According to the SBA, over 600,000 new businesses are started every year in the US. If you’re considering starting one of these businesses, you must take the proper steps to make sure your business will be recognized as a legitimate company.
Meeting a few small business requirements will ensure you can legally function and have the protections that come with a recognized business. Let’s take a look at the steps to be a legitimate company.
Business Structure
One of the first small business requirements you need to consider is what type of business structure you will use. If you choose to be a sole proprietor, there isn’t any legal paperwork to do so.
However, business structures such as partnerships, LLCs, and corporations do require certain steps to be legally compliant. These structures require creating and filing documents such as articles of organization or incorporation.
You may need an attorney to provide you with legal services to do this step.
Business Name
If you do need to file formation articles, you’ll need a name for your business. Choose one that works for your business and will help customers understand what you do.
You also need to check that the business name is available. After that, register your name. You can register an entity name, or trademark, or doing business as (DBA) depending on your needs.
This is also a good time to claim the web address and social media handles you want.
Tax ID Number
If you want to hire employees, file employer tax returns, operate as a corporation or use certain pension plans, you will need an Employer Identification Number. This will function as your federal tax ID number.
Some states collect taxes directly from businesses. If you operate in one of these states, you may also need a state tax ID number. Make sure to check your local laws regarding this and other income and tax requirements.
Business Permits and Licenses
Many locations require business permits to operate legally. You should check with both your state and local government about any permits you need and fees you may owe. Registering a business will give you the legal rights to operate in an area.
In addition, you may need to apply for a business license. This will depend on what industry and location you work in. Using business licensing services can help make this part of the process less confusing and ensure you meet all requirements.
Insurance
You may be required to carry certain types of insurance including unemployment and disability insurance depending on your business structure and industry. However, even if it’s not required, business insurance can help protect your personal and business assets.
You may want to consider general liability, product liability, and commercial property insurance policies.
Bank Account
Separating your personal and business finances is important from a legal aspect. It creates a bit of a barrier between you and your business. Look for a financial institution that meets your needs and offers business bank accounts.
Then, make sure all of your business transactions go through this account.
Meet All of your Small Business Requirements
When you are starting a business you must meet all of the requirements to make sure it is a legitimate business. These small business requirements will start you off on the right foot and ensure you have adequate legal protections too.