Incorporating your business as an LLC in your state is one of the first steps in starting a company. You might think that’s all it takes before you can operate, but there’s a little more to it than that. As a business, you have certain legal and ethical obligations, and there are a few more steps involved.
Keep in mind that every state has different requirements. Study your state laws for an accurate list of steps for starting a business. In the meantime, here are a few basic things every business owner should do (in no particular order).
- Register with the IRS
All business owners must register with both the state and federal government for tax purposes. When you register with the IRS, they’ll assign you an Employer Identification Number (EIN). Like a social security number, an EIN is a set of numbers unique to each company. It gives you an identity among the millions of other businesses in the U.S. and makes tax time much easier, even if you don’t hire employees.
- Open a Business Bank and Credit Account
Separating your personal and business expenses is crucial for ethical business practices. It’s a legal requirement featuring harsh penalties for disobedience in some states. You can open a new bank account under your LLC so that you can accept business checks made out to your business name.
A business credit card is also very useful, particularly for startups. It helps you make all of your payments when your cashflow is still inconsistent at the beginning. Your credit limit will likely be low at first, but once you establish a steady flow of revenue, you can ask for an increase.
- Obtain Local Licenses and Permits
Forming an LLC is not the same thing as obtaining a business license. It’s simply the first step. You still need certain licenses and permits before legally operating a business. The types of documentation you’ll need varies based on your business type, city, and state.
You may be required to obtain a sales license or permit, zoning permit, general business operation permit, home occupation permit, health department permit, professional licenses, and more. These are just examples of some documents you’ll need to consider. Contact your local Chamber of Commerce to learn exactly what you’ll need.
- Buy Insurance
An LLC by nature offers some protection to your business, but it’s not enough. You need insurance, an entity that’s required by law in many states. Your insurance will protect your business from losses in the event of unforeseen circumstances.
Most startup owners take out a general liability insurance policy or Business Owner Policy (BOP). These are broad forms of coverage that protect you against things like personal injury or negligence claims. They may also cover operation shutdowns or worker’s compensation claims. Depending on the nature of your business, you may need a few additional niche policies to afford full protection.
- Meet with Tax and Legal Professionals
Your accountant will be your best asset in the days to come. Many accountants will, on your behalf, form your LLC, register with the IRS, open your business account, and guide you through the process of financial tracking. They’ll also explain tax implications and help you make quarterly payments, so you avoid fines.
It’s also smart to council with a business attorney. You can often hire an attorney without a retainer to discuss a few basics of legally starting your business. They’ll charge you hourly for their time as they go over the essentials of protecting your business and assets.
If you see fit, you can hire an attorney on a retainer to draft contracts, negotiate more favorable terms, advise you on protecting intellectual property, prevent employee discrimination, and more. Their guidance will minimize your legal risk so you can operate safely and effectively.
- Trademark Your Business Name
An attorney can also help you trademark your business name, which protects your brand identity. It provides exclusive rights to that name so that you can effectively build a brand around it.
Don’t trademark your name until you’re absolutely certain you won’t want to change it. Many startups begin with a different name than they ultimately end with, so consider waiting a few months before going through the expense of trademarking your name.
- Plan to Stay Compliant
Once you’ve met all legal requirements for operating your business, it’s not over yet. You may be required to renew permits and licenses yearly, and there are always unforeseen circumstances that require changes. Draft a plan to stay compliant with all federal and state requirements for the life of your business to avoid legal repercussions and enjoy the fruits of your labor.
