You’ve discovered your “why” for wanting to start your own business, drafted a thorough business plan, and set short and long-term startup goals. You feel confident that you’re ready to make the leap forward into entrepreneurship.
However, you also want to make sure that particular leap is a smooth one. Have you fulfilled every other necessary registration, from obtaining an EIN to applying for business licenses, before you open your doors for business?
If you’re unsure that there may still be items to accomplish to legitimize your business, this guide will help you check off your to-do list.
1. Incorporate the Business
Some startups initially decide to be sole proprietorships when they launch their business. This entity makes sense if you’re looking to save a bit of money and would like the ability to exercise complete control over the startup.
However, sole proprietorships are the only entity formation that does not provide liability protection. This type of protection creates a separation between your personal and professional assets. For example, let’s say your business was served with a lawsuit. The suit could put your personal belongings, like houses and cars, at risk since the company is a sole proprietorship.
The good news is that small businesses may incorporate under entities that do provide liability protection. Some of these legal structures include limited liability companies (LLCs), corporations, S Corporations, and benefit corporations. Review the different entity formations and choose the one that is the best fit for your business and its needs. Then, fill out the necessary paperwork to incorporate the startup and ensure its protection.
2. Apply for Federal Trademark Registration
Your business likely has a unique name, slogan, tagline, logo, and design. This mark helps to differentiate the business from other companies. It is also at risk of being plagiarized without federal trademark registration.
Conduct a name search for your trademark before applying to register the mark. This will allow you to see if any similar trademarks have already been registered or are pending registration. If you find that a similar or identical mark to your own is in the process of being registered, you’ll need to rethink the mark you wish to register. If not, you may move forward with registration.
Apply to register the trademark and pay a filing fee. Once the mark has been registered, you will receive exclusive rights to it. This ensures nobody else may use your trademark.
3. Obtain an Employer Identification Number (EIN)
Do you plan to hire employees for your startup? If so, you will need an employer identification number (EIN). This is a nine-digit federal tax ID that uniquely identifies employer tax accounts.
Outside of hiring employees, an EIN can be used for several other business aspects. Some of these include opening business bank accounts and establishing a business credit profile. You may also use an EIN in lieu of your social security number (SSN) on business paperwork. An EIN is a bit less sensitive than an SSN, making it a safeguard against potential identity theft.
4. Register for Your Business Licenses
Many startups are required to have business licenses in order to operate. Having a business license allows the license to track the business’ activities for tax purposes. It also helps notify citizens of activities occurring within the business that may impact them and makes the business accountable for its actions.
The license you need may differ depending on your industry, activities, and location including the county, city, and state. Check in with your local Secretary of State to determine which licenses, and permits, your business may need to register for before it can open its doors to the public.
5. Determine if you Need Extra Funding
While drafting your business plan, you likely outlined the financial projections of your small business. You probably have a pretty good idea of what the cash flow for your company looks like, but if it’s not enough you may start looking into additional funding options for your startup.
Consider applying for a small business grant in your industry, taking out a loan through the SBA, or crowdfunding the startup through platforms like Kickstarter for a little extra financial cushion.