I can’t tell you how many times I have consulted with clients who do not have the proper corporate documents needed in order to move forward with our services. Most small business owners only have the minimum paperwork needed – registration with the state, EIN, bank account. I find it very common that that most small business owners do not understand that what they have is just the beginning! Even those who have used a service like Legal Zoom for their business formation don’t understand what all of the other documents are for or how they should be completed.
Corporate paperwork matters! One of the biggest mistakes a small business owner can make is to use a title that isn’t established in the company’s governing documents. For example, in order for a woman to hold the highest officer position in the company, the governing documents need to establish that her role is, in fact, the highest. Even small, family-owned companies need to ensure that their corporate documents are up to snuff.
It is also important to understand that before any business qualifies for certifications and grants, that business must be properly formed and have readily available the necessary documents to demonstrate proper formation to the certifying agency. Many Small Business owners are unaware of all of the documents required for various certifications.
Before opening any business, it’s vital that you know which documents you need. Establishing the organization and obtaining the proper federal and state permits, identification numbers and licenses is a fundamental part of the process to prevent tax penalties, hefty fines or even cease and desist orders to close the business until all guidelines are complied with.
There are several ways to register a business that each have different liability and tax pros and cons: corporation, limited liability company, partnership or sole proprietorship. Speak with a tax adviser before you create your organization to make sure you are using the most advantageous design. To register, you must file a business registration with the secretary of state or county registrar.
Remember, registering with the state is just the beginning. If you run a LLC, which is one the most popular type of business entities, you want to invest in an operating agreement. If you own a C-Corp or S-Corp (Inc), you will need corporate by-laws. This is the agreement among owners, that pertains to financial and managerial duties, who owns what percentages, and what should happen if one of the owners decides to leave.
For help with your business formation, check out our Starting Strong! Business Formation service.
