The last thing you want to do when starting a business is to give an unprofessional impression. It’s vital to make sure that potential customers know that you are a trust-worthy business owner.
Focus on these legal, regulatory and insurance matters and you’ll turn your company into a legitimate operation.
One of the most important steps you should take is picking a business structure. It formalizes your business and lays the groundwork for other important decisions. This decision will inform how you pay taxes, raise money and protect yourself from risks.
Options include sole proprietorship, partnership, limited liability company (LLC) and several kinds of corporations. Not sure which structure applies to your business? Find out more here.
Protect your personal privacy by getting a business address. If you use your home address, it will be publicly listed as the business address after you register your business. If you don’t have a physical office, consider opening a post office box instead.
Once you name your business, make it official by registering it with local and state governments. (Do your research, too, to ensure there aren’t existing businesses with the same moniker. Most states have a business name check tool as part of their online business services pages that you can use to make sure your business name isn’t already taken.) The Small Business Administration (SBA) suggests registering companies in four ways1:
Just like people receive a Social Security Number, businesses receive an Employer Identification Number (EIN) from the Internal Revenue Service. Head to IRS.gov to sign up for an EIN, or federal tax ID number, for your business. This number comes in handy when you open a bank account, apply for business licenses and pay federal taxes.
Check with your state’s Department of Revenue to determine whether your business needs a state tax ID, too. Not all states require them.
Customers will see a stamp of approval in the form of business permits and licenses. Check with federal, state, county and local governments to see if your business requires this authorization. If a federal agency regulates your type of business activity, then you will need a federal license or permit, the SBA explains.2 States generally license more broadly, covering everything from restaurants and retail to construction.
Don’t combine your personal bank account with your business funds. It’s smart to separate your personal and business finances, making it easier to track company expenses and income.
Account options include checking, savings, credit card and merchant services, which allow you to accept credit and debit card transactions. Having a business account also helps your company establish a credit history and offers limited personal liability protection for you and customers.
Purchase insurance to protect you and your personal finances. Then if the worst happens – property damage, liability or an injured employee – insurance has you covered. Note: Workers’ compensation laws and regulations differ by state. Small businesses also should consider a business owner’s policy that combines property, liability and income insurance. This will cover missed income if your company can’t operate during a loss.
With these structures lined up, your business will be more solidified. And customers will be reassured that you are legitimate.