Congratulations! You’ve decided to start your own company. Your business plan is complete and you’re ready to hit the ground running. Before you go too far, however, be sure to take care of one of the most important aspects of being an entrepreneur: setting up the legal entity for your business.
This step is important because it provides legal protection for both you and your company, especially in areas like copyright and taxes. It’s also a signal to yourself and the world that this is a serious business effort.
Before setting up your business, you’ll need to decide which legal structure to use, such as sole proprietorship, LLC, C-Corp, etc. If you’re not sure which type to choose, there are a variety of online resources that can help, including those mentioned below.
Tax ID Number
All businesses require a tax ID number. For all but sole proprietor, you’ll need to establish a Federal Employer Identification Number (EIN), which can be done at the IRS website, www.irs.gov. You can use your Social Security number as your tax ID number for a sole proprietorship, which also means you’ll file your business taxes as part of your personal tax return. You’ll also need the EIN to open a business checking account.
Manual vs. Online
Like most things these days, setting up your business is easier to do online than manually. We suggest trying it manually the first time, which will help you better understand the process as you deal with each state and federal agency. But if you choose to do so online, below are three resources we recommend.
Three Online Resources
- IncFile.com is an easy-to-use site that supports more business types and states than many other incorporation services. It’s also one of the more affordable ones, providing good value.
- IncForFree.com is a free yet commercial website for incorporating a business.
- Many states allow incorporation online, usually through their Secretary of State’s office or other government web portal. For example, for the state of New York, visit www.dos.ny.gov/corps/online_filing.html. A state filing site, however, may not provide some services such as registered agent, which receives official notices for your business and passes them on to you. This is helpful if you think you will moving to another state at some point during your business ownership.
- LegalZoom.com is probably the most popular service, due to their ubiquitous television commercials. They provide host of legal services and documents, and are still very affordable.
These are just three of many online resources that can help you set up the legal entity for your business. Before choosing one, research their history, read their user reviews, and make sure you don’t end up paying for additional services you don’t need.
If you have any questions or would like more information about incorporating your startup, please let us know. We are happy to help entrepreneurs like you get your business off the ground.