Whether you want to form your first business or your tenth, you must follow a defined set of legal and financial principles. Failure to fill out a document properly or on time could lead to extra costs and even penalties.
A precise plan when it comes to business formation puts your new company in a strong position.
Decide on the right business structure
Though Forbes notes several important steps before this point, choosing the optimal business structure remains a critical juncture and one that requires complex documents. This core decision impacts how you pay taxes, what financial risks you face and how you will handle daily operations. You will likely need to choose from these four possibilities:
- A limited liability company
- A limited liability partnership
- A sole proprietorship
- A corporation
Each type of company entails specific documents and legal requirements. For example, an LLC calls for a registered agent, while an LLP requires a partnership agreement. A sole proprietorship makes the owner responsible for all business debts. A corporate structure allows multiple options for tax strategies that meet IRS requirements.
Complete all mandatory paperwork
At this stage, you must focus on the essential paperwork. This includes choosing your business name and filing it with the appropriate regulatory agency. You will likely have to file with the secretary of state, apply for a business license, get a tax ID number and pay applicable fees.
Unless you have a sole proprietorship, you must file for a federal employer identification number with the IRS. Depending upon your industry, you will likely need to apply for licenses and permits through the appropriate government agency. Following the right procedures will make the process run more smoothly.
