Starting a Business? Make it official

Starting a business but wondering how to make it official?

Im talking, official. Like legally. By the state.

Many people will say they’re business owners but they aren’t even legally official.

At that point it’s just a hobby with cash coming in under the table.

You want to start right from the beginning and we hope this guide can be of assistance.

Decide on a Business Structure

How will you structure your business?

There are a few common options, and each one works a little differently.

Sole Proprietorship

This is one of the simplest ways to operate a business.

In many cases, there is no separate legal entity between you and the business.

That can make setup easier, but it also means there is less separation between your personal and business liability.

LLC

An LLC, or Limited Liability Company, creates a separate legal business entity.

A lot of small business owners choose this structure because it can provide liability protection while still keeping things relatively simple.

Partnership

A partnership is when two or more people own a business together.

There are different types of partnerships, and the responsibilities, taxes, and liability can depend on how the partnership is structured.

Corporation

A corporation is a more formal business structure.

It is its own legal entity and may make sense for certain businesses, especially as they grow, take on investors, or become more complex.

There are also different types of corporations and different tax elections, so this is an area where professional advice may be helpful.

The main point is this:

Understand the different types and do your due diligence to make sure you are choosing the correct structure for your business.

Don’t choose something just because you saw someone else do it.

Your business may have different needs.

Register the Business

Once you decide how you want to structure your business, it’s time to register it.

There are a lot of websites and services out there that can help with this process.

Some people choose to register everything themselves directly with their state.

Others use a business formation service to help make the process easier.

Many of these companies offer packages where they handle a lot of the setup on your behalf.

You’ll want to make sure you understand what is included.

Depending on your business, that may include things like:

* Business registration

* EIN

* State registrations

* Local registrations

* Registered agent services

* Filing reminders

* Other formation documents

Don’t assume every package includes everything.

Read the details.

Know what they are handling and what you may still need to do yourself.

Get Your EIN

An EIN is an Employer Identification Number issued by the IRS.

Think of it like an social security number for your business.

Depending on your business, it may be used for:

* Business banking

* Payroll

* Taxes

* Hiring employees

* Business accounts

* Other official business purposes

If you use a formation company, make sure you understand whether getting the EIN is included or whether you will need to handle it separately.

Check State and Local Registrations

Registering the business at the state level may not be the end of the process.

Depending on where you are located, there may also be local registrations or additional tax accounts you need to set up.

Requirements can vary by state, county, city, and industry.

This is why doing your research matters.

What Kind of Licenses Are Required?

Every business is different.

Some businesses may not need much beyond basic registration.

Others may need specific professional or industry licenses before they can legally operate.

For example:

A contractor may need a contractor or trade license.

An accountant may need professional licensing depending on the services being offered.

A restaurant may need health permits and food-related licenses.

A barber or cosmetologist may need professional licensing.

A childcare business may need additional state or local approvals.

The list can change completely depending on what kind of business you are starting.

So ask yourself:

What licenses does my business require?

Do I qualify for them?

Can I attain them before I start operating?

This is not something you want to find out after you’ve already started taking customers.

HatchStride Tip

Stay organized.

Keep your physical business documents organized in one place.

Create a digital library as well.

Scan important documents and keep them organized in clearly labeled folders so you can find what you need when you need it.

It may feel small now, but once the business starts growing, you’ll be glad you did it.