The day has finally arrived. After all your hard work, your life as a small business owner has officially begun. Well, at least in the eyes of the government. You’ve filed the paperwork for your LLC. But filing your LLC paperwork is just the first step. Now the real work begins.
To set you and your small business up for success, you’ll still need some critical documents. The following steps will ensure you’re prepared to do business once you receive your business’ formation documents.
The Documentation You Need
Before getting started, you should know that required documents slightly vary from state to state. Check with your state’s Office of the Secretary of State for a complete list. You can also check with a local business advisor or attorney.
Before we dive into the paperwork, you should be aware of the critical need for a registered agent. A registered agent is someone whom you designate to receive official papers for your business. These include court papers if your business is sued (what lawyers call “service of process”), business registration renewal notices from the Secretary of State, and tax notices.
Such a person is called a “registered” agent because you submit a form to the state that “registers” him, her, or it to be your business’s agent for official communications.
A registered agent can be an individual (over 18 years of age) or a business. However, the registered agent must be located in the state where your business is registered. You must provide the Secretary of State not just your registered agent’s name but also a physical street address (not a post office or UPS box). This agent and address is where you might receive any summons and complaint for a lawsuit. An incorrect address, or improper agent, could lead to a default judgement if you fail to appear as required by a summons.
Every formal business, LLC, corporation, etc., is required by law to have a Registered Agent.
Bylaws and Operating Agreements
Bylaws and Operating Agreement are the guiding documents for your corporation, even if you’re a non-profit. These documents describe the structure of your company’s finances, how key business decisions are made, as well as each member’s duties, powers, and responsibilities.
Even if your state doesn’t require Bylaws or Operating Agreements, we highly recommend that you create them anyway.
A corporate resolution outlines the decisions and actions made by a company’s board of directors. Your board is responsible for making significant decisions and establishing corporate policies for the management to follow. Corporate resolutions help keep your board accountable to laws and regulations as well as ensure that the board is upholding its fiduciary duty to the shareholders.
Corporate resolutions provide a paper trail of decisions made by the board and the executive management team. These resolutions can be reviewed later by regulators, the Internal Revenue Service (IRS), shareholders, and corporate officers to ensure that the board and the company’s management are adhering to regulations, tax laws, and the bylaws that you establish for your corporation.
A good business plan guides you through each stage of starting and managing your business. You’ll use your business plan as a roadmap for how to structure, run, and grow your new business. It’s a way to think through the key elements of your business.
Business plans can help you get funding or bring on new business partners. Investors want to feel confident they’ll see a return on their investment. Your business plan is the tool you’ll use to convince people that working with you — or investing in your company — is a smart choice.
Holding annual meetings and keeping minutes is a fantastic way to stay organized. This practice also holds members accountable and ensures they’re meeting their responsibilities. Your minutes should include names, votes, and discussions of any significant changes to the company.
Your annual meetings help to determine if your LLC is still operating as it was initially designed — this is a great way to ensure you’re remaining compliant and up-to-date with the law.
Please note, unlike other corporations, LLCs are not legally required to hold annual meetings unless stipulated in the operating agreement or bylaws. However, we strongly recommend keeping minutes to help your LLC remain organized and prepared.
Labor and Employment Compliance
If you plan to hire employees, you’ll need to draft an Employment Agreement. Even if you plan to hire part-time, an Employment Agreement will protect you and your employees.
Employment agreements ensure that the employee knows their rights and responsibilities. It also protects your company from any legal challenges that may arise.
Every state has its own rules and regulations regarding Employment Agreements. It’s essential to speak with a local business attorney to ensure you’re following the rules and regulations for your state.
If you plan to hire freelancers, consultants, or contractors, it’s best to create a specific Contractor Agreement.
A Contractor Agreement ensures that the freelancer or contractor is clear about their duties, pay rate, and other crucial data points. The language and requirements will vary from your Employment Agreement. Consult a local expert to ensure your business is protected.
If you’re starting a new business, it’s vital to protect your territory from other companies looking to do the same thing. Especially if you are planning on hiring contractors. Signing a Non-Compete Agreement limits your exposure.
Non-Compete Agreements, or Restrictive Covenants as they’re also called, limit the contractor’s ability to work with competitors. These agreements will keep contractors from using your proprietary information to help your competition.
Before drafting a Non-Compete Agreement make sure you check with an attorney in your state. The language you choose, the terms of the agreement, the industry, even the state in which you incorporate can render your Agreement invalid.
