Before starting this article, I want to make sure that you understand that I’m neither a lawyer nor an accountant. This advice is just based on my opinion. I would definitely recommend talking to both a lawyer and an accountant before getting started.
One of the less fun but necessary parts of running a business is setting up your company properly. This includes deciding on a business structure, getting a tax ID, thinking about taxes and checking on legality issues like trademarks, patents, and copyrights. While this is not the most exciting part of starting a business, it’s super important. Setting everything up correctly will save you a lot of headaches in the future.
- How to Set Up a Company Infographic
- Decide On a Business Structure
- Get a Tax ID
- Think About Taxes
- Think About Legal Issues
- Places That Can Help You Get Started
How to Set Up a Company Infographic
Decide On a Business Structure
When you want to start a business you have to decide on a business structure. There are 5 business structures to choose from. Which structure is right for you business depends on a couple of things: How much protection you want, if you’re the only one working on the business and how much time are you willing to spend on keeping your business in good standing. This is a short overview of the different structures. I also created a separate post to thoroughly explain each business structure.
The 5 Business Structures Are:
Sole Proprietorship 🙋♀️
- One person
- Easy and inexpensive to set up
- Personal assets not protected
Partnership 👯♀️
- 2 or more people
- Shared liabilities
- Easy and inexpensive to set up
- Personal assets not protected
LLC (Limited Liability Company) 🏢 ≠ 🙋♀️
- Fairly easy and inexpensive to set up
- Follow LLC guidelines
- More protection of personal assets
Corporation 🏢
- Company is a separate entity
- Most protection of personal assets
- Most expensive and complicated to set up
- Double taxation
S Corporation 💵
- Avoid double taxation
- Can’t have more than 100 shareholders
Get a Tax ID
You’ll most likely need an EIN for your business in order to open a business bank account and to file your taxes. The EIN (employer identification number) is for the business what the SSN is for you. It’s a nine-digit number assigned by the IRS.
You can apply for the EIN online here: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
Alternatively, you can request the EIN via mail, fax or phone:
https://www.irs.gov/businesses/small-businesses-self-employed/how-to-apply-for-an-ein
Think About Taxes
Who doesn’t love to talk about taxes? You definitely want to make sure to get your taxes right if you want to run a successful business. Third-party marketplaces like Amazon as well as Shopify and WordPress help you collect taxes. However, filing taxes is up to you. Make sure to closely keep track of all your business income and expenses. Softwares like QuickBooks make this process less painful. Having everything nicely categorized will make filing your taxes easier.
Think About Legal Issues
It doesn’t matter what kind of business you want to start. There is always a couple of things that need to be straightened out. Help your customers and protect yourself by setting up a clear cancellation policy, terms, and services, privacy policy, and return policy. Also, make sure to check if there are any existing copyrights and trademarks for your products and brand name. You might also want to consider filing for a patent to protect your business from copycats.
Places That Can Help You Get Started
- Small Business Administration
- SCORE
- Your Local Chamber of Commerce
- Check with Universities. They often offer pro bono help to entrepreneurs
- If your company makes the world a better place, don’t be afraid to check with lawyers and accountants if they do any pro bono work
Taking care of all the formalities of launching a business can feel overwhelming. Just take a deep breath and tackle each step one by one. Also, don’t hesitate to reach out to any resources mentioned above and ask for help. Setting your business up correctly from the beginning will help you avoid problems down the line.
