Starting your own business and working for yourself can be one of the most rewarding professional experiences that you can have. Entrepreneurs know the undeniable feeling of glee in building something from scratch and bringing an idea in their head to fruition; whether that be offering services or products to their customers. Building a solid foundation early in this process is key to long-term success. Today, we explore how to form a business and speak generally as to the different types of businesses you can form.
Business can be conducted as a sole proprietor, a limited liability company (“LLC”), corporation (either s-corporation or c-corporation) or partnership. Each of these business types have pros and cons. The beauty is that a well-advised attorney (hint, Schwartz Law Firm) can guide you through which entity type is best for you and your blossoming business idea.
Once the decision has been made to form a business, Articles of Organization or Articles of Incorporation are filed with the State. In Minnesota, Iowa and Arizona, that governmental body is called the Secretary of State. In Wisconsin, the documents are filed with the Department of Financial Institutions. The governmental body typically accepts the formation documents and nearly instantaneously you have an active entity.
With the Certificate that you are issued you can obtain an Employer Identification Number from the IRS. Your EIN is how the federal government tracks, for instance, taxable wages and employment taxes. Your EIN along with your Certificate can be taken to a financial institution of your choice to open up a bank account for your new business *it is key to have a separate bank account for your business*.
These are the basic steps in forming a business. It is important, however, to go beyond simply the basics to ensure that your business has the foundation for success. We have all heard the story of The Three Little Pigs. The above would be akin to building your home out of straw. Having an Operating Agreement, Buy-Sell Agreement, Partnership Agreement, Shareholder Agreement and other formation documents would be building your business from brick – strong enough to withstand the strong winds that often blow during the life of your business. We frequently are asked to present to other attorneys about the keys to proper business formation and take unique interest in helping you build your dreams into a viable business.