1. Decide your structure. There are five different business structures you can choose: Sole Proprietorship, Partnership, Corporation, S Corporation, and Limited Liability Company (LLC). You could also look at other structures (nonprofit, etc) if your goal isn’t to make money for yourself and own your own business. I’m not an attorney or tax accountant so I can’t advise you which structure you should choose – but I’ll tell what my businesses are and a little bit about why those were chosen. All three of my businesses are currently LLCs. They did NOT all start that way. Originally, The Advancement Company was a sole proprietorship and Deckci Decor and The Woof Room were partnerships. I had been told that if we chose to be a corporation then we would be double taxed and those had just seemed easier.
Eventually, we switched everything to LLCs. This is because it helps take the risk/liability away from the owners – yet still allows pass-through taxation. Since I do the taxes for all the businesses, that was a plus. Since you likely aren’t super familiar with how to do taxes when you own a business, I’ll share how I do them. With Deckci and TWR I do a Form 1065 with Schedule Ks for each owner (which we just put on our own taxes). For The Advancement Company, I just do it with my taxes as a business I own (I use TurboTax Home & Business). It actually makes things pretty simple. I should also note, I did not use an accountant/attorney in making these decisions about structure – I just did some research and picked. They have worked out fine for me so far.
2. Get legitimate. Now that you have a name for your business, it’s time to claim it (you should have already bought your web domain!). First, get an EIN for your business. An EIN is basically a social security number for your business (and depending on the type of business you have, clients/vendors will ask for it). It’s free – but you need to know your structure before getting. It takes literally 5 minutes. Then, complete any local paperwork (assumed name, articles of incorporation, etc). See your state’s website for more on this. In Minnesota, our state has a very helpful website so you know what all you need to do. Once you have your EIN and have filed with your state, you will be able to open a bank account for your business (which you should do as soon as you can).
Photo Credit: Kara Allyson