Things You Need to Start a Business
From insurance to tax forms, here are steps and lists of documents you need to start a business with Fifth Third Bank.
Starting a business is a thrilling undertaking. But it’s easy to get so swept up in the rush of the moment that important pieces of the process fall through the cracks. It’s important to make sure you don’t overlook key steps or make mistakes that can cost time and money down the road.
Each business sector and state will have different requirements that new business owners need to master, but all businesses require these documents or processes in some form. Here is a simple guide to the documents and processes required to start your business.
1. Find a Business Name
Ideally, your business name should be unique for both brand development and to avoid conflict or confusion should another business already have rights to the name. To make your business name official and reduce legal risk, you can register a trademark for your business name online at the U.S. Patent and Trademark Office.
While some new owners may outsource this to a law firm that specializes in intellectual property, the basic process can be completed on your own within 90 minutes.
2. Create a Business Plan
While not strictly essential, business plans give startups a better chance of success. A study of more than 1,000 would-be entrepreneurs found that those who wrote business plans were 16% more likely to succeed than their non-planning counterparts.
The Small Business Administration (SBA) provides a good resource for writing business plans.
3. Obtain a Federal and State Tax ID
The Employee Identification Number is a federal tax ID and often thought of as the “Social Security” number for businesses. It is required to open a bank account for your business, have employees, or plan to run your business as a corporation or partnership. You can apply for an EIN online through the IRS website. If you have employees, they will need to fill out the federal tax Form I-9 PDF and Form W-4.
Many states also require a state tax ID for paying state taxes. Unlike the federal EIN, a state tax ID, sometimes referred to as a SEIN, or state employer identification number, does not follow the company if it relocates outside of the state. Businesses must apply for a new SEIN in the state in which it is located. These credentials are issued through a state’s department of revenue. Here is a link from the IRS to find your state’s relevant website.
4. Set Up Your Business Tax Structure
Choosing a business structure is a crucial decision that has ramifications for everything from how you pay taxes to how you raise funds from investors. The most common forms of ownership include sole proprietorships, general partnerships, LLCs and corporations.
The Small Business Administration has a good primer for considering the best business structure for your needs.
5. Create Your Articles of Incorporation
Articles of incorporation legally document the formation of a company and are filed with the secretary of state’s office in which the company is based. Lenders and investors will ask for your articles of incorporation when applying for a line of credit or seeking investment. These contain basic information such as location, the ownership, the company’s officers or LLC members and the type of stock issued, if any.
You can find free forms for articles of incorporation online and through your secretary of state’s office. If your company structure is complex, this is a good time to seek a relationship with a business lawyer.
6. Establish a Business Bank Account
At minimum, your company will need a business bank account to keep personal and business transactions separate. The IRS frowns on the comingling of accounts. To obtain a business bank account, you will need to first obtain your federal Employer Identification Number, or EIN and your articles of incorporation.
7. Secure Insurance for Your Business
All businesses incur some risk in property damage or liability claims. There are many types of coverages to limit your out-of-pocket exposure.
- General liability insurance covers bodily injury, property damage and personal and advertising injury.
- Professional liability insurance protects businesses such as media companies against libel, accounting firms against accounting errors and so on.
- To sign a commercial lease, landlords and leasing agents will require business liability insurance as their protection.
- Workers’ compensation insurance is also mandated by law. This pays for medical bills stemming from a work-related accident, replaces lost wages while recovering from a work-related injury and provides death benefits for loss of life from a work-related incident.
Note that different businesses call for special licenses or permits, such as medical, waste disposal, environmental, manufacturing, building trades, health and more. Contact your secretary of state for a list of special licenses and permits required for your business.
Making sure you have your documents in order may not be the most exciting aspect of starting a business, but taking these steps is essential to launching and growing your venture.