I Incorporated My Business. Now What?
I incorporated my business. Now what? Answering this question should be considered from both an entity and a tax perspective.3 min read
I incorporated my business. Now what? Answering this question should be considered from both an entity and a tax perspective.
Actions To Take After Incorporating Your Business
From an entity perspective, if your corporation or LLC was formed under the same name as your sole proprietorship, you can quickly begin conducting business under the corporation or LLC. From a tax standpoint, it is important to check with your accountant to determine the ideal time to close the books on your sole proprietorship and open them on your corporation/LLC. Doing so in error could result in some hefty tax implications. There are many steps to take after incorporating your business.
- Obtain an Employer Identification Number (EIN) from the IRS: An EIN is comparable to a Social Security Number for individuals. This is the number used by the IRS to track the activities of your business. As it is a separate entity, a corporation or LLC requires its own EIN from the IRS. An EIN is necessary to file tax returns or to open a bank account for your business. It is not possible to transfer an EIN from one business entity to another.
- Apply for the appropriate business licenses: Turning your business into a corporation or LLC is what lays the legal foundation for your company. Specifically, it's what actually turns your business into a legal entity. However, a business license is still required to operate your company legally. You can contact your city hall or local county office to determine what types of licenses and permits are necessary for your type of business. Completing the appropriate paperwork will prevent being fined or the shutdown of your company.
- Meet with a tax adviser: While it's not mandatory, it is beneficial to meet with a tax adviser to gain valuable insight as to how you should file your taxes as a corporation or an LLC. The adviser can help determine whether you should choose S corporation tax treatment from the IRS and inform you of other additional deductions that may now be applicable.
- Open a business bank account: After receiving an EIN, a bank account for the business can now be opened. Once that is complete, you can begin to accept payments and checks in the name of your business. Additionally, you're required to keep the finances of your business and personal affairs separate once you incorporate or establish an LLC. If a business bank account was opened for your sole proprietorship, that account must be closed and a new account opened under the new corporation's name. At this time, it's advisable to open a business credit card for two main reasons:
- To streamline the accounting for your business expenses.
- To begin building credit for your business.
- File a Doing Business As (DBA): Most corporations operate under a variety of official company names. However, in order to legally do so, you will need to file a Doing Business As (DBA). This notifies the public of all the different names associated with your business. For example, if your formal company name is “Star Company, Inc.,” but you typically utilize a less formal version like “Star Company,” you will need to submit a DBA under both names. Wait until you have established your LLC or corporation to ensure the DBAs are correctly filed.
- Protect your name with a trademark: When you form an LLC or corporation, the name of your business is protected in your state. To clarify, no other company can file as an LLC or corporation in the same state. For some business owners, this is enough protection for their brand. Others may choose to legally protect their business name by registering their trademark in all 50 states.
- Learn what you need to do to stay compliant: One of the primary reasons to incorporate or form an LLC is to limit your personal liability. Failing to follow the proper rules and regulations may cause you to lose your liability protection. Be sure to understand exactly what is required to keep your business compliant every year. Normally, this entails the following tasks:
- Filing a yearly annual report with your state.
- Holding an annual shareholders' meeting.
- Keeping your business and personal finances separate.
- Keeping up with the state and federal taxes.
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