Starting your own business is exciting, but before you open your doors, you must follow some important legal steps. Doing things the right way protects you, your company, and your future.
Step 1: Choose a Business Structure The first decision is to pick how your business will be organized. Common types include:
- Sole Proprietorship (one person owns it)
- Partnership (two or more people share ownership)
- Corporation (separate legal entity)
- LLC (Limited Liability Company) (mix of partnership and corporation benefits)
Each type has different rules, taxes, and protections. It’s smart to get advice from a lawyer or accountant.
Step 2: Register Your Business Name You’ll need a name for your business. Make sure no one else is using it by searching online or checking with your state’s business office. Some businesses also need a "Doing Business As" (DBA) name if operating under a different name.
Step 3: Apply for Business Licenses and Permits Depending on what you sell or where you operate, you might need licenses or permits from the local, state, or federal government. Examples include:
- Food licenses
- Seller’s permits
- Professional licenses (like for hair stylists or real estate agents)
Step 4: Get an EIN (Employer Identification Number) An EIN is like a Social Security number but for your business. You’ll need it to open a business bank account and pay taxes. You can apply for free on the IRS website.
Step 5: Open a Business Bank Account Keep your business money separate from your personal money. This makes bookkeeping easier and protects you legally.
Step 6: Understand Your Tax Obligations Businesses must pay taxes. Depending on your type of business and location, you may owe:
- Income taxes
- Sales taxes
- Employment taxes
Talk to a tax professional to set everything up right from the start.
Step 7: Protect Your Business with Insurance Business insurance helps protect you if something goes wrong. Common types include:
- General liability insurance
- Workers’ compensation insurance
- Property insurance
Final Tip: Keep good records, stay organized, and never be afraid to ask for legal or professional advice. Starting a business takes work, but following the right steps will help you succeed!