When you want to start a business, the first step is to do online research, but you will probably find plenty of conflicting advice. To start new business projects, there really is not a one-size-fits-all path for everyone to follow. Every business is unique. Every business must, however, follow a few steps to meet the requirements to operate legally. Here are the steps to follow to get your new business legally established:
Decide What Type of Business Entity You Want
Is your business a partnership? An S-corporation? A limited liability company? Every type of business (“entity” is the legal term) has to follow slightly different rules regarding taxes. If you are not sure which type of entity designation is most appropriate for your business, ask an accountant who specializes in businesses.
Apply for a Tax ID for Your Business
Shortly after you were born, your parents applied for a Social Security Number for you. Once you received it, the IRS began to recognize you legally as a person (technically an “entity,” just like businesses). Only then were your parents able to claim you as a dependent on their tax returns.
Likewise, you must complete a Tax ID application for your new business. The Tax ID for businesses is called an Employer Identification Number (EIN). You can apply for an EIN online to get your EIN more quickly. You will receive your EIN by email shortly after submitting your online application. A physical letter from the IRS, containing your EIN, will arrive within four weeks.
Once you have your EIN, your business legally exists. Then you can open a bank account. You can also apply for the insurance coverage your state requires for businesses.
Online EIN applications make it easy to establish a new business.