Paperwork Needed to Start a Business
A sole proprietorship doesn’t need to do much more than register with the state since it is really just an extension of the owner’s personal life and endeavors. All other business structures are going to entail the execution and signing of various agreements and contracts.
A partnership requires a partnership agreement. This agreement will spell out contributions — monetary and otherwise — and responsibilities of each partner, along with a mechanism for sharing profits and losses. It should also include provisions for dealing with a partner who decides to opt-out. Without this clause, the enterprise could collapse with the departure of one person.
LLCs and corporations require even more legal agreements and contracts to proceed. For an LLC, an article of organization is the starting point. Then, an operating agreement will serve a similar function as a partnership agreement.
For a corporation of any type, an article of incorporation must be agreed upon. Company bylaws are needed to spell out the duties of the directors and officers, goals and frequency of corporate meetings, and types and numerical limits of stock classes. If the corporation plans to issue stock, a shareholders’ agreement is necessary to lay out the rights of shareholders and duties of the board and officers.
These are just the basic documents needed for these business structures. States and the federal government will also impose requirements. Knowledgeable attorneys can guide you through the process and help you draft instruments to meet all legal requirements.
Other Important Steps
In addition to registering your entity with your state, you must also file a form SS-4 with the IRS to obtain an Employer Identification Number (EIN), also known as a federal tax ID number. The quickest way to obtain an EIN is by telephone. If done by mail, it can take up to four weeks.
Depending on the nature of your business, you may also fall under the regulation of various state and federal agencies that may require you to obtain special licenses. For instance, if you plan to sell alcoholic beverages, you will be subject to control by the state Alcohol Beverage Control (ABC) Board from whom you must obtain a license. You will also be subject to the laws and regulations of the Alcohol and Tobacco Tax and Trade Bureau.
You also must cover your liability through various forms of business insurance. The most basic insurance needed by a business is called general liability insurance, which protects against financial loss resulting from a variety of factors, including property damage, bodily injury, libel, slander, and other adverse incidents. Product liability insurance protects against financial loss resulting from a defective product that causes injury or damage. Other types of business insurance cover professional services, home-based businesses, and commercial property.
If you have employees, every state requires you to provide workers’ compensation insurance coverage in one form or another except in limited circumstances.
Work with Skilled Business Law Attorneys
Getting a business up and running involves a wide range of decisions, along with the creation of various legal documents to set up the structure you desire. And that’s just the beginning. State and federal requirements for registration and licensing are also important steps before you can start operating your enterprise.
Business formation is not something you should undertake by yourself. Getting the advice and guidance of experienced and knowledgeable attorneys is essential.