Steps to Starting a Business
Starting a business can be a confusing process. In order to form a business, individuals usually need to make a variety of legal decisions and file the paperwork necessary to register with the appropriate state and federal authorities. Nevertheless, there are only a few critical steps to starting a business that individuals should keep in mind when forming a business.
Choose the Type of Business
There are a number of different business entities that individuals can choose from when considering steps to starting a business. If a business is small, and there will be no partners, individuals can form a sole proprietorship, which does not require much paperwork. Furthermore, if the business will only involve a few individuals, it might make sense to organize the business as a partnership or a limited liability company, depending on the type of business and a number of other factors. If individuals associated with the business want to make it easier to transfer ownership in the company, it might make sense to form a corporation. There are also tax elections associated with incorporating that can be favorable. It pays to speak with an experienced business attorney to determine which type of entity would work best for your particular business.
Form the Business
Another important one of the steps to starting a business is filing the documents needed to legally form the business. The types of documents that must be filed differs depending on the type of business you are forming. A corporation, for instance, typically requires an incorporator to file the certificate of incorporation. However, a limited liability company usually requires that articles of organization be filed. In order to complete these documents, incorporators or principals of the business need to supply certain types of information. This includes the registered office of the company, the name of the incorporator, and the number of shares, officers, and other information depending on the type of company that is formed.
After legally forming a business, it is important to receive a status report, certificate of good standing, or other documents showing that the business has been formed. This will be important to have when opening bank accounts and fulfilling other tasks needed to operate the business. Many states allow individuals to complete the filing process online, and some states allow people to form certain types of businesses online and other types of applications need to be done by mail. In addition, many states allow formations on an expedited basis for people who need to form businesses on short notice. An experienced attorney will be able to help clients navigate the formation process and make it as simple as possible to complete this step.
Agreements Between Principals
Either before or after the company is officially organized, another one of the critical steps to starting a business is drafting agreements between the principals of the company. It is important that companies have detailed agreements about the rights and responsibilities of the parties with respect to the company. This can make it easier for people to operate the business and resolve disputes that may arise. Furthermore, without a written agreement among the principals, a number of default rules set by statute control many situations. These default rules may not apply to your business, so it is necessary that principals agree between themselves about how they want to operate their company.
The agreements between principals will vary depending on the type of company that will be formed. A limited liability company generally has an operating agreement, but a corporation usually has a shareholders’ agreement and bylaws. A partnership will usually have a partnership agreement that covers the rights and responsibilities between partners. A skilled business lawyer will know what types of documents should be negotiated between the companies and what subjects should be included in these documents to ensure the business has the best chance at being successful.
Government Registrations and Filings
Even after a business has been formed, another one of the important steps to starting a business is completing other necessary filings. Nearly all businesses will need to apply for a federal employer identification number from the IRS, which is needed to file for taxes, open bank accounts, and complete other tasks. Furthermore, companies that focus on certain professions and businesses will need to apply for licenses and registrations depending on the nature of the work that is performed by the company. In addition, if a company is formed in one state but does business in another state, the company may have to apply for authority to do business in the other state. Furthermore, some businesses may need to publish information about the company and complete other steps within a short time period from when they are organized to ensure they complete all needed registrations. Furthermore, many types of businesses need to file annual reports with state authorities, complete information with state workers’ compensation authorities, file taxes, and complete a number of other registrations.
The Rothman Law Firm has substantial experience helping clients organize businesses. We understand all of the steps to starting a business, the agreements that need to be negotiated, and the recurring obligations businesses need to complete in order to stay in good standing. If you are looking for an experienced New York and New Jersey business attorney to help you start a corporate entity, please feel free to contact The Rothman Law Firm to request a free legal consultation.