One-third of the U.S. is self-employed. Being your own boss and doing just you have a lot of benefits but how does one start a small business? Assuming you already figured out what kind of small business you are going to operate, here is all the paperwork related things you need to know.
First and foremost, you need to give your business a name and choose a legal structure. The legal structure you choose is also going to be your tax classification—meaning the way you file taxes and use certain tax forms and documents will be different. That should be your least of concerns though. The legal structure of your business is all about how it is owned and operated.
If you are going to be the one and only boss, then you will have a sole proprietorship. This is going to be the case for most American small business owners. Other than a sole proprietorship, your legal structure can be any of the following.
- Limited liability company (LLC)
- C Corporation
- S Corporation
Employer Identification Number and Company Account
Once you know the name of your business and the legal structure that suits you the best, you must apply to get an Employer Identification Number (EIN). You will apply for this to the IRS. However, this is only necessary when you have employees working for you. So if you plan on not having any employees whatsoever, then this isn’t a must for you.
Then, open a company bank account. If you’re going to process payroll, the bank will require your EIN. So make sure to get it first before opening a company bank account.
Federal and State Licenses/Permits
This depends on the type of business you’re operating. Most businesses don’t need to get Federal permits. Only those who are in the following fields of businesses need a federal permit.
- Selling firearms, alcohol or tobacco
- Drug manufacturing
- Preparation of meat products
- Investment advising
- Ground transportation
On the state side of things, you may be required to get a permit or a license. Check it with your state to see whether you are required to get one or not. Oftentimes, you will need to get permits and licenses for the following fields of business.
- Bill collectors
- Building contractors
- Funeral directors
- Insurance carriers
- Private investigators
- Private security guards
- Real estate agents
After your permits and licenses are done, pick your business location and you’re all set. For additional information on payroll and everything an employer needs to do as an employer as far as the taxes are concerned, read the articles below.