Starting a business can seem intimidating—but in reality that part can actually be pretty simple. It’s everything that comes after forming the business that is difficult: funding (which we’ll talk about next week), taxes, vision, plans, partners, employees, etc. But sometimes taking the first step will launch you into the excitement of planning out your business.
- Choose a Business Structure: My advice, unless there is something unusual going on with your business, is that you should use an LLC for your business structure. The only real exception to this, would be if you live in a state that is still not LLC friendly. Most all are now, so there shouldn’t be an issue with that.To learn more about types of business structures, click here.
- Pick Your Business Name: You can do this online and will need to find one that has not been taken in your state. If you are registering for an LLC, this process is simple and you can just type your options into their business name search engine. The good news is that no one in your state can form a business with that name! The bad news is that this only works for the state you are in. Your business name can be taken in the other 49 states. If you go to other states to operate, and you have an LLC in Colorado, some states will require that you file an LLC in that state and have a registered agent in that state. So you may have to use an attorney in that state to be your registered agent.
- File Articles With the State: Don’t file with the fed or the IRS, file with the state first. The articles should be boilerplate. In an LLC, it’s called an Operating Agreement. In an s-corp and a c-corp, thy are called your articles and bylaws. Filing your articles is simple to do and costs about $50 depending on the state. Always make sure you understand the tax consequences in your state. Again, you can do this all online and you’ll be incorporated in the state.
- File For an EIN With the IRS: Do this at irs.gov After you file your articles, you file for your EIN, or Employer Identification Number. Now, if you’re using an attorney, he’ll do both of those for you. Now, this is where capitalism really helps you. When I said I don’t own anything, it’s because your EIN kind of becomes another person. In the US, having an EIN is a powerful thing. That EIN is a company that functions as an individual person. When I was really building portfolios aggressively, there were some bank loans I never signed for personally, I only signed corporately. Those become personally non-recourse loans. This means that if anything happens, they can only go back to the corporation for money. I’m safe. I even buy my cars that way now–but know that this all takes a long time to set up. When you walk down to the Toyota store to buy a car, they’re going to ask to check your credit score and see your income. So you’ve got to be ready. I had my personal homes titled in the corporation’s name. I can get bank loans for land that I’m not personally recorded on the title. When you grow to that point, your business can be a powerful asset for you. I love that, in the US, you can have an EIN number with your corporation–and if you protect, cultivate and grow that business, then you can have a powerful entity in your life. This is why it’s time to start shopping banks even early. You always want to have two or three banks you’re working with. As you grow, you don’t want to be limited to one bank. You need to make banks compete against each other as things progress.
If you’re a nonprofit, you get an EIN and then you get your 501(c)(3) status. This 501(c)(3) status, if you’re a public charity, allows you to receive donations.
I hope this has been helpful to you! Good luck out there starting your businesses.
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