You’ve incorporated or formed an LLC for your business. Now what? You spent time and energy figuring out which business structure to form and when to do it, but there can be just as many questions after incorporating a business or forming an LLC. And the steps you take after forming your business are critical to creating a solid legal foundation that will serve you and your business for years to come.
Things to Do After Incorporating
Here are the 10 essential legal steps to take after you have incorporated or formed an LLC:
1. Execute Your Organizational Documents
After you file your formation paperwork, you’ll need to create and execute your bylaws (Corporation) or Operating Agreement (LLC). These documents define your company’s internal governing rules, such as how meetings are held, what votes are required to take action, how stock should be issued, the officers and their duties for corporations. An LLC’s Operating Agreement defines the relationship of members and their responsibilities, how membership interests can be transferred, how profits and losses are allocated, and more.
2. Get an Employer Identification Number (EIN)
An LLC or corporation needs its own federal tax ID number, also known as an Employer Identification Number (EIN). You’ll need this ID number in order to open up a business bank account or file your business tax returns properly. You can easily get an EIN with the IRS.
3. File Any DBAs (Fictitious Business Names) for Any Business Name Variations
If your company is going to be operating under any variation of the official company name filed on your formation paperwork, you will need to file DBAs, also called fictitious business names, for each of the variations. You should have your Corporation or LLC file the DBAs so they operate under the umbrella of your corporation or LLC. If you previously had a DBA as a sole proprietorship, you can cancel that DBA or just let it lapse.
4. Open a Business Bank Account
You will need to create a separate business bank account to keep all business transactions separate from your personal transactions. This step not only will streamline your business accounting and tax reporting, but it’s essential to maintaining the “corporate veil” that minimizes your personal liability. Most banks will require the business’ formation documents, organizational documents, and an EIN in order to open up the bank account. If you previously had a business bank account as a sole proprietorship or partnership, you’ll need to close that account and then open up a new bank account under the Corporation or LLC.
5. Apply for Business Licenses and Permits
Incorporating or forming an LLC provides the legal foundation for your business, and a business license gives you the legal right to operate your business. Most types of businesses require federal or local licenses to operate (the specifics will depend on your type of business and location). You can find out what permits you need by contacting your local government or an online legal filing service.
6. Maintain Your Corporate and LLC Compliance
Your work isn’t done after you submit that initial paperwork. For both the LLC and Corporation, you’ll need to keep up with state paperwork (typically on an annual basis). For example, you’ll most likely need to file an Initial Statement of Information within your state and pay a small fee, and then continue filing an Annual Statement with the state each year. You’ll need to keep up with your estimated taxes on allocated corporation or LLC profits and file the annual tax returns for the LLC or corporation with both the IRS and your state. And corporations will need to file their annual meeting minutes for board of director and shareholder meetings.
7. Apply for Trademark Protection
When you incorporate, or form an LLC, you prevent another company from filing under the same name in the same state. But, this is far different than federal trademark protection which can protect your name in all 50 states. By officially registering your trademark with the USPTO (U.S. Patent and Trademark Office), you’ll help prevent others from choosing your name in the future (since there’s a public record of your trademark), and it will be easier to bring a suit in federal court in case someone else does begin using your name.
8. Prep Your Documentation to Work with Third Parties
If, like most businesses, you plan on frequently working with third parties (employees, contractors, customers), you should have paperwork to document each of these relationships. For example, you may want to have a non-compete form in place before hiring any employees. Or, you’ll need an Independent Contractor Agreement before using independent consultants. Anticipate these needs and get these documents in order up front so they’ll be ready to send and sign as soon as you need them.
9. Sign Agreements, Contracts and Loans in the Corporation’s Name
Now that you have formed an LLC or Corporation, it’s critical that you sign all important contracts under the official LLC or Corporation name filed in the paperwork. Unless it’s absolutely necessary, avoid signing business contracts as an individual.
10. Get Business Liability Insurance Coverage
Creating an LLC or Corporation is an important step toward minimizing your personal liability. However, it’s not a substitute for insurance. That’s because a corporation or LLC won’t protect you unconditionally from personal liability. For example, if your personal actions result in an injury, you can be personally liable. In addition, you will probably want to protect your business from personal injury or property damages in the event of a lawsuit. Insurance comes in different forms depending on your business needs, so you should discuss your specific business risks with an insurance agent or broker who’s familiar with small business.
This list may seem daunting to the first-time business owner, but don’t worry. Many of these steps, such as getting an EIN, can be done in minutes. You can even commit to tackling one task per day, and in less than two weeks, you’ll have a solid legal foundation for your business!
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