Pop quiz! What should a solopreneur do next after incorporating their small business as a legal entity formation?
A. Consider filing for trademark registration — or possibly a tax ID. You are unsure which application has top filing priority.
B. Reflect back to your business plan to see which goal or milestone your startup can reach first. You want to start hitting the goals you set for your startup!
C. Nothing. Now that incorporating is out of the way, your small business is all set with liability protection — right?
Once a small business owner incorporates their startup, it’s easy to think all they need to do next focus on taking care of business. The correct answer to this question is A. However, there isn’t a specific order in what comes next after incorporating a business. You may file for a tax ID first or decide to conduct a name search for a trademark. The next steps moving forward depend on the needs of the entrepreneur. Solopreneurs unsure of what they need to obtain next may reflect to the six items on this list for extra guidance.
1. Apply for an employer identification number (EIN).
What’s a tax ID? Why do small businesses need one? A tax ID is often referred to as an employer identification number (EIN). After you incorporate or form an LLC for your business, the IRS will issue this nine-digit number to identify and track employer tax accounts.
As mentioned above, it’s necessary to obtain an EIN once you incorporate or form an LLC. This is because your business is now its own legal entity. As such, the IRS needs to keep track of your business activities including making sure you collect payroll taxes.
When else do you need an EIN? Solopreneurs must obtain an EIN if they plan to open a business bank account. Many banks require documents stating that you have an EIN before opening a bank account under the startup’s name. You may also hire employees, build business credit, and even change your entity formation with an EIN. Filing for an EIN requires only a few items including a Form SS-4 application, the correct information about your business, and a small filing fee.
2. File for trademark protection.
Do you have a distinct design, logo, or name that differentiates your business from the competition? This is your trademark. A trademark is a unique piece of intellectual property. It must be protected on a federal level to ensure competitors do not use the mark.
The best way to protect a trademark is to file for trademark registration. First, look up your mark in a trademark database. This will allow you to determine if the mark is available. If it is already pending registration or has been previously registered, you may not register the mark. However, if it is available you may begin the filing process.
File a trademark application, along with a small filing fee, to protect the mark. Once the application has been processed, you will receive exclusive rights to the trademark. This means nobody is allowed to infringe or copy your federally protected trademark.
3. Obtain the proper business licenses.
Many states and local jurisdictions require small businesses to have certain business licenses before they start to do business. These licenses, however, often vary depending on the startup’s location, industry, and entity formation.
Check in with your local Secretary of State before obtaining business licenses. This ensures you obtain the proper licenses, and permits, in order to do business.
4. Get a registered agent.
A registered agent acts as a point of contact between your business and the state. This individual, or third-party service, helps accept legal and official documents on behalf of the small business. They organize the materials and deliver them to the business owner in a discrete and private manner. This ensures no important paperwork is accidentally lost and the business is able to stay in compliance.
Can a solopreneur be their own registered agent? The answer is yes. However, you must be able to follow certain rules for acting as an RA. You must have a physical street address in the state in which you do business. You must also be a resident of the state and be available to accept service of process between general business hours. Typically, this is Monday through Friday between 8 AM to 5 PM.
These same rules apply for third-party registered agents, too. Don’t worry if you find you do not have the bandwidth as a solopreneur to act as your own RA. You may work with a third-party service and/or organization to assist with your documentation needs.
5. File for foreign qualification in states outside your incorporation state.
Let’s say you want to do business in a state that differs from your incorporation state. In order to move forward, you need to “qualify” or register the business as a foreign qualification. This gives your business the authority to conduct operations in a different state.
How do you file to foreign qualify? After incorporating a business as a corporation or LLC, you must apply for a certificate of good standing. This document verifies your business is in compliance with its local Secretary of State. It is in existence and has met all tax and filing obligations. Then, get a registered agent to accept paperwork on behalf of your business. File a foreign qualification form and use it to register your business as a foreign corporation.
6. Stay on top of annual maintenance.
From filing annual reports to paying tax fees on time, incorporating a business as a corporation or LLC requires keeping up with annual maintenance.
Make sure you are able to file these documents in a timely manner. Additionally, update operating agreements and bylaws as necessary for your corporation or LLC.
Let’s help you obtain a tax ID, file for trademarks, and get the necessary business licenses after incorporating a business. Visit mycorporation.com and let our team of professionals assist you with all of your small business needs.