Crucial First Steps to Take After Incorporating Your Business

Congratulations, you are officially incorporated!

Unfortunately, the tasks you completed to become an incorporated business were only the first in a deluge of tasks that you will need to perform to ensure that your company is running within the confines of the law and the tax code.

If you are transitioning from a sole proprietorship to an LLC, there are a few essential things you need to do as soon as possible to avoid serious headaches in the near future.

Get Your EIN Number

Even if you are transitioning from a previously registered sole proprietorship to a corporation, you need to get a new Federal Tax ID number; this number is often referred to as an Employer Identification Number or EIN.

Whether you plan to hire employees or remain the sole employee, you will need to get an EIN. The reason you need one is is because your LLC is recognized as a separate entity. The IRS uses it to track your business’s movements similarly to the way it uses the Social Security number to keep tabs on individuals.

Getting an EIN needs to be at the top of your priority list because it will be difficult to do anything else without it. To get a bank account, apply for credit or keep up with your taxes, you will need to provide your unique EIN number.

Fortunately, getting an EIN is relatively easy. Simply fill out the form on the IRS website. You will need to provide either your Social Security number or a previous EIN.

Set Up Your New Bank Account

One of the biggest changes that you might experience after you incorporate is with your finances. When you’re a sole proprietorship, you can mix your personal finances with your business finances. However, that all changes when you become an LLC.

Once you become an LLC, it’s imperative that you open a business bank account. Your EIN will be judged separately from your Social Security number, and therefore, it is essential that it is easy to distinguish between your personal finances and your business transactions. Not doing so will create huge headaches come tax season and could land your new business in a lot of trouble.

If this is your first time setting up a business bank account, make sure you take plenty of time to research your options. You will quickly notice that there are a seemingly infinite number of accounts, banks, and business options for you to choose from.

Every bank will have different paperwork requirements, so do not worry about gathering a huge dossier of information right away. As long as you have your EIN and other general information, you will usually be okay in the initial stages.

There is a lot that goes into opening a business bank account. Many of the individual characteristics will be unique to the bank and account type that you sign up for.

But no matter what your bank account goals are, try to avoid some of the biggest mistakes that new incorporations make when opening a new account:

1. Watch out for accounts that require a minimum balance. In many cases, if your account dips below the minimum, you will be charged fees. If you want an account that delivers great benefits but has a high monthly minimum balance requirement, make sure you can meet the balance requirement so that you don’t end up helping the bank earn money.

2. Make sure that you use the right tax codes when you open the account. For corporations or LLCs, you will need to use your EIN number, not your Social Security number. If you open an account with your Social Security number, you will probably need to start the process all over again because your money will be tied to your personal number.

Switch Your DBA

If you were previously operating as a sole proprietorship, you might have used a DBA to register your business name. If you decide to reincorporate under the same name, you will need to cancel that DBA and refile for a new DBA. You only need to do this after you have set up the corporation and after all the paperwork has been approved, otherwise, you will remain in the same place you were before.

Find a Tax Advisor?

You do not need a tax advisor. However, if you’re new to LLC life, it may be a good idea to have one. A great tax advisor can help ensure that you stay financially compliant and out of trouble with the IRS. An advisor can also help you save money by teaching you about all the new tax credits and deductions that you are now entitled to as an incorporated company.

Becoming a new LLC takes a lot of hard work and hours of research, but the freedom from liability and the tax benefits you receive make it well worth it for many young businesses.

The post Crucial First Steps to Take After Incorporating Your Business appeared first on AllBusiness.com

The post Crucial First Steps to Take After Incorporating Your Business appeared first on AllBusiness.com.