Setting Up a New Business? Here Are 4 Steps To Follow

When setting up a new business one of the most difficult tasks is the paperwork involved. This is particularly more difficult if you are trying to find one particular business structure. Given below are steps to set up a company irrespective of the structure of the business.
1. Name your BusinessCreate a name for your business that is unique and different. The name you give your business is also called a “doing business as”, or DBA name. You have to use this name on all Government forms that you have to fill for example for any license your business requires or tax forms etc.
2. Register for Employee Identification Number (EIN) It is the IRS that issues the employee identification number (EIN). The EIN issued to your business is used for federal and state taxation and for documents required for payroll tax reporting. You have to apply for the EIN on the IRS website. While applying for EIN you will have to register your company under the name you have created for it.
3. Open a Business Checking AccountOnce your company is registered under the name that you have chosen and is assigned an EIN number, you should open a business bank account. No business should be run from the owner’s personal account even if their tax liability passes through their business structure.
There are several reasons to have a separate business account:

• Financial reporting:  Having separate accounts for personal and business needs is best because it is easy to track business activities for computing financial statements. Then there is the possibility of mixing personal expenditure with business expenditure.
• Legal liability: If there is a legal case against your business it is important to prove that your business is separate from you personally. Using the same account for business and personal needs can put your personal assets –like your house and personal savings- at risk if your business is sued.
• Additional capital: As your business grows you may need to add more capital to it and it may be in the form of new investors. Having a separate business account shows that you take your business seriously.  People are more likely to invest in your business if you have an exclusive business account.

From the very beginning keep your personal and business accounts and transactions separate to have a healthy business.
4. Keep Documents and Licenses in OrderWhen you begin a business you are expected to create and maintain a number of documents depending on the type of business you run:

• Article of the organization, operating agreement:  Limited Liability Company (LLCs) documents are required to file these documents. The LLC documents explain who the LLC members are and how the LLC is operated. The partners of the company draw up a partnership agreement which lays out how the company will run. Both the above said forms have to be filled with the taxing authorities.
• Select tax Status: In some cases, the company has to choose how the company will be taxed. For example, an LLC may be taxed as an S corporation with a pass-through tax structure.
•  You haveApply for Licenses and Permits: to apply for licenses and permits according to the requirements of your industry.  For example, a home construction company will need a city permit to renovate homes or make additions and extensions. Attorneys and accountants must have licenses from their state to do business there. Your city, county, state and federal authorities will determine the licenses and permits you need to run your business.

​Fulfilling these steps is important while setting up your business as it will have a far-reaching impact on the future of your business.