Starting a new business?
One question you need answered is what documents you need to start a business, especially if you are considering doing the paperwork yourself.
If you are starting your business in the United States, and you have decided to start your business as a sole proprietorship (one owner) or a general partnership (multiple owners), then you can start a business with a minimum number of forms and documents.
1. Business License.
Check with your state, county, and city or town. Usually you can find that information on their website, but if not, go to the city or town hall and find the business department. In some places they require you to have a general business license or pay a business tax, but in other places you only need a business license for certain industries, like if you are selling food or alcohol. In some areas you may also need a permit to operate in your physical location, such as a home occupation permit to run a business out of your house or apartment.
2. Tax ID Number.
If your business has only one owner, you can operate it using your social security number as your tax ID, but that’s not recommended for privacy reasons. Obtaining a federal tax ID number (EIN) is free and can be done online most of the time. You’ll need an EIN anyway as soon as you hire employees. If the owners are not U.S. citizens, at least one owner will need a U.S. tax identification number (ITIN).
You need a state tax ID number(s) for reporting sales taxes or employment taxes. Obviously you only need to report employment taxes if you have employees, but if you are an S Corporation the owners are considered employees. Sales taxes do not apply just to businesses selling physical products; in a few states they also apply to some services and electronic products too.
Privacy Policies are required by many states and countries to protect the use of personal information. Depending upon the type of business and where your customers are located, you may be able to use a template. If you have customers located outside of the United States, especially in the European Union, you may need to have an attorney review or draft a custom policy. If you operate in a sensitive area, such as healthcare or children, your policy and your practices should be reviewed by an attorney.
What other documents should you consider?
If you are using a business name that’s not the same as the legal name of the owner(s), then you need to file a DBA/trade name registration with your state or county. Other categories of documents to consider include: terms and conditions agreement, client contracts, independent contractor agreements, and a partnership agreement.
You may also want to consider whether you should form a Limited Liability Company (LLC) or Corporation, instead of remaining a sole proprietorship or partnership. Typically these entities are formed for tax savings and to manage liability, but sometimes they are formed for marketing purposes. If you do go with an LLC or Corporation, you’ll have more paperwork to file with additional costs, so it is not right for every brand new business.
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