7 essential steps for business startups
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Pick a business name and check availability
Before you order stationary, signage, and other branding for your startup business, make sure the name you have chosen for your product or business will not conflict with an existing business. To do that you will need to perform a trademark search to check the availability of the name within the U.S. You should also check with your state’s secretary of state to make sure no one has registered your product or business name within the state.
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Register your business name with the secretary of state
If you decide to form an LLC or corporation (see “choose a legal entity” below), that will automatically register your business name and you can skip this step. But if you are not quite ready for formal business structure, it may be a good idea to register your business name with the state by filing a DBA (doing business as), also known as a fictitious business name. This lets the public know who is behind your company. It also ensures that you are legally able to operate your business under that name while stopping others from using the same name in your state.
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Choose a legal entity and file incorporation/LLC documents with the secretary of state
Unless you specifically create a formal business structure with the state, then you will be operating as a sole proprietor by default (if you are a single owner). While this may be the right choice for some, it is not always the best option. When you create a separate legal entity with the state, you are separating yourself (and your assets) from the business. Many business owners choose to operate either as a limited liability company (LLC), or a corporation (either S or C corporation). Talk to your legal and/or tax advisor to determine which choice is best for your situation.
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Request a federal tax ID number or an employer identification number (EIN)
The IRS tracks your company’s transactions via a tax ID number. Think of it as a social security number for businesses. If you’re operating as an LLC or corporation, your business is required to have a tax ID number and you will also need one to open your business bank account. If you are a sole proprietor, you are not legally obligated to get a tax ID number, but it is smart practice. With a tax ID number, you will not have to give out your personal social security number to every client or vendor you work with.
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Open a business bank account
You will need a separate bank account for your business (under your new EIN), especially if you are operating as an LLC or corporation. If you commingle your personal funds and business funds, then you risk losing the asset protection that having a separate legal entity provides.
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Choose a location for your business
Decide whether you will work from home or rent office or commercial space. Depending on the type of business you are starting, working from home could violate zoning laws or raise other legal issues. Consult an attorney if you are unsure.
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Obtain necessary permits and licenses
Depending on what kind of business you have and where you are located, you may need to get business licenses from the state, county, or town. Examples include: zoning permit, sales tax license, permit from the health department, professional licenses, or a general business operation license. The need for special permits or licenses will depend upon your industry and location. Do not begin operations without obtaining the necessary permits and licenses.