10 Steps to Forming a New Business
Forming a new business can be a confusing and stressful process unless you have a good idea of what you need to do. Many would-be entrepreneurs have great ideas but then are at a loss at how exactly to start up a new business. Here are 10 steps for forming a new business.
Prepare a business plan
A business plan is a roadmap for where you want your company to go from its inception through its first three to five years. It details how you intend to grow your business. The most important part of the business plan is the Executive Summary, a one-page summary of your plan that touches upon your company’s strengths, weaknesses, opportunities, and outside threats (economic and competitive challenges). Be sure to include a detailed company description, location, goods and services provided, key differentiator, examination of the local competitive landscape, required permits, marketing plan, organizational management, sales forecasts, and estimated startup costs.
Determine if your company name is available
Even if you are not yet ready to form a corporation, there are services that allow you to search to see if your intended business name is available. A comprehensive search can be done on the state level through a municipal website. The most accurate search should be done on a state level (the state in which you are intending to form your business) or through a service such as The Company Corporation. Consider alternative names before embarking on your search to help save time.
Determine if your desired URL is available
Once you have established a unique and memorable business name, your website domain name should be no different. Although it is not necessary to have a URL or website in order to form a company, it is highly recommended if you are searching for funding, particularly in today’s world of digital commerce. Securing the proper URL is best addressed in the early stages of a company’s formation. There are many services that allow you to search URL name availabilities for free, such as Whois.com. If you cannot replicate your same business name in a URL, try to come as close as possible. Also, consider social media variations for your company name for sites such as Facebook, LinkedIn and Twitter.
Register your URL
Many websites that allow for free name searches will also offer registration for a fee, such as GoDaddy.com. The .com extension is the most desired, but consider also purchasing a few other extensions such as .net, .org and .biz. It is not necessary to have a registered URL to form a company, but it is highly recommended.
Choose the state in which you want to register your business
You don’t need to form your business in the same state where you are located. Different states offer varying benefits of incorporating. For instance, Delaware and Nevada can offer lower tax rates and simpler incorporation processes.
Choose your legal business structure
LLC, C-Corp, S-Corp and Non-Profit are all examples of business structures. Limited Liability (LLC) and Incorporation (Inc) are the most popular structures that small businesses form. They both offer protection from personal liability, but there are significant differences.
Appoint a registered agent
State laws require that a business has an agent who is responsible for legal and tax documents.
Obtain an EIN
An Employer Identification Number or EIN is much like a social security number in that it is a nine-digit number that identifies a business entity. It is required on all tax filings for the entire life of the business.
Corporations, most LLCs and all businesses with employees must have one of these. Although EINs are officially issued by the IRS, business service companies, such as The Company Corporation, can help obtain an EIN from the IRS on your businesses behalf to help make the process fast, easy and convenient.
Open a separate bank account for your business
Opening a bank account and a company credit card will help legitimize your business and help you build up your credit score to secure capital for your future growth needs. Establish a separate business bank account so that your personal assets are not mixed with business funds. Banks may require an
EIN in order to open a business checking account.
Secure all required licenses
Most state, county and local governments require companies to have the right licenses and permits in place before they open their doors. There are over 150,000 filing jurisdictions across the country, all with specific requirements. Depending on your particular industry and where you are located, a variety of licenses may apply to your business. Failure to obtain the correct business licenses or permits can result in fines, notices and forced closure of your business.
State licenses are usually required for personal or professional services like accounting, contracting, or cosmetology that have specific industry standards. Federal licenses are required for businesses that are highly regulated by the federal government, such as ground transportation, preparing meat products, manufacturing alcohol or tobacco, or providing investment advice.
Now that you have formed your new company, keep your business compliant in order to satisfy the federal, state and local regulations that apply to most enterprises each year you are in business. There are many legal formalities and paperwork required for maintaining your corporate status.
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About E.J. Dealy
E.J. Dealy is CEO of The Company Corporation, the Small Business Unit at Corporation Service Company® (CSC®), which incorporates tens of thousands of new businesses annually and provides ongoing compliance services to 200,000 companies located throughout the U.S. Dealy previously served as CSC's vice president for corporate development. Before joining CSC, Dealy was president and…