Usually the easiest and best way to get your business legit is by making it an LLC, which stands for Limited Liability Company. They're usually pretty easy to file (yes, you really can do this yourself!) and also offer you some legal protection.
Below is a basic breakdown, but we'll soon have tutorials for every step of the process and even state-specific guides, so check back often.
Why Go LLC?
- Keep Your Stuff Safe: If your business gets in a bind, your personal assets like your car or house aren't up for grabs to cover business debts. (That's why it's called "limited liability")
- You Do You: LLCs are pretty laid back. You run your business how you want, and you and your buddies (if you have any in the business) decide how you want to split the profits.
- Tax Breaks: The tax man treats LLCs pretty well. Instead of the business getting taxed, any money you make just passes through to your personal taxes, which can make things a lot easier to manage.
Getting Your LLC Rolling:
1. Pick a Name
You've got to name your baby, but make sure no one else has claimed that name for their business.
2. Registered Agent
You need someone to handle official mail. This is called your "registered agent," but usually you can list yourself and just use your home address. This person is supposed to be available during business hours, like the manager at a store... but, uh, that's up to you.
There are also businesses out there that just acts as registered agents for other people. They get your mail and forward it on and let you know if someone shows up at the door to serve you with a lawsuit.
3. Sign Some Papers
To actually start your company, you'll have to file Articles of Organization. It's not as hard as it sounds, it's just some paperwork to make your LLC official. You usually file it with the Secretary of State's Office. We'll have a detailed breakdown for each state soon.
For now, just Google "Secretary of State file LLC" and your state name. You'll probably get to the right page, just be to ignore any ads that pop up at the top of the list.
Don't fall for scams: you don't need to use LegalZoom or pay some company to file for you--every state lets you file directly with them and it'll cost you way less. The paperwork is easier than you think.
Also, heads up: Once you file the company becomes part of public record and other companies will begin mailing you a lot of crap. They'll say you need to buy posters to put up in your work area and other nonsense. Sometimes this is true, but generally, it's not. Don't fall for it. Do your own research.
4. Make Some Rules
It's good to write down who owns what and how you'll run the show in what's called an Operating Agreement. It's not mandatory everywhere, but it's a good idea if you'll have other people who will run the business with you.
5. Get the Right Permits
Depending on what your business is, you might need some special permits or licenses, so look into it. You can probably operate for a while without them, but it'll catch up to you sooner or later and could result in big fines or even shutting the business down and even personal liabilty... so, yeah. We don't recommend doing that.
If you're not sure if you need a license or not, do some searching for a state licensing office. If in doubt, just email them and ask.
6. Taxes
You'll file taxes for the business on your own personal tax return, especially if the business isn't very big and you're the sole proprietor (owner). This makes doing them pretty easy.
Even so, your state may even require that you file for a tax ID from the IRS. You can do that on the IRS website, here. This is usually required to open a bank account for the company, too. Either way, you probably need one.
7. Keep Up With the Paperwork
Some places make you check in every year with a report or pay a small fee to keep your LLC in good standing with the state. If you went the legal route, don't forget about this. It's usually just a quick form you submit each year and pay a small fee.
Wrapping Up
Getting your business set up as an LLC is usually a smart move. It gives you some legal cover and can be easier on your wallet come tax time, all while letting you run your business your way. Just remember, the rules can change depending on where you're at, so make sure you check out what you need to do for your specific state.
We'll be doing tutorials for every state soon, so check back often.