Now comes the part that everyone loves: paperwork!
Yep, we’re happy to report that you need to get some paperwork done in order to start your business. We’ll clear that up for you:
You’re going to need an EIN, an Operational Agreement, and Articles of Organization, among other things.
Let’s go over these:
- EIN: EIN is short for Employee Identification Number and it’s used for, you guessed it, identification purposes. Sometimes, it’s also called a Federal Tax Identification Number. Basically, it’s a number used for identifying your business. Whenever somebody looks up your EIN, they can get info on what type of business you’re running, where your located, and other tidbits. You can apply for an EIN in every state, but you need to make sure whether you need a state number for the state you’re located in. This little nine digit number has been around since the 70’s, and is a must-have for forming your company or corporation. Just a tip: if you are a non-U.S. citizen and need to get an EIN for your company, you need to have an ITIN first to proceed with your business formation process. Which is something that we also help our clients with. See more here.
- Operating Agreement: This is an important piece of document when you’re forming an LLC. It’s basically a document which outlines all the goings-on and who’s-who of your business. Each owner decides how to run their business, and who will be responsible for what duty during its operation. All of this is outlined in the operating agreement of a business. Basically, all the rules of your LLC can be found in this document. This includes the percentage each member owns, who has what rights and what they can do internally, how profits and losses are distributed, when and how meetings are held, and what will be done in the event of a death or a transfer of interest. Again, the requirements for this document vary in each state, and some might not even require operating agreements. But, trust us, it’s a pretty handy document!
- Articles of Incorporation: This document has been around since the 1800’s! That alone showcases how important it is. Articles of Incorporation is a document which validates that your company or corporation officially exists within the U.S. or Canada. Usually, you’ll find the name of your entity, the type of corporation, the registered agent, and other pieces of information in this document. Filing for this document requires fees, and as usual, they vary from state to state.
- Articles of Organization: This is the LLC counterpart to Articles of Incorporation. It’s basically the same thing, but for LLCs. It includes the name of your LLC, the legal structure, members or managers list, signatures, and the whole nine yards. This is the document which shows who can do what and when in your LLC.
Did we tell you everything there is to know? Hmm, something seems to be missing…
Oh, right! The name of your business! How could we forget?
Let’s say you’ve decided what entity type you need, and you know the state you’ll be operating from. Time to start the filing process! But, you can’t really do that if you haven’t decided on a name! Your name is your identifier, and how people will recognize your business. And just like with everything else, there are regulations for choosing names for your company or corporation.
You obviously can’t use names that are trademarked, like Nike, Disney, etc. It’s also generally advised not to use names that exist in other states, because it might lead to legal issues and complications. Do you really want to carry that liability? Probably not! Make sure whatever name you choose, is unique, simple, and memorable. It should stick with people after they hear it. How you choose one is completely up to you!
Also, don’t forget about tax exemption either, if you’re planning to be a reseller! That’s a very important part of your business. After you’re done with forming your business, we can help you take care of this side of things as well. More info here.
As you can see, there are many layers to forming a business or corporation. From choosing the entity type you think fits you best (could be a corporation, sole proprietorship, or limited liability, or a partnership), to picking a name, to filing the right paperwork. It might seem like a ton of work, but if you set everything up correctly, and you should, your business will have extremely strong groundwork, making it ready for a successful take-off!
If you have a general idea of how you want your business to be shaped, go to the next page so we can discuss what we, Prestige Auditors, can do for your business, from helping you choose the perfect entity, to handling all the formation processes, sparing you the headache of paperwork!