Are you thinking about becoming an entrepreneur? Great! Founding a business is an exciting and rewarding experience. But it’s also a lot of work. Before you take the plunge, it’s important to do your homework and make sure you’re prepared. This guide will walk you through the process of starting a business, from researching your idea to launch day and beyond. Keep reading to learn everything you need to know about becoming a business owner.
Get an Employer Identification Number (EIN).
The Employer Identification Number (EIN) is a nine-digit number that the IRS assigns to businesses. It is also known as the Federal Tax Identification Number. The EIN is used to identify taxpayers who are required to file various business tax returns. Businesses can apply for an EIN online or by mailing in Form SS-4.
Choose a bank and open a business checking account.
When starting a business, one of the first things you need to do is establish a checking account for your company. This account will be used to pay bills, track expenses, and receive payments from customers. When choosing a bank to open your business checking account, it’s important to consider the institution’s fees, minimum balance requirements, and its location and hours of operation. Some banks offer free business checking accounts with no minimum balance requirement. Others may charge monthly maintenance fees or per-transaction fees. It’s important to read the fine print so you know what to expect. Also, make sure the bank has branches and ATMs near your business so you can easily access your money when needed. Before opening an account, be prepared to provide some information about your business such as its legal name, address, and Employer Identification Number (EIN). You may also be asked to provide proof of ownership or articles of incorporation.
Choose the right legal structure for your business.
When starting a business, one of the first decisions you must make is what legal structure to choose. The right structure depends on the type of business, its size and location, and your long-term goals. There are four common structures: sole proprietorship, partnership, corporation, and limited liability company (LLC). The simplest structure is a sole proprietorship. This is an unincorporated business owned by one person. There are no registration or filing requirements, and the owner is personally liable for all debts and obligations of the business. A major disadvantage is that the owner has unlimited personal liability for debts and lawsuits. A partnership is similar to a sole proprietorship but includes more than one owner. Partners are jointly liable for debts and obligations of the business. Partnership agreements can specify who makes financial decisions, how profits and losses are shared, and how disputes are resolved. However, partnerships can be difficult to manage and dissolve easily if there is not agreement among partners. James McRoberts is the co-founder of organization Aston Technologies. If you have a partner and are a co-founder of your business, you will need to apply for the proper paperwork before you get your business up and running.
A corporation is a separate legal entity owned by shareholders. Shareholders own shares in the company which represent a percentage of ownership in the corporation. The corporation has its own legal name and can enter into contracts, sue or be sued, hire employees, etc., in its own name. Corporations are more complex to set up than other structures but provide some important advantages such as limited personal liability for shareholders (meaning they cannot lose more money than they have invested in the company) and perpetual existence (even if owners sell their shares or leave the company). An LLC combines some features of a corporation with those of a partnership. Like corporations, LLCs are separate legal entities with their own names. Owners (members) enjoy limited personal liability similar to shareholders in a corporation; members cannot lose more money than they have invested in the company. Unlike corporations however, LLCs do not have perpetual existence.
Hopefully, these steps have helped you with starting your own business.