Every business starts with an idea, big or small. And, most entrepreneurs are eager to jump in. Transforming that idea into an actual, profitable company, however, requires following a definitive process. Seemingly basic decisions, like choosing a company name or legal entity structure, can have long-term effects on your ability to attract customers and grow. Those extra planning steps can make or break your success.
We know you’re excited to start your new business. In this article, we’ll give you tips and resources to help you jump in - the right way.
Selecting a Business Entity Structure
The business entity structure you choose, such as an LLC or a corporation, has a long-term impact on your ability to grow. Both LLCs and corporations offer limited liability protection, which means the business and its assets are separate from its owners (which is critical in the event of a lawsuit). However, that’s about as far as the similarities go.
The entity structure you choose determines how the business will be taxed, both now and in the future. It can either increase or limit your ability to gain fellow owners and attract outside investors. There are substantial differences in the recordkeeping, governance, and reporting requirements that may be attractive or cumbersome to business owners.
LLCs are a popular choice for many entrepreneurs because of their ease of setting up and flexibility in taxation. However, corporations are generally the preferred vehicle for businesses that will immediately earn substantial revenue or have complex ownership. Entrepreneurs should carefully review the differences between LLCs and corporations and speak with a licensed attorney for personalized advice.
Picking the Perfect Business Name
Choosing the right name for your new business is a big decision. You probably already know your business name should reasonably tell customers what your company does or sells. It should be appealing and, hopefully, easy to remember.
But hang on! Before you commit to that super-sleek brand name, you’ll need to make sure you can actually use it.
The act of filing articles of incorporation or articles of organization with the secretary of state officially creates your corporation or LLC, respectively. It also officially registers the business name. Your business name must be available in that state, which means you cannot select a name already in use by (or too similar to) another registered business. Obviously, the name may not contain vulgarity or blatantly misrepresent the work you plan to do. These are basic steps to help protect existing businesses and consumers in that state.
As your company grows, it may be required to register with other states to do business there. You will need to make sure that your business name is available in those other states, too. If there’s a conflict, you may be required to adopt an assumed name for doing business specifically in that state. Entrepreneurs that expect to register in multiple states can save themselves a massive headache by searching state databases first, then selecting a business name that is likely to be available everywhere.
Many entrepreneurs wish to add protections to their business and product names through trademarks. Keep in mind that trademark registration is entirely separate from registering a business name with a secretary of state. Entrepreneurs that wish to register a trademark should consider conducting trademark searches before forming their business entity.
Choosing a Reliable Registered Agent
Regardless of where you decide to form your business, you must designate a registered agent in that state. The registered agent must be available during regular business hours to receive lawsuits and other notices on behalf of your company. Selecting a registered agent that falls short of its legal duties can have significant consequences for your business.
Many entrepreneurs consider listing themselves and their home or business address as their registered agent in public records. By doing so, entrepreneurs risk receiving lawsuits in front of employees, clients, and even family members. Appointing a registered agent service company adds a degree of privacy and helps ensure that the business reliably receives these critical notices.
As your company grows, it will need a registered agent in each state. Typically, only a service company can adequately provide businesses with a reliable registered agent in each state. There are dozens of registered agent service providers, but choosing the right one can be tricky. Ensure the company can help your business both when it starts out and as it grows. Be aware of deeply discounted annual fees, as hidden fees and rate hikes usually accompany them. The best way to choose a reliable registered agent provider is to contact them directly. You’ll get a good sense of whether they’ll be a strong partner within minutes.
Surrounding Yourself with Experts
The most important thing to remember when starting a business is that you aren’t alone! Successful entrepreneurs recruit experts for every need. As you plan your new business, seek the guidance of the following:
- An accountant or CPA to advise on tax matters
- A small business attorney to address tough legal questions
- A reliable provider of small business insurance
- A partner to stay in compliance with multi-state legal entity, tax, and license requirements
Taken together, these experts are an investment, helping ensure the business is protected, saving time and expense in the long run. They’ll give you the ability and confidence to get up and running faster.
Abraham Lincoln once quipped, “If I had eight hours to cut down a tree, I’d spend the first six sharpening my ax.” Planning and preparation reduce the amount of risk and uncertainty involved with starting a business. By taking a proactive approach and doing some extra research upfront, you can directly impact how quickly your new business can start winning clients and achieving profitability. What are you waiting for?
Author Bio: James Gilmer is a Compliance Specialist at Harbor Compliance, a leading provider of compliance solutions for companies of all types and sizes. Founded by a team of government licensing specialists and technology trailblazers, Harbor Compliance has helped more than 25,000 organizations apply for, secure, and maintain licensing across all industries. James is passionate about helping nonprofit organizations leverage compliance to enhance their fundraising and program activities and educating the sector on compliance issues.
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