Non-Disclosure Agreement (NDA)
NDA’s can also help protect your business and the information it holds.
A non-disclosure agreement (NDA) is an agreement that certain info will remain confidential. NDA’s are commonly used to protect trade secrets, client information, and other sensitive or valuable information.
An NDA prevents a person who has signed it from discussing any information included in the contract with non-authorized parties. Sharing information in spite of an NDA qualifies as a breach of contract and can open the breaching party up to a lawsuit. An NDA can continue indefinitely or can include a duration clause that stipulates an end-date to the agreement.
An LLC’s annual report (or statement of information) provides your state with details about your business or any changes made since the last filing.
Typically, your annual report will include: your business address, names and addresses of your members and managers, your LLC’s identification numbers (like your state entity number), the purpose of your business, authorized signatories, and your Registered Agent’s information.
This is, as it says in the name, an annual report. Check with your state’s Office of Secretary of State for details, date deadlines, and filing fees.
Financial Planning and Tasks
Employer Identification Number
The next step is securing an Employer Identification Number (EIN). An EIN is necessary for filing your taxes and opening bank accounts.
Your EIN is essentially a 9-digit number assigned by the Internal Revenue Service (IRS). The IRS can quickly identify your business and your filing history with this number.
You can apply for one fairly easily online, though there are some nuances to the form with which you may need help. If you used self-service legal software to set up your LLC, your EIN should be returned to you with your formation documents.
If you do this on your own, you should make sure that you download the PDF that immediately pops up as that has your EIN on it. Otherwise the IRS will mail you your EIN, which could take months, delaying critical business operations for some time.
Business Bank Accounts
Once you’ve received your EIN, you’ll need your business bank accounts.
Common business accounts include a checking account, savings account, credit card account, and a merchant services account. Merchant services accounts allow you to accept credit and debit card transactions from your customers.
Though dependent on your city’s requirements, generally your new business bank account should match the name on your EIN. If you are working with a CPA, they will need this so they can easily track and manage personal vs. business account transactions.
We see many small business owners use their personal accounts for their business. Putting business cash into a personal account or personal cash into a business account (other than a capital contribution) is considered “commingling” and may be prohibited by your state, depending on your industry and the regulatory authority that monitors your type of business.
Furthermore, commingling is the quickest way to having a judge to disregard your limited liability, thus giving creditors access to funds that would otherwise be protected. This is called “piercing the corporate veil” and exposes everything that you and the business possess to risk.
In addition to keeping you well-organized, a business account offers some significant benefits. Depending on the bank you choose, you might get:
- Easier access to loans and capital
- Lower interest rates
- Bonuses and rewards for joining
- AND protection of your personal assets from creditors
Licensing and Permits
Every business will be different so this section won’t go into every possible situation. However, we’ll run through some of the standard licenses you might need to keep your business legal.
First, if you are starting a home-based business, you might not need to get any licensing or permits at all.
But if you plan on operating out of an office or storefront, your local government will require you to be up-to-date with licensing and permits. The specific requirements around licenses and permits are determined by the appropriate state or local agency that handles business regulations in your area.
Some other types of business licenses you may need:
- Sales tax license or permit
- Zoning permits
- Health and safety certificate from the Department of Public Health
- Fire Marshal inspection report from the Fire Department
Keep in mind, if you plan on selling products you will also be required to get a retail dealer’s license. The requirements vary from city to city and state to state. Check your local government’s website for the full scoop on your requirements.
You Don’t Have to Figure It All Out
We know, there’s a lot to think about when starting a business. But having a team of trusted experts on your side makes all the difference.
Partnering with a business compliance company like Semaphore Corporate Solutions can save you months of time and the headache of setting all of this up yourself, not to mention a complete education and guidance into correctly building your business to boot. Compliance professionals at Semaphore can help you with all the paperwork needed to file for your corporation and keep you on track with the ongoing paperwork needed after your corporation has been registered. We can also recommend ways to save money and limit tax exposure.
At Semaphore, our team of business and financial advisors will partner with you to create flexible options and custom solutions to fit your business’ needs.
For more information on how we help businesses of all sizes with the processes detailed above, feel free to call our Chief Compliance Office, Shawn O’Buckley, at (720)762-8728 or email him at firstname.lastname@example.org, and we’ll work together to get you back to running your business faster than you can say, “Help, I’m being prosecuted for compliance violation.”