When starting a company to run a business, there are a lot of issues to deal with and often not enough time and resources to handle everything in the perfect way. This conflict almost always exists when starting a small business. However, there are some administrative and legal matters that are a must do. Here is a quick checklist of the most important ones.
1. Come Up with a Name for Your Company and Product/Service
It is important to come up with a name for your business that is not already being used by anyone else in the areas where you will conduct your business activity. You can conduct a simple business entity search in the state where you are looking to incorporate to check for name availability.
Equally important is that if your company is being created to sell a product or a branded service, you also need to decide on a product or service name and check to make sure it is not already being used in the industry in which you are going to be participating in. This too can be a violation of law- called trademark laws. For some businesses, a branded name is more important than others. And, if you are planning on distributing your product and service to more than just the local area, then you need to really make sure your trademark is available for your use. You can run a search at the US Patent and Trademark website or pay for a search to determine whether there are any issues.
2. Create a Legal Entity for the Company
Before conducting any business activity, you need to create either a corporation or a limited liability company to operate the business. The biggest reason for this is to protect you and your personal assets from being lost due to business obligations and problems that may arise in the future. Given the statistics in this country where small business disputes and lawsuits are rising significantly, the small expense to incorporate or form an LLC is well worth the protection.
3.Complete Governance Organization of New Company
Do not make the mistake of forming a legal entity at the state level and then not doing anything with it. A new entity is just a shell. First, it needs to have owners. For a corporation, these are shareholders and for limited liability companies, these are members. There must be an official legal document establishing the owners and their rights and obligations. Further, it needs to adopt a personality. That means that it needs to be attached to a set of rules, procedures, and other guiding principles that determine how it will act to conduct business. Certain roles such as directors, officers and managers need to be established. All of the major governance requirements are typically set forth in Bylaws or an LLC Operating Agreement.
4. Obtain EIN# and Open a Bank Account
Another important legal aspect of starting a company is to make sure you keep the business finances separate from your personal money and accounts. The best way to do this is to open a bank account right from the start for the business. As part of this process, you will likely need to obtain an EIN# for the corporate or LLC entity. This is obtained through the Internal Revenue Service.
5. Business License and Other Licenses
It is safe to say that most any new business will be required to obtain a business license in the locality where the principal business office is located (even if this is your home). Each locality differs so call the business license office of your local county or city to determine the specific requirements. Also, depending on the nature of your business, you may need to obtain other licenses or permits for your company. F or example, if you are rendering a service that is regulated by the state (e.g., engineering, medicine), you need to check with the relevant regulating state agency to determine if you company needs to file for anything additional. Another example is if you plan on selling products. In those cases, you will likely need a sales tax permit and will be required to collect and transmit sales tax.
6. Creating and Adopting a Business Plan
This is not a legally mandated requirement but is such an important startup matter. There is this saying that those who fail to plan, plan to fail. It is a given that any new company will face challenges and twists and turns. In fact, a majority of businesses go out of business within the first 2 years. The ones that are prepared to adjust and keep moving toward well-defined business goals are the ones that will survive and then prosper.
Your business plan will reveal other essential matters that are specific to your business.