So you've decided to incorporate and now you are doing the research to learn how to do it the right way. First, congratulations on taking the leap into entrepreneurship. Going into business for yourself isn't easy, trust me, I know these things! But, here you are and you want to learn.
First, let me cover the cookie cutter paradigm of starting your business. If you have done enough research, you've already seen when you enter on the search bar on how to open a business, most of it are websites selling you stuff you really don't even want. Right?! Well there is a reason for that. Unfortunately, the internet will do that to you... So, what ends up happening is that you spend hours, days looking every where and asking friends or everyone else telling you "No, do this" or "No, do that" trust me, I've heard it all. This is the reason I wanted to enter into this industry of business consulting and more specifically helping those wanting to start a business.
Now this post is going to be a little long, so if you have a short attention span, please bare with me, because this information is important.
So if you do a google search on How to start a business the right way, this image will be on the first page. The link goes to entrepreneur magazine's website, this is a good article. It's written by John Rampton a VIP Contributor. Now, in an educated sense, where you're looking at it in a textbook, theoretical sort of way, he's on point, no questions asked. That's what you learn in business school. Now, the order in which he puts it in, can be reorganized depending on a variety of factors. But, for the most part, the majority of businesses being opened today are small mom and pop businesses, more than half are home based businesses looking to make extra income to some day be able to do it full time.
So, the first question I would ask, are you planning on opening a home based business or are you going to have a commercial location? This is an important question, because all the follow-up questions will heavily depend on your response. For the purpose of this post, lets focus on home based businesses, an estimated 14.4 million, or 52 percent of America's 27.8 million small businesses, are home based. This statistic comes from the Small Business Administration circa.. Jan 16, 2013 ...
Regardless of where you live, there are certain steps you have to take to start your own business. First, let's already assume that you have done all your due diligence and are ready to incorporate. The first thing you have to do is visit your state's incorporation website, this website is hosted by your state, in Florida, it is called Sunbiz.org or in Georgia, it is Georgia Corporation Division, For your own state, you'll have to do a google search. You will have to be careful though, there are a lot websites that are private companies and will charge you to incorporate and it's an additional fee on top of what the state charges you.
Now, your in the website, you are ready to incorporate, but wait! you still have to do something before you register your name as a corporation... You will need to do a name search of your business and make sure it isn't taken already. There is nothing worse than having this great idea of a company name and when you try to incorporate you can't. Why, because your company name is already taken. So, you do a name search to make sure your idea of a company name isn't taken. If you see a name similar to what you want, you will have to think long and hard on what you do next. You must ask yourself, what industry am I in? Is the company with the similar name in the same industry? Second, is the company with the similar name still in business? If the company is no longer doing business, look to see how long its been since its been closed, determine if its the right move for you. If you are unsure, always consult with your corporate attorney for legal advise on this matter.
So now you have done a name search, you have picked your perfect name and now you want to move on to actually incorporate. When you incorporate, you have the option of doing it online or mailing in your forms. Also, when you begin the application process, you will be asked if your company is a for profit or non-profit company. If your company is a non-profit organization, the instructions are almost the same, but there are a lot of other things that are very important to know which we can't cover in this blog post. So we will focus on for profit companies. In Florida, if you are creating a corporation for profit, other than an LLC, the cost is about $70.00 + some additional fees depending if you want certified copies and what have you. For a LLC the fee is higher. So watch out for that.
While you are creating the corporation, in the application form it will ask you some very specific questions, which is very easy to follow. One particular question that gets everyone is the "Registered Agent" Who is a registered agent? The RA as I will call it, is a person that will be available during business hours to receive any legal documents that may be sent to you. In legalese it is (In United States business law, a registered agent, also known as a resident agent or statutory agent, is a business or individual designated to receive service of process (SOP) when a business entity is a party in a legal action such as a lawsuit or summons). Usually, you want to make the RA either your attorney or your accountant. If you are a full time home based business, it may be ok to put yourself and your home address, but I would ask your CPA or your corporate attorney just to be sure.
Congratulations, You Have Incorporated Your Company!
Well, you're almost done, but not yet, the work is just getting started. So your baby is born, you now have a birth certificate for your baby, it will take usually a few days for your state document number to be assigned. This is a unique number associated specifically to your company. You will use your document number one more time. Now, you will need to go to the IRS website to get what is called a FEIN or a Federal Employer Identification Number. This is very, very important, this is your social security number for your company, you will not be able to do anything, not even open a bank account without having this.
When you apply for your FEIN you will be asked what type of corporation are you? i.e. S corp, C corp, Sole Proprietor, LLC, or NPO for the purpose of this post, you are a home based business and you will want to establish yourself as either an LLC or an S corp.
You can apply for an FEIN online, it is very simple but you must know the answer to the question above. Once you have applied, you have received you FEIN, you are now ready to take the next step. But, before we move on, one side note.
On rare occasions, there might be a possibility that while you are applying on line for your FEIN, when you get done, you may experience an error code 101 or 115. If this happens, you will have to manually fill out form SS4 and fax it in to the IRS. If you get that error code, don't try to reapply, just follow the directions on the screen, fill out the form, print it and fax it. At this point, it's a waiting game. It may take a few days, it may take a couple of weeks, make sure you follow up by calling the IRS at 1-800-829-4933.
Now, moving forward... If you have elected to be a S corp. Make sure you fill out IRS Form2553 to establish your S corp. Next, you are ready to go to the bank and open a bank account. This is pretty much the final step in what is the basic function of opening a business.
So, how do you open a business, incorporate, get a FEIN, establish what type of corporation you will be and open a bank account? It's as simple as following the directions I provided, actually not really! If you have never done it before, no matter how detailed I can get, you will always have questions, and that's ok. I was there once.
If you need help opening your company, don't hesitate to contact my office and we will be more than glad to help you. I hope you enjoyed this post, I know it was long, but there was a lot of good information. I'd love to hear from you, send me some feedback and will see you soon.