1. Name Your Business
First things first, your company needs a business name — but not just any name! Your startup’s name needs to be catchy without being too opaque as well as an accurate representation of the business’s purpose and brand.
For some entrepreneurs, their startup name comes before the idea for the business is even realized, but if you’re like most and you’re still at the drawing board, we recommend using this free business name generator to help you out.
When you have the perfect name picked for your company, it’s time to double-check that it is unique and register your business name in your state of operation or file a “doing business as” (DBA) name. Business owners typically file a DBA to operate their business under a different name than the one it's registered under for branding purposes.
2. Choose a Business Structure
There are four common business structures: sole proprietorship, partnership, limited liability company (LLC), and corporation. Each has its pros and cons, and deciding on the right business structure depends on the type of business you’re starting and its needs. Let’s take a look at the four common business structures and who they are right for:
Sole proprietorships are owned by a single individual who assumes the business’s financial liability. This structure does not offer personal liability protection or tax benefits. Since sole proprietorships aren’t formally organized, this is one of the easiest and cheapest business structures to start with and is ideal for small businesses that don’t plan to accrue large profits right away.
A partnership is structured in essentially the same type of structure as a sole proprietorship, but the key difference is that partnerships are owned by several individuals who all assume the liability of their company. A group that is launching a startup that they don’t expect to initially absorb large profit from may benefit from forming a partnership business structure.
Limited Liability Company (LLC)
LLCs are the simplest formal business structure to start and maintain. In addition, forming an LLC offers tax benefits and personal liability protection, so your assets are safe if your startup is sued or owes a debt. Startups with one or a handful of owners that are actively involved in the business will most likely benefit from the simplicity and protection of starting an LLC — not to mention its flexibility as the business grows and adapts.
Corporations are a formal business structure and by far the most complicated on this list. Starting a corporation does offer some real perks in terms of tax benefits, personal liability protection, and investor opportunity. If your startup is planning to look for outside capital, expects massive initial growth, or would benefit from an easy transfer of shares, forming a corporation is the way to go.
Recommended: Read our full guide on choosing a business structure. Additionally, once you’ve chosen a business structure, we recommend appointing a registered agent to help you stay compliant with the law.
3. Determine if You Need to Register Your Business
Believe it or not, you might not need to register your startup. Plus, knowing when you can skip this step will save you precious time and resources. For example, if you structure your company as a sole proprietorship, you don’t have to register your business with the state. In fact, in some cases, you are only required to register your business name to get your startup off the ground.
This might seem like the way to go — less paperwork, less hassle, right? But while registering your business can seem like a daunting task, forming your company as an LLC or corporation offers many more advantages and keeps your personal assets safe.
4. Register for Taxes for Your Business
The two most important tax registrations you’ll need to complete for your business is state taxes and your Employer Identification Number (EIN).
An EIN is essentially a social security number for your business that allows the IRS to identify your business for tax reporting. While it is only required if you have or plan to have employees, obtaining an EIN offers many benefits for entrepreneurs. Opening a business bank account, protecting your corporate veil, and helping to prevent identity theft are a few of the main reasons getting an EIN is a good idea for your startup.
Next, you need to get registered for state taxes, which typically include sales taxes and corporate income taxes; however, not all states implement these taxes. We recommend that you work with a tax professional to ensure that your startup is registered for all applicable state and federal taxes to avoid being audited.
5. Obtain Permits and Licenses for Your Business
Permits and licensing requirements vary depending on where you’re located and the type of business you’re operating. So it’s important to make sure that you obtain the licensing and permits to run your business before you start operating, which means you need to do a business license search.
Failing to obtain the proper business licensing and permits has some serious consequences such as hefty fines or even the closure of your business. The best way to make sure that you have all your bases covered is to work with a business license service to get the job done right.
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