5 Steps to Take to Make Your Business Official

Congratulations – you’ve come up with a great idea for a new business or a way to make money as an entrepreneur! The next step is to make it official, but this is precisely what most brand-new business owners find so intimidating. 

In fact, many great business ideas never go any further than the initial brainstorming idea, because entrepreneurs are nervous about doing everything they need to do to get their companies off the ground. 

Don’t worry, we’ve got you covered. Starting a new business doesn’t have to be exceedingly complex or time-consuming. Here are 5 steps to making your business official and how you can get started.

1. Decide on a Legal Structure for Your Business

The first step in making your business official is deciding on a legal structure. The most common business structures are sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Each has its own advantages and disadvantages. Most of the companies in Texas are registered as LLC in Texas based on its benefits & flexibility.

A sole proprietorship is the simplest and most common type of business structure. It’s easy to set up and you are not required to file any paperwork with the state. The main disadvantage of a sole proprietorship is that you are personally liable for all debts and liabilities of the business. 

Other disadvantages of a sole proprietorship include having a harder time raising capital and that your business life is closely linked to your personal life. 

A partnership is similar to a sole proprietorship, but there are two or more owners. Partnerships can be either general partnerships or limited partnerships. Limited partnerships have at least one partner who is not actively involved in running the business, and these partners have limited liability. 

General partnerships do not have this distinction, and all partners are equally liable for debts and liabilities. Disadvantages of this type of business include having to consult someone else when you want to make decisions for the company and taking a cut in profits. But in exchange, you have another person available to take on some of the workloads.

A corporation is a separate legal entity from its owners, meaning that the owners are not personally liable for the debts and liabilities of the business. Corporations also tend to be more complex and expensive to set up than other business structures. The main advantage of a corporation is that it offers its owners limited liability protection from lawsuits and creditors. 

Owning a large company with multiple partners and employees can be a great way to generate big revenue figures, but it’s also one of the most complex legal structures for a business. 

A Limited Liability Company (LLC) is essentially a hybrid between a corporation and a partnership/sole proprietorship. Many entrepreneurs choose this structure because it provides the benefits of both a sole proprietorship and a corporation with fewer of the caveats associated with each. 

LLCs have the advantage of being relatively easy to set up and maintain, you can get an LLC online by following the relevant state’s requirements and steps quite quickly. The limited liability company provides the protection of a corporation, essentially separating your business assets and personal ones to ensure you’re free to operate your business. The main disadvantage of an LLC is that it can be more expensive to set up than other business structures.

The type of business structure you choose will depend on a number of factors, including the size and scope of your business, the level of liability protection you need, and the amount of money you are willing to spend on setup and maintenance costs. You should also consider things like the amount of paperwork and red tape you are willing to deal with, as LLCs and corporations often have more required filings and reporting than other business structures.

2. Decide on Your Business Name

Your business name is important – it’s how customers will identify your company and separate it from competitors. It should be unique, exclusive to your company, and let customers know what they can expect when doing business with you. 

Here are a few more things to keep in mind when choosing a name:

• Keep it simple and easy to remember. Don’t make it too long or too complicated.
• Make sure it’s easy to spell and pronounce. You want people to be able to easily share your brand with others.
• Avoid using industry jargon. If you want to appeal to a wider audience, use language that is easy for everyone to understand.
• Avoid using words or phrases that could be offensive to some people. Make sure you aren’t excluding any of your potential audience or customers. 
• Make sure the name is available as a domain name for your website and as a social media handle on platforms like Twitter and Facebook.
• Check to see if the name is trademarked or already in use by another company.
• Once you’ve settled on a name, register it with the state and/or county where your business will be located. If you’re not sure how to proceed, you can consult an attorney specializing in business law.

3. Get Your Business Licenses & Permits

There are many licenses and permits that may be required for your business, depending on the type you are running, such as a food permit for a restaurant or a cosmetology license for a hair salon. You will need to research what licenses and permits are required in your state and locality.

The U.S. Small Business Administration (SBA) is a good resource to get started, and its License Wizard tool can help you determine which licenses and permits you need.

In general, businesses will need to obtain a business license from the city or county they are operating in. They may also need to get zoning approval from their local government before they can open their doors. Zoning approval is typically only required for businesses that will be operating in a commercial or industrial area.

You can usually obtain the necessary licenses and permits from your local city or county government office. If you are unsure whether or not your business needs a license or permit, you should contact your local government office for more information.

4. Obtain a Tax ID Number (EIN)

You’ll need to obtain a Tax ID Number (EIN) from the IRS in order to legally operate your business. This number will be used on all of your business tax filings. You can apply for an EIN online, by mail, or by fax.

If you’re applying online, you’ll need to have your business information handy, including your business name, address, and contact information. The online application is fairly straightforward and shouldn’t take more than a few minutes to complete.

If you’re applying by mail or fax, you’ll need to fill out Form SS-4 and submit it to the IRS. This form requires more detailed information about your business, including the names and addresses of all owners and officers, as well as a description of your business activity. Once the IRS receives your Form SS-4, they will issue your EIN within four weeks.

5. Open a Business Bank Account

Opening a business bank account is an important step in making your business official. A business bank account will help you keep your personal and business finances separate, and will make it easier for you to track your expenses and income. It will also make it easier for you to apply for loans and other forms of financing in the future.

There are a few things to keep in mind when deciding to open a business bank account:

Choose the right type of account. There are several different types of business bank accounts, so make sure you choose one that fits your needs. For example, if you plan on accepting credit card payments, you’ll need a merchant account.

Shop around. Don’t just open an account at the first bank you come across. Shop around and compare features, fees, and customer service before making a decision.

Know what documentation you need. Most banks will require some form of documentation before they’ll open an account for your business. Be prepared to provide things like your business license, Articles of Incorporation, or Partnership Agreement.

Once you’ve chosen the right bank and gathered the necessary documentation, opening a business bank account is relatively simple. Just go to your chosen bank’s website and follow their instructions. In most cases, you’ll be able to open an account online in just a few minutes.

Getting Started With Your Business 

Making your business official is an important part of ensuring its success. If you delay these steps or miss one, the future of your company could be at risk. You can protect yourself, your business, your family, your customers, and any partners you’re working with. 

By taking the time to choose the right legal structure, and business name, and obtain the necessary licenses and permits, you can help your business thrive. Additionally, opening a business bank account and obtaining a tax ID number will help you keep your finances in order and avoid any legal issues down the road.