When you’re looking for the perfect location for your company, consider government regulations, workforce availability, and the proximity to your ideal customers.
Step 5. Determine the legal structure of your business
You’ll have to decide on a legal structure for your business to ensure that you’re fulfilling your tax and reporting obligations. Choose the structure based on your business’s needs.
are the most common structure chosen because they’re the simplest. In a sole proprietorship,
you own the company and are responsible for its assets and liabilities.
Partnerships are businesses owned and operated by two or
more people. Each partner shares the profits and losses and must provide money,
property, labor, or skill.
A corporation is one of the most
expensive and complex business structures to start, so it’s generally only
suggested for large businesses with multiple employees. A corporation is an
independent entity owned by shareholders. The corporation is liable for the
debts and other obligations of the business.
liability company (LLC) combines the limited liability features of a
corporation with the tax efficiencies and flexibility of a partnership. Like a
partnership, the business is not taxed separately, but the profits and losses
pass through to the owners, who then report the profits or losses on their
personal tax returns.
Corporations are a special type of corporation – formed through an IRS
election – to avoid the double taxation that corporations often face. Profits
and losses are “passed through” to shareholders, who then report the profits or
losses on their personal tax returns. There is one major caveat to forming an S
Corporation – any shareholder who works for the company must pay themselves reasonable compensation.
are owned and operated for the benefit
of those using its services. Any profits and earnings generated are distributed
among its members, who all have voting powers.
Step 6. Register your business name
Choose your business name, then register it with the federal government and state agencies. If you want your business to be known as something other than your legal business name, you’ll have to register your “Doing Business As” (DBA) name. A DBA name is also called a fictitious name or trade name. Depending on your location, you’ll either register your DBA name through your county clerk’s office or with your state government.
Step 7. Apply for an Employer Identification Number (EIN)
If you plan to hire employees, you’ll need an EIN. The IRS requires most businesses to obtain an EIN to identify employers’ tax accounts. You can register for an EIN online, by fax, or by mail.
Step 8. Register for state & local taxes
Every state has its own income, sales, and employment taxes, so you’ll have to register with your state to pay these taxes. You’ll have to pay workers’ compensation insurance and unemployment insurance taxes. In some cases, you’ll need to pay for disability insurance for injuries and illnesses that happen outside of work.
Step 9. Obtain a business license
Almost every business needs some form of license to operate within your state. The type you need will depend on where your business is located and what industry you’re in. If your industry is regulated by the federal government (such as alcohol or firearm sales), you will likely need a federal permit to operate your business.
Step 10. Understand your responsibilities as an employer
If you’re going to hire employees, you have certain obligations,