For many people, the idea of starting a business can be overwhelming. Following the necessary steps to legally form a business is critical to protecting assets of both the business owner and the business. However, business formation does not have to be daunting; by following the simple steps below, you can responsibly and efficiently set up a new business in North Carolina.
Develop and write a knock-out business plan
Investors and lenders will generally expect to see a thoughtfully written business plan. The business plan shows the bank or other investors that you, the owner, have considered possible pitfalls and have taken steps to mitigate risks. At minimum, a business plan should contain the business’ strengths, weaknesses, opportunities, and industry competitors — particularly how you plan to compete with them. This is the document you will use to introduce your business to the world, so make sure to really sell your business idea and present a strong plan for success.
Determine which business structure is right for you
There are many different options for your company’s structure, each with benefits and drawbacks. In a sole proprietorship or general partnership, one or more people contribute to a business and share in profits and losses. In this type of structure, the business is not separate from the owner, who may be legally responsible for the actions of all co-owners. Corporations, limited liability companies (LLCs), and limited liability partnerships (LLPs) generally shield business owners from personal liability, provided you maintain the formalities of your chosen entity. Limited partnerships (LPs) will shield investors as well, but not those who operate and manage the business. No matter what form of company you choose, you should have an operating agreement that identifies the relationships and responsibilities among co-owners and any shareholders you may have. Clearly written agreements help avoid disputes between co-owners and shareholders.
Register your business and protect your business name
You should give some serious thought to your business name. You want to pick a name that will suit your company and industry over the long term. You should pick a name that’s catchy, but also easy for customers or clients to remember and recommend to others. You should consider the availability of web domains and social media accounts under your chosen business name. If for some reason you need to conduct business under a name that’s different from your legal business name, you will also need to pay additional fees to register a DBA (doing business as) or assumed name.
Obtain federal and state tax identification numbers
If you plan to hire employees, you must have federal and state tax identification numbers. These numbers are used to track tax withholding and other employer responsibilities. You may also need to obtain a sales and use tax number to report and pay sales taxes collected from your customers. You should treat all tax identification numbers as secure information, just as you would your personal Social Security number.
Obtain the relevant business licenses
Depending on your particular industry, you may need to obtain federal, state, city, or county licenses. There may also be zoning requirements in your local area. Obtain the necessary permits and investigate zoning issues prior to committing to a set location.
Open a bank account
Your business will need a separate bank account. Not only will a separate account make accounting and taxes simpler and easier to track, but it will also protect you from additional liability due to mixing personal and business funds. A bank account also makes it easier to obtain outside funding, loans, or grants. You should also find a computer software program to help you track your finances, including expenses, payroll, and taxes.
Determine your other responsibilities as an employer
Depending on your specific industry or business, you will have a variety of other obligations. If you have employees, you will be responsible for obtaining workers’ compensation insurance, unless you meet an applicable exception. Your business must also comply with OSHA regulations for employee health and safety. You also must be prepared to check each employee’s work eligibility and report all new hires to the state.
Starting a new business requires attention to detail that can make a difference between failure and success. It is worthwhile to obtain the services of an experienced attorney to guide you through the options and help you make the best choices for your new business. By understanding the relevant laws that govern businesses, you can protect yourself and your assets.