How To Start A Business

Business woman working at a desk

Every business and invention begins with an idea. An idea was borne of boredom, epiphany, or necessity.

The idea sounds great. Significant enough to be business-worthy. Great enough that some of your co-workers want in on your rodeo.

Short Video – How To Start A Business

There’s just a problem. None of you knows what it takes to set up your company. Starting up a new company is a bit more complicated than what’s shown in film and TV, with all the paperwork, legalities, and decisions based on the former.

Fortunately, there are document filing companies that can assist you with a lot of the steps toward starting and forming a new business. Check our website's front page for a list of our recommendations for 2020 or visit the services linked on this page.

 

Incfile

LLC Filing, Formation, EIN (Tax ID), Operating Agreement, One-Year Registered Agent, Compliance Reminders, Express Shipping

Incfile $149 + state fee

Find Your State's Filing Fee
Step #1 Visit Incfile
Step #2 Click 'Incorporate Now' or 'Launch My Business'

Incfile Launch business
Step #3 Select "Entity Type" & 'State of Formation'

Results 'Gold Plan' $149
This example,$50 State Fee for Arkansas

Incfile LLC Arkansas

State fees determined by the state. Some are $45, $100, $300+

 

Step 1 - First, Give it a Name

When you name something, you get attached to it. Naming your soon-to-be business can only spur your decision forward. Backing out on the idea will be less of an option. When forming a company, you and your co-founders need to brainstorm and decide on a few things, such as your business name. Before contacting a document filing service, you need to:

  • Come up with a name that hasn’t been used before. Feel free to check here.

  • That name, even if unique or derivative, shouldn’t sound like an existing one as the Secretary of State in your state would reject it.

  • Ensure that the name does not violate any State Law

Step 2 - Choose Your Entity

This is an essential part of creating your company apart from choosing a name. You can choose to be a corporation or a limited liability company or LLC. Small companies often choose LLCs because there are plenty of benefits.

  • A corporation – is a legal entity that is separate from its founders or owners. The corporation, therefore, pays for its taxes. The owners will not be held liable for the company’s taxes. Corporations can pay taxes based on their profits. The company, as a whole, is responsible for its actions. However, there will be extensive record-keeping, reporting, and definition of operations. Corporations should also have a rigid structure. Plus, corporations can be recognized as international entities.

  • LLC – is a legal entity that also provides limited liability protection that protects the company’s owners from the company’s debts and claims in case the company tanks or runs into problems. As a pass-through entity, LLC owners are considered self-employed and subject to self-employment tax. Profits and losses will be passed through to the owners’ personal income. No corporate taxes required. Whether you’re alone or partnered, LLC profits and losses are reported to your tax return. LLCs are also allowed to have a flexible management structure as long as it is reported when compliance is due. Lastly, the LLC entity applies to American companies only.

Step 3 - Getting a Registered Agent

A requirement to build an LLC, a registered agent, is a direct contact between a company and the Secretary of State as well as government offices. Several states require a registered agent to allow the formation of an LLC. What registered agents do is to receive correspondence or legal notices on behalf of your business and relay them to you. This way, you cannot miss or claim to miss any communication from government agencies or private vendors or debtors. In case your business runs into problems, Registered agents can receive embarrassing letters on your behalf.

In case your business, for some reason, transfers to another location, the registered agent doesn’t, ensuring that you continue to receive your correspondence. In that regard, your appointed registered agent must have a permanent physical location in the same state where your LLC is formed and must be open during regular business hours. In case your company prefers a change of registered agent, it must be filed accordingly with the Secretary of State. Business formation companies such as ZenBusiness can also act as registered agents. After finding a good registered agent in your state, the next step is…

Step 4 - Registering the LLC with the state's Secretary of State

Each state has its own rules and requirements, and formation companies like ZenBusiness will do most of the leg work in filing the Certificate of Formation. They will also ask for this information so you might as well be aware of the contents.

  • Article 1 – Your business name and business type (LLC/Corporation)

  • Article 2 – Address and name of the Registered Agent. Agents with physical addresses only.

  • Article 3 – Your company’s governing authority. (Who will be calling the shots, founding members or appointed managers)

  • Article 4 – Purpose of the LLC. Basically, a description of your business and its goals or mission statement. This is an optional item in case you still have to come up with one.

  • Organizer – the person or entity that prepared the Certificate of Formation. This could be you or your business formation company.

  • Effectiveness of filing – when you intend to launch your LLC as a legal entity.

  • Signature – date, and signature of the organizer.

Processing

Business formation processing can be as quick as a day, a week, or can take several months. The latter is most likely without the assistance of an insider or a business formation service. If you’re in a rush, then it’s essential to hire a formation service. Many can get your business registered with the Secretary of State within 3 to 5 days for rush jobs. There’s a little added premium, of course, but for regular jobs, it can take from two to three weeks.

Enough time for you to hammer things out. If you want things to be a little faster, they have an Expedited level that can get your business registered in a short 6 to 8 business days. The term for getting your business confirmed by the Secretary of State is “filing for evidence.”

However, each state's Secretary of State still has the last say whether the business is confirmed or not. The business name could even be rejected for some reason despite passing the criteria.

You will then would have to come up with a new name and re-file the application.

ZenBusiness will ask for three alternate business names during sign-up, which should mitigate such a scenario.

Step 5 - Getting the Employer Identification Number or EIN

The IRS then assigns your business a nine-digit code known as the Tax Identification Number or Employer Identification Number (EIN), which is required by banks to open an account, hire employees, and to limit liability. This EIN will also help you tell the business and personal transactions apart.

Additional EIN Details:

  • An EIN is required if your company will be hiring employees. The IRS uses company EINs for payroll tax remittances and taxes on 401k plans.

  • Your EIN shields your SSN from identity theft. You’ll be giving out your EIN to suppliers, lenders, and customers instead.

  • Should your company suffer litigation, your business becomes a separate entity, and your personal finances will not be affected, hence limited liability.

  • As mentioned above, your EIN will enable banks and other entities to treat your business and personal finances separately.

  • Speaking of banks, your company cannot start an account without an EIN.

Step 6 - Opening an Account

Keeping your personal and company money separate is one of the main points of having an LLC. Banks will not recognize your company without a separate account, and it will protect both you and your company. Your finances will also be better organized, so they’ll be easier to track and review by you and concerned agencies. Your choice of the bank will gladly help you after showing your EIN and Certificate of Formation.

Step 7 - Business Permits

Your EIN and Certificate of Formation are just meant to recognize your company but are not licensed to run the business in a particular state or anywhere. You’ll be needing business permits such as city, county, state, federal, sanitary, or environmental depending on your type of business. Some business formation companies such as ZenBusiness have it as an added service.

Step 8 - Write-up an Operating Agreement With Important Guidelines

A business requires a document known as an Operating Agreement that describes things such as the company’s purpose, how the company will grow, and how it’s funded. If you need to start the business right away and put this document on hold, your company guidelines will default to the standard rules of the state. The operating agreement should detail the following:

  • Growth – the purpose of the company and plans for future growth

  • Ownership – details a succession plan in case of ownership change

  • Protection – regulations designed to protect or separate owners’ personal assets from the LLC

  • Funding – details on how investment funds will be used, which will aid in interacting with investors.

Step 9 - Compliance

All LLCs are required to keep tabs with the state they’re registered in. This is a process known as Compliance, which is an all-important activity if you wish to continue conducting business within the strict laws of each state. Failing compliance means that your company can have poor standing with the state, and there could be costly fees and penalties involved. What’s worse is that the state could revoke your right to do business.

Some states require more than others, while some states do not require much. For example, while other states require several annual reports, some only require an Annual Tax Franchise Report to be filed with the state CPA (Comptroller of Public Accounts).

All taxable entities doing business in the state may be required to pay and report a Franchise Tax, which is a percentage of the business’s annual income. These reports have deadlines, and for those who are late can suffer poor standing as well as penalties $ for a late submission.

Step 10 - Let’s Get Started

  • Choose a cool business name.

  • Choose your business entity. The best choice for startups is to become an LLC.

  • Find a Registered Agent.

  • Register with your state's Secretary of State.

  • Claiming your EIN

  • Getting a company bank account

  • Draft your company’s Operating Agreement

  • Get the necessary business permits

Most of these requirements can be done through the help of business formation companies such as ZenBusiness. The people at ZenBusiness can do the process quickly, efficiently, and best of all, affordably.

You and your partners can then concentrate more on ironing out your ideas and pitching your company to investors and other important matters.

Since we’ve been mentioning ZenBusiness, let’s describe their services in a little more detail:

  • First is their business filing service, which can be done online, for an affordable $49 plus state fee. The state fees can vary but are often around a few hundred dollars. Prices can change, so please check on the current fee amounts. Starting a business is just as easy as pulling a hundred-dollar bill out of your pocket. The process can be finished in as short as a week.

  • EIN – ZenBusiness can do this task and pay a visit to the IRS for a small price of just $70

  • Registered Agent – ZenBusiness will hook you up with a partnered registered agent, which is included in its starter package of $49.

  • Compliance Deadlines – ZenBusiness will be on top of compliance requirements, including annual reports, so that you could concentrate more on your business. They charge a small amount of $110 annually (and $75 for annual reports) unless you choose a more elevated package.

  • Business License Reports – ZenBusiness charges just $95 for business license renewals.

  • Name Reservation – is like a pre-order for a business name. ZenBusiness will keep your cool chosen business name in reserve ($50) while you iron out your idea and prepare to do business.

Recommended LLC Filing Service