Congratulations on wanting to form your own business! Entrepreneurship is the surest way to use your own talents to improve society while growing wealth.
People often ask, “I have an idea for a company—when is the best time to get started?” The answer is, “Right now!”
Starting a business is regulated by multiple levels of government. It is irresponsible (and illegal!) to operate a business without following those laws and regulations. It is not difficult to get the ball rolling, but there are many considerations and forms to address. So it is wise to get the basic decisions and legal steps out of the way well before you want to start doing business. That way, when an opportunity for your business idea presents itself, you are ready to pounce on it!
Argent Place Law does more than merely create paperwork for legal filings, the Firm is dedicated to making sure the you understand what is required to start your company right, operate it successfully, grow its value, and ultimately exit in a manner that satisfies you.
Here are six issues that are important to understand before starting your company.
Step 1: Decide your form of governance. Here are your options::
- Sole Proprietorship (one owner, personally liable)
- Partnership (multiple owners liable “jointly and severally”)
- Limited Partnership(multiple owners, some with limited liability, loose structure)
- LLC(one or more owners, limited personal liability, very general structure)
- Corporation (one or more owners, limited personal liability, strict structure)
Step 2:Register with state and local governments and the IRS. All business forms except the Sole Proprietor and Partnership must register with the state, and pay fees to the state. Most businesses must also register with the local government to get a license (and pay local taxes). You need an Employer Identification Number (EIN) from the IRS in order to open a bank account in the name of the company, whether or not you have any employees.
Step 3: Have an agreement with your partners on how to run the company. The partnership agreement (also called an operating agreement or shareholder agreement) is critical. Among other things it should include a buy-sell agreement.
Step 4: Decide how you pay income taxes. LLCs and Corporations have the option to be taxed on income at the federal level in a special way called an S-Corp. Companies that choose the S-Corp election do not pay income taxes directly, rather all the company income as allocated to the owners who pay the income tax.
Step 5: Think about registering to use a fictitious name. Fictitious names are also known as the DBA or “Doing Business As…” name. For example, “Robert Sandborne Plumbing, LLC” may advertise as “Famous Bob’s Plumbing,” but only if a fictitious name is registered.
Step 6: Protect your intellectual property. Stop and apply for a trademark on your company name. The application process also confirms that you are clear use use the name you have chosen. Other proprietary ideas should be protected as trade secrets or patents, and creative work such as software or graphical design, photography, or literary works should be copyrighted.
Argent Place Law wants to be your partner For The Life Of Your Business.™