Over the course of my career, I’ve helped hundreds of thousands of small business owners incorporate a business or form an LLC. If you’ve created a formal business structure for your business, then you know you’ve taken a big step toward protecting your personal assets and setting the foundation for your business. But you might be wondering what’s next.
Here are eight steps to help you navigate life after incorporation or forming an LLC.
- Get a new federal ID tax number. An LLC or corporation is its own separate entity, so it needs its own federal tax ID number, also known as an Employer Identification Number (EIN). Think of business formation like the birth of child. Once a child is born, it needs its own social security number. The same holds true for your business. Even if you had a tax ID number as a sole proprietor, you’ll need to get a new one for your new business structure.
- Cancel a DBA (Doing Business As) you may have had for your sole proprietorship. Many small businesses start as a sole proprietorship and then get a DBA for their business name. If you file your corporation/LLC under the same name as your sole proprietorship/DBA, you can start conducting business under the Corp or LLC. In this case, you should cancel the DBA that you had set up with your sole proprietorship to ensure that all your paperwork is clean and in order.
- Close your previous bank account. If you had a dedicated business bank account as a sole proprietor, you should close that account in preparation of opening a new account.
- Open a new bank account for your business. Once your corporation/LLC is processed, you can open a business bank account under the Corp/LLC. This will allow you to accept checks made out to your business name. In addition, when you’re a corporation or LLC, you’re obligated to keep your personal and business finances separate—so having a dedicated business bank account is a must.
- Keep your personal and business finances separate. As mentioned above, once you’ve formed a corporation/LLC, you can no longer commingle (aka, mix) your business and personal finances like you may have done as a sole proprietor. That means having separate bank accounts and keeping all expenses and cash flow separate.
- Consider trademarking your company name. Once you form an LLC or corporation, you’ve registered your name in your state. This prevents anyone else from using your name in the state, but it won’t stop someone from using the same name in any of the other 49 states. If you want to protect your brand nationwide, you should consider filing for trademark protection.
- Get new DBAs if needed. If like most businesses you’re going to be operating under any variation of your official company name (e.g., CorpNet vs. CorpNet.com vs. CorpNet, Inc.), you will need to file DBAs for each of the variations. You should have your Corporation/LLC file the DBAs so they operate underneath your Corp/LLC.
- Look into your compliance responsibilities. Once you become a corporation or LLC, you’ve got to operate your business at a higher administrative level than you’ve been used to as a sole proprietor. For example, if your business is operating as corporation, you’ll need to record Minutes of Meetings whenever a corporate meeting is held. You’ll need to note every action or decision for the company in these minutes. Both LLCs and corporations often need to file an annual report with their state, as well as keep up with their quarterly tax payments. If you’re worried about keeping up with your paperwork, you can sign up for the free B.I.Z. (Business Information Zone) service which will automatically send you email alerts for any important state or federal filing deadlines.
As a small business owner and mother of four myself, I know just how busy your schedule is. But be sure to set aside some time to address your administrative and legal obligations. Know your deadlines and get your paperwork in on time. It will help keep your business in good standing for years to come!
This was originally written by Nellie Akalp for The Mogul Mom
Payroll Tax vs. Income Tax: How They Work for Canadian Payroll
Employees’ Fringe Benefits After Tax Reform
What is the Schedule K-1 Tax Form for Businesses?