How to Form an Enterprise
You might be interested in turning your part-time hobby into a money-making venture. But before you begin taking cake orders or providing interior decorating services, it's best to plan and organize. Without careful planning, a great business idea will be just that -- an idea. If you are establishing a new enterprise or even expanding or changing the structure of a current business, it is important to register your business with specific federal and state agencies. And if you combine your zeal and creativity with necessary planning and organization, your endeavor will be on its way to success.
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Instructions
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Decide on the best legal structure for your enterprise. Without a legal structure, a business will not be able to apply for a Federal Tax ID, licenses, permits or even register a business name. When determining what type of structure is best for your business, think of your business' needs. The legal structure of a business determines many things, such as an owner's ability to receive financing from lenders and establishing agreements with vendors.
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Register your business' legal name. Also known as "Doing Business As" or "DBA," your company's legal name is required on all government forms such as employer tax IDs, licenses and permits.
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Apply for an Employer Identification Number (EIN) from the Internal Revenue Service.
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Obtain tax IDs and permits from your state's revenue agency. Also, if your company will sell products and you are required by state law to collect sales tax, you will need to get a Sales Tax Permit or Vendor's License.
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Register your business with state and local government agencies. General business licenses and industry-related operating permits from state or local government agencies are necessary to operate legally.
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Tips & Warnings
Set up a sole proprietorship if you are running a micro business out of your home part time that has a low liability risk.
If your enterprise will have more than one owner, a partnership will allow you and the co-owner to make decisions concerning your entity's overall mission and daily operations.
Establish a corporation if your business will have multiple partners or investors. A corporation is an independent organization owned by shareholders; therefore, in the case of legal actions or debts, the corporation, not the shareholders, is held accountable.
Organize your enterprise as a limited liability company if you are interested in having the legal and debt protection associated with a corporation, along with the tax benefits and operational flexibility of a partnership.
References
Resources
- Photo Credit business image by peter Hires Images from Fotolia.com
