Business Checklist: Legal Resources
When starting a business, navigating the legal task list can be daunting. A lot of folks wait to address these aspects far longer than they should or really need to. Making your business “legit” is very straight forward and essential to your growth. There’s also great piece of mind knowing you are protected by your status.
Below is a short overview of the legal section of our New Business Checklist along with a few resources. As a part of my new business coaching program, all clients receive a digital copy of the complete business resource guide. Enjoy!
- Jessica Bondalapati, Lady Bondo
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Register for Business Name and Apply for IRS Tax Number
These are the absolute first steps I do with any of my clients if they haven’t done them yet. Not only is it quick, but it’s a cheap investment for a lot of protection as a business owner.
Registering your business with the state gives you a lot of benefits. You will be able to secure your business name (and make sure it isn’t already registered!) and operate legally. This opens the door to a lot of opportunities like getting a business bank account. There’s also a level of personal protection from the state when it comes to liability. That is critical if any potential complications like a lawsuit happen. Not that we think that will happen, it’s just important to be prepared, right?
In the state of Michigan, the Department of Licensing and Regulatory Affairs (LARA) is who you register with. You can search your business name to see if it’s already taken here and register by filing your Articles of Incorporation here. If you are an individual business owner aka a sole-proprietor then you will most likely file 700 - Article of Organization for a Domestic Limited Liability Company. That means your business structure is an LLC. The fee is $50 and can be paid with a credit card. It will take a few days to maybe a few weeks now to receive approval. Once approved you will have a profile where any documents filed with the state will be public. You will have to renew this filing every year by February for $25. If you require a professional license to operate or are a nonprofit, you will need to fill out a different form.
Now you can file here for an IRS EIN number (Tax Id), a social security number for your business. You do not need to have approval from LARA to register for the EIN number but it’s okay to wait if you’d prefer. You will answer a series of questions then your EIN number will be generated at no cost. Make sure you save the number in a safe place since it’s a little difficult to recover from the IRS if you lose it. That’s the only thing you need to do if you are a service based business. If you sell products, or are a nonprofit, there are a few other forms you need to fill out for tax-exempt status, sales tax, or employment tax.
Open Business Checking Account
Now that you have your LARA registration, EIN number, and a state ID, you can open a business checking account. Many folks open one at their personal bank or you can search around for the best offers. A separate account is important when it comes to record keeping, taxes, and knowing your business costs. Make sure you find out everything your bank needs you to bring like an additional application. It’s up to you and your business needs if you’d like to add a savings account or credit card, but you can always add later.
Purchase Insurance
Even though registering with LARA gives you a little bit of protection, it’s recommended to have at least liability insurance in addition. Depending on your business or if you have employees, you may be required to have different types. This resource here from the Small Business Administration (SBA) is helpful in knowing what insurance you need.
Create Contracts
Some businesses will need contracts right away because of the type of work while others may not need a contract until later. Here are a few reasons you may need to create a contract:
You provide a service to a client
You are hiring a contractor or sub-contractor
You are entering into an agreement with another business or individual
There are many sites like Templet.net and LawDepot that give you access to contract templates that can be personalized. If you use a CRM tool to send your contracts like Bonsai, it may also provide a template. There is some standard protection language that does not need to be edited so focus on the specifics of the service or agreement including dates, payment structure, deliverables, etc. If you’d like to have a lawyer look it over just for good measure and