Yes! Initial registration of your new company is taken care of! Now what? What are the next steps involved in the compliance process you can get a jump on and ensure there aren't any big bumps in the road during your first years in business? Good question! That's exactly what we'll be addressing.
Each of the 5 steps below are important, and while we know you're in a big hurry to change the world and redefine the landscape of your niche, take your time with these. Get it right, especially if you aren't familiar with any of this stuff and it's your first time (the vast majority of our readers are new entrepreneurs). Enjoy!
#1) GET AN (EIN)
What's an EIN? If you don't already know it's an Employer Identification Number, which is similar to a Social Security Number for individuals (meaning a 9-digit tracking code). Every business in the nation has to get one through the IRS before operating their business. So no, it's not optional and it's not something to put off or procrastinate on. Good news is it's nowhere near as complex or intimidating as taxes.
An EIN is important for three reasons:
- It's through your EIN that the IRS monitors your business activities to see that they match up with your taxes at the end of each year.
- As such, typically, most banks require you have an EIN to open an official business bank account.
- Obviously, this number plays a huge role in tax season, streamlining the process, for your business at least.
#2) HANDLE LICENSING & PERMITS
If you're like the majority of people in your situation, starting their first new company, you may not know what licenses and permits (if any) you need. Are you working with the public? Any hazardous chemicals involved? Starting a home-based food or rocket ship business? Maybe just a dropshipping-based eCommerce store?
Listen, it's not hard to figure out. Along with the endless amounts of informative content and guides online (we have plenty on Startup Savant), you can make a couple calls and learn what licenses and permits you need in your state/county. Or, you can head on down to city hall if it's nearby. If you know any of your competitors in the area, or in general, reach out and ask them what they needed to do to get compliant and off the ground.
Note: The Small Business Administration's State Licenses & Permits page is a great place to start. Simply choose your state, then go through the steps they outline, use the resources, and you'll have your paperwork sent off in no time. You can also leverage deals like $99 License Research Packages.
#3) WORK WITH A TAX-PERT
At closing in on 90,000 pages, no one blames you for being clueless when it comes to the U.S. tax code. No one. Should you have a grasp on the basics of how you're being taxed and how to steer clear of audits? Yes, it's 100% your responsibility as the business owner. But do the right and responsible thing and work with a tax expert if you're in over your head when it comes to payroll management and state/federal tax laws.
Think about it this way when you wonder if You Should Do Your Taxes Yourself - in 2016 86% of returns were filed with tax software, but most of those e-filed returns were completed by tax professionals...not the business owners. So even with a business bank account and accounting software, most owners choose to work with an official and accredited tax preparer.
Note: The average cost to file in 2016 (with itemized deductions and the whole nine yards) was about $250-$300. A small, tiny cost compared to the risks of making a mistake and getting audited.
#4) OPEN A BUSINESS BANK ACCOUNT
First and foremost, keep in mind that you're opening an official bank account for your business so you can keep personal and business accounts completely separate. This is about protecting not just you, but your business as well. Here are some other points to consider:
- The #1 reason is to easily track expenses and streamline taxation!
- Banks have specialized solutions to help startup owners manage money.
- Online/mobile banking that dramatically increases your accessibility.
- Merchant accounts are amazing these days but do come with a fee in most cases.
- Incentives: lower fees, travel perks, business rewards, lower interest rates, etc.
Once you're set up with a banking institution, you’ll be able to receive checks and payments under your business name and it'll feel so much more secure. Unsure of where to start? Check out our breakdown of the Best Business Bank Accounts for Entrepreneurs.
#5) SECURE YOUR BUSINESS NAME
While at first, this might not seem like an uber-important step to take right now, countless business owners have had to learn the hard way how important it is to trademark/secure your business name or brand name. It's surprising really when we consider just how valuable and powerful brand names are, right? How big of a role with your product or service's name be, or the name under which it's offered?
Initially, when there's little at stake, small revenue streams, and not much money on the table the risk of someone swooping in and trademarking before you is smaller. But it can and does happen. Or, you're 6 months into your first year and suddenly get an official letter claiming you're doing business with an already trademarked product/service. Uh oh!
- It's a relatively simple process to Conduct a Trademark Search.
- You can visit the concerned office in your state and ask for assistance with documents, filing requirements.
It's important to keep in mind that your responsibility as a business owner doesn’t just end when initial registration documents are in the mail You have to make sure that you're knowledgeable on annual compliance matters.
There may be licenses/permits that need to be renewed, or reports to be filed, fees to be paid and documents to be obtained over and over again. You need to know all these things to maintain the good standing and reputation of your small business. Enjoy!