As the saying goes, nothing is done until the paperwork is complete. A lot of people jump into starting a business without giving much thought to the business start-up legalities. This can become a problem. While each country, state, city or province has its own rules, there are some basics to consider. It’s important to at least know where to look for the information.
Decide the Type of Business Entity
Starting a sole proprietorship is the simplest, and no paperwork needs to be filed that is special. However, if you want to start any other type of business entity such as an LLC or Inc., you will need to file special paperwork. There are websites today that will help you file the paperwork if you don’t want to hire an attorney. However, it is highly recommended that you hire a business attorney in your area to handle these issues.
Choose a Business Name
If you’re not using your own name as part of your business name, you’ll need to find out if the name you want to use is available. Depending on the type of business entity you choose, such as sole proprietorship or LLC, there are different rules regarding business names. You may need to file a DBA (doing business as) in order to conduct business using that name. If you have a corporation and you want several different businesses under the corporation, you’ll need to file several DBAs.
Obtain a Federal Employee Identification Number (EIN) (USA)
Even if you have no intentions of ever hiring employees, this is something that is important. You can do it right on line and you don’t even need to have a business license yet to do it. In fact, you should do this prior to getting a business license so that this number can be on your business license. Use this number instead of your social security number anytime you do business with anyone. It’s safer because you can avoid the problems with identity theft, and in some cases it is required to have this number to be seen as a real business.
Get a Business License
Each country, state, province and city has its own rules regarding business licensure. Most cities and counties require even a home business to be licensed. In some cases you will need state licensure. The best place to find out what you need is to go down to your local court house and ask or look up the search terms, “Getting a business license in Your City, State”. It’s usually a very simple process which requires a small fee
You will need to renew this license each year. Depending on your type of business, you may need other permits and licenses to be legal. You can go to your local SCORE office for more information and help.
Open a Business Bank Account
Depending on your type of business, you may only need a separate personal account. Business accounts can be expensive. But, you do need to open a separate account. In many cases if you don’t have a business account you won’t be able to get a merchant account enabling you to take credit cards. If you plan to use PayPal, check the current rules and terms of service to ensure that you can be compliant. You will need your EIN and your business license to open a business bank account.
These are just a few of the legalities of opening a business. Depending upon your type of business, it may be more or less complicated. However, don’t ever shy away from making sure the paperwork is done, and done right, when embarking on business ownership. Doing it right from the start will ensure your continued success.