards. A merchant account is a special bank account that holds funds from credit and debit card purchases. Once the transaction is approved, the funds are transferred to your regular business bank account.
You’ll need to apply and be approved for a merchant account, and you can expect to pay startup costs and monthly fees. If your business doesn’t have much revenue yet, you can consider starting with a third-party payment processor such as PayPal, Google Checkout or Square. These services have no monthly fees, but charge a percentage of each transaction.
7. Visit an Accountant
Don’t wait until it’s time to file taxes to find an accountant for your new business. Both corporations and LLCs may have choices about how they’re taxed by the federal government.
Because certain tax classifications are subject to deadlines after you have incorporated, it’s important to get tax advice sooner rather than later. An accountant can also recommend business deductions and ways to save money at tax time.
8. Get Legal Guidance and Insurance
It’s easy for small businesses to make expensive legal mistakes. But many of those mistakes are avoidable if you seek advice from a lawyer before you sign contracts or hire employees.
A lawyer can draft and review contracts, and negotiate more favorable terms, advise you on how to protect intellectual property like logos or product designs. A lawyer can tell you how to avoid violating employment discrimination and independent contractor laws. And a lawyer can advise on what types of employee-related contracts you should have to protect your business and its confidential information.
To further minimize your legal risks, it’s always a good idea to contact an insurance agent and get appropriate insurance for your business.
Forming a corporation or creating an LLC is just the first part of getting a new business up and running. Banking, licensing and tax and legal issues can seem overwhelming at first, but by working through them step by step, you ensure that your business is on track for success.