Will 2022 be the year you launch a startup? If you know your “why” for wanting to start a business and are establishing short- and long-term goals that allow the startup to reach success, you may be on your way to turning an idea you are passionate about into a business.
Starting a business requires getting familiar with and learning how to use a suite of business formation services. These services, ranging from incorporating as a registered entity to filing a trademark application, allow small businesses to stay in good standing in their state of formation and to retain key pieces of their intellectual property.
Here are a few basic filings entrepreneurs need to take care of for their small businesses:
- Incorporating or forming a limited liability company
- Filing for trademark registration
- Obtaining a tax ID
- Preparing business license applications
- Designating a registered agent
- Obtaining business insurance
1. Incorporating or Forming an LLC
Generally, most small businesses start off as a default entity known as a sole proprietor. A sole proprietorship allows entrepreneurs to exercise complete control over their company, but also does not provide limited liability protection. The only way a small business can receive limited liability protection is by incorporating or forming an LLC.
Why does it matter to have limited liability protection? Liability protection helps to create a separation between the assets of the entrepreneur and those belonging to the business. A sole proprietor, for example, would be held fully responsible for unforeseen circumstances that may impact their business, like business debt or a lawsuit. However, if an entrepreneur decided to incorporate as a corporation or form an LLC, liability protection would ensure the safety of their personal assets. Belongings like cars or houses would not be seized or impacted as an incorporated entity.
Corporations and LLCs are just two options of entity formations entrepreneurs may choose. Other options include partnerships, S Corporations and nonprofits. Do a little research to determine which entity best meets the needs of your business.
2. Filing for Trademark Registration
It’s highly likely that your business has a unique name, slogan, design or logo associated it. As such, it’s critical to conduct a name search and file for trademark registration at the federal level for a few reasons.
Filing to register a trademark gives you exclusive rights to the mark. This ensures that nobody else may attempt to use or plagiarize the trademark without your consent. A trademark is also a valuable form of intellectual property. It works to differentiate your brand from its competitors. Trademarks are also unique and original ideas must be protected to ensure they are not copied elsewhere.
3. Obtaining a Tax ID
A federal tax ID goes by another popular name: employer identification number, or EIN. If you have incorporated or formed an LLC, the IRS will issue you a nine-digit number — EIN — that identifies employer tax accounts. (Entrepreneurs that choose to act as sole proprietors will need to file an EIN application to obtain this tax ID.)
Having an EIN provides several benefits to small businesses. You may use an EIN to hire employees, open a business bank account, build business credit, and establish pension, profit sharing and retirement plans.
4. Preparing Business License Applications
Every small business will require specific licenses and permits to operate the company. Some businesses may file for a seller’s permit if they sell goods online. Others may operate their business from home and require a home occupation permit.
The types of business licenses you file for will depend on your industry, city or county location, and state. If you are uncertain as to which business license or permit your business needs, reach out to your local Secretary of State. They may be able to supply you with a full list of business license requirements and application forms to start the filing process.
5. Designating a Registered Agent
Registered agents act as the point of contact between your business and the state.
An RA will receive service of process on your behalf. They organize the documents and deliver this confidential paperwork discretely to the owner of the business. From there, the business owner may file annual reports, pay franchise taxes, and complete any other paperwork that allows the business to remain in good standing.
There are two options available when it comes to appointing a registered agent for a small business: Acting as your own registered agent, or working with a third-party filing service. Here’s more information from my blog on either of those registered agent options.
6. Obtaining Business Insurance
Anything can happen when you’re in business and it’s always a good idea to be prepared for “in case of emergency” moments.
Use this time to obtain business insurance for your company, even if you don’t necessarily think you will need or use it. You can research different types of business insurance and determine which policies are best for protecting your business — and yourself.