If you’ve decided to take the step to start your own business, congratulations. As it happens, sole proprietorship companies are straightforward to set up—all you really need to do is say that you’re starting a business and then get busy. In fact, you don’t even technically need to register sole proprietorship companies.
However, that doesn’t mean that there aren’t ways to legitimize your business. Here are four steps sole proprietorship companies should take to level up their credibility.
1. Open a Business Bank Account
Of course, nothing conveys a sense of professionalism like using a business check imprinted with your official name to pay your suppliers. But that’s not the only reason to separate your business and personal finances. When you combine accounts, it’s more challenging to track budgets and chart your growth as funds intermingle, not to mention that it can lead to potential tax headaches and missed tax deductions since it’s harder to know what qualifies as a legitimate business expense.
Opening a business bank account also allows you to take advantage of products like merchant services, cash management solutions and credit cards that feature additional reporting tools. A business banker can offer advice on the type of account and services that are right for your business and share their expertise to help you grow your business.
2. Obtain a Business License and Requisite Insurance
At a minimum, most municipalities require that you register your company and obtain a business license, but it’s important to note that your city and state might require supplementary licenses. (Search online for your state name + business license to find out what documentation you need to pursue.) And, many industries—real estate, finance and construction, just to name a few—require additional licenses or certifications. Your clients may ask for proof of proper licensing, so find out what you need so you have them at the ready.
Next, you’ll want to make sure you’re properly insured. Consult with a reputable insurance broker to make sure you are covered with overall business insurance, as well as industry-specific insurance licenses you might need, such as those for construction, food handling and more.
3. Acquire an Employer Identification Number (EIN)
While not technically required for sole proprietorship companies, an EIN can be an alternate option to using your personal Social Security number for filing taxes that can help deter identity theft. In addition, using an EIN rather than your Social Security number can boost credibility when working with clients and vendors. If you eventually hire employees—even if you maintain your sole proprietorship status—you’ll need an EIN, so it’s smart to be prepared.
It’s easy to apply for an EIN online at the IRS website, using Form SS-4. And speaking of the IRS, don’t forget that if you expect to owe at least $1,000 in taxes, you need to make quarterly tax payments (due January 15, April 15, June 15 and September 15). This form will help you calculate the payments you should make, and more information is available at the IRS Self-Employed Individuals Tax Center.
4. Secure a Domain Name
Today, many customers will search for you online to ensure you are legitimate, which is why you need to apply for your own “domain name.” And, even if you aren’t a web-based business, your website can be a powerful form of marketing 24/7—offering details about you and your company and answering many common customer questions. A web domain usually comes with an email address, as well, and using a business email adds to your professional image and helps with consistent branding.
To find out more about registering your domain name, search for a “domain registrar,” which will help you identify and purchase a domain name that will then be registered with the ICANN (Internet Corporation for Assigned Names and Numbers), a non-profit organization that manages domain names worldwide. Prices typically range from $10 to $20 a year, but make sure to find out all the fees that will be incurred.
Sole proprietorship companies know that credibility is key, and starting your business professionally will set you on the path to success. For more advice on navigating the small business journey, contact a Fifth Third business banking professional today.