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Setting up a New Business Entity

Setting up a New Business Entity

Do you own a small business or are looking into starting a small business and want to form a new business entity?  It is not as complicated as one might think. You don’t have to hire an attorney and it doesn’t take as many complicated steps as one might think, particularly if the only owner is you.

So you have a small business and now want to form a new business entity. You first need to create your legal entity: LLC, corporation, partnership.  Then you need to obtain an employer identification number which can be done on the IRS website and then you open a bank account.  These are the three minimal initial steps to forming your small business entity.

Forming a corporation or an LLC in the state of Tennessee is really not very complicated.  The Secretary of State’s website allows you to perform a name search to make sure the name is available. If the name is available, you can complete documents online by providing some basic ownership and officer information, pay the processing fees with a credit card and then electronically file the documents with the State.  In seconds later you will receive a pdf copy of the articles of organization and proof of filing.  Please note, I am only recommending this process for single owner businesses.  Also, once your business gets up an running and you start to generate cash flow, you should seek out a business attorney and have him or her prepare any additional documents as he/ she feel is appropriate.  However, at the outset, this document will permit you to get started and begin building your enterprise.

Once you have your organization charter or articles, you can then go on the IRS website request an employer identification number (EIN) for your company.  You can receive the EIN letter via pdf right then and there.  All you have to do is answer a few fairly simple questions to complete the EIN request. You will need the EIN letter and the articles of formation in order to open a bank account.

Next, you go to the bank of your choice and open your new business’ bank account. Congrats, you now are an owner and operator of a separate legal tax entity that is open for business. You went from I want to form a new business entity to creating one in a single day or two.

There are a number of other considerations once you complete these three steps.  You may need some business liability insurance or other types of insurance consideration.  You can speak with your personal lines agent at this point and if he/ she doesn’t do business insurance, he/ she can certainly direct you to someone who can. You will need business cards, a website, a social media presence and the like and in today’s day and age, these can all be done inexpensively and quickly.

To give you an example of how simple this process all is and how fast it can be done, recognizing that I have some expertise and familiarity in opening new businesses, I formed a corporation, obtained an employer identification number, designed a logo through Vista Print, built a website through Go Daddy, ordered business cards and designed a brochure all in one day. The next day I went to the bank and opened a business checking account. Now, I subsequently tweaked the website to get it the way I wanted it, but it was up and published the first day. The point here is that you don’t need to put off forming your business entity because you are afraid it will take too much of your time or it is too complicated. The process is fairly simple and with a little direction you can do it in a day.

So if you want to form a new business entity, go for it.  If you need any assistance in direction (we do not prepare documents as we are not attorneys) or processing the online documents or obtaining an EIN, please feel free to call our office at (615) 513-5522.  We at Joseph F. Fragnoli, CPA, PC in Nashville, TN are here to help.  Know this, small business ownership has many tax advantages and can not only afford you additional revenue sources to you other primary income sources, it can help with your tax burdens.  Please visit our affiliated company, Pinnacle Tax Planning Services, Inc. to see where we can help you in tax planning.