10 Startup Filings You Should Know About
You want to start your own business! Wonderful! How exciting! But, as a new entrepreneur you will encounter uncharted territory as you navigate all you must do to create your legal business entities.
Today, I'll give an overview of various state and federal forms to give you a better understanding of the startup documentation you may have to complete. What I offer here is not financial, tax, or legal advice—it’s purely for informational purposes. Also, budding entrepreneurs should consider consulting an attorney for legal advice on what paperwork and filings apply to them.
Anyone who wants to incorporate their company must complete this formation document and file it with the state’s Secretary of State office (or a comparable government agency). Filing articles of incorporation registers a company as a corporation in the state, making it a separate legal and tax-paying entity from its owners (shareholders).
After a company receives the state's approval of its articles of incorporation, the business becomes "domiciled" in that jurisdiction. In other words, the state where the articles of incorporation application is filed becomes the entity’s home state. The business goes on record as a domestic corporation in the state, and it is obligated to operate according to that state’s laws and codes. The cost to file articles of incorporation varies by state.
Entrepreneurs who wish to form a limited liability company (LLC) must file articles of organization with the state where they want their company domiciled. The fee for filing articles of organization varies by state.
Upon Secretary of State office (or a comparable state agency) approval, the business is in the state's records as a domestic LLC. As such, it must operate according to that state's laws and codes.
Forming an LLC establishes the business as a separate legal entity from its owners (members). By default, the company and its owners remain the same tax-paying entity.
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Clients who form their company in one state (their domicile) and also want to conduct business in another state must file paperwork to "foreign qualify" in the additional state. Some states call the documentation a "Certificate of Authority" application; others call it a "Statement and Designation by a Foreign Corporation." Regardless of the name, it's an essential filing for companies that want to expand their business activities beyond their home state.
Sole proprietorships and general partnerships that want to use and market their business under a name that does not include their legal personal name must file a fictitious name registration, also known as filing a DBA (“doing business as”). Likewise, if an LLC or corporation wants to use a name other than the one it registered with the state, it must file a DBA.
As a hypothetical example, let's say that someone named Suzy Sunshine wants to start an interior design consulting company. She wants to operate her business as a sole proprietorship but plans to market herself as "Innovative Interior Solutions." Because she is not disclosing her first and last name in that company name, she must file a DBA with the state to request permission to do business as “Innovative Interior Solutions.”
A DBA lets the public know the true owner of a business. DBA laws exist so that consumers have full transparency about whom they are transacting business with.
When entrepreneurs register as either an LLC or corporation, their business name is protected against other LLCs and corporations using the same name in the state. However, if business owners want to protect their most valuable brand asset from being used by other companies in other areas of the U.S., they can file a trademark application with the United States Patent and Trademark Office (USPTO).
Some states require corporations and/or LLCs to file an Initial Report, also known as a "Statement of Information," soon after registering their companies. Due dates vary by state, with most requiring the reports within 90 days of registration. An initial report helps to ensure that the state has a company’s vital information on record (e.g., names of directors and officers of a corporation, registered agent name and address, etc.). Most states charge a small filing fee to businesses when they submit their report.
If a business fails to file its initial report on time, it could result in penalties and late fees— or even suspension or dissolution.
States that require initial reports include Alaska, California, Georgia (corporations only), Missouri (corporations only), Nevada (included in formation fees), New Mexico (corporations only), and Washington (included in formation fees).
Regardless of entity type, any business that will hire employees needs an Employer Identification Number from the IRS. And any company operating (or being taxed as) as a corporation or partnership (including multi-member LLCs) must obtain one. Also, a single-member LLC that is a disregarded entity—even if it has no employees—will need an EIN if it’s required to file excise taxes. From a federal standpoint, a single-member LLC without employees won’t need an EIN if it isn’t required to pay excise taxes. However, it may need an EIN to open a bank account or comply with state tax law.
Fortunately, Form SS-4 to apply for an EIN is straightforward, and the IRS processes online requests nearly immediately. One thing to understand is that there are eligibility requirements for getting an EIN. For example, the principal business must be located in the United States or U.S. Territories. Also, the person applying online must have a valid Taxpayer Identification Number (i.e., SSN, ITIN, EIN).
IRS Form 8832 (Entity Classification Election) is the form an eligible business entity (LLC or partnership) uses to elect federal income tax treatment other than its default treatment. For example, if an LLC or partnership (including multi-member LLCs) wants to be taxed as a C Corporation, Form 8832 must be completed and submitted to the IRS. Also, if a business owner wants to change their company's tax election down the road, they would use Form 8832 to do so.
Business owners that want their LLC or C Corporation taxed as an S Corporation must file this form (“Election by a Small Business Corporation”) with the IRS. After the state has approved articles of organization or articles of incorporation, the business can submit Form 2553.
Note that not every LLC or C Corp qualifies for S Corp tax treatment. For example, the business may not have more than 100 shareholders or members.
Many businesses must have some form of business license or permit to conduct their commercial activities. Requirements, fees, and the application process vary by state, county, and municipality. Depending on the industry (such as agriculture, aviation, firearms, broadcasting, and transportation), a business might need a federal license.
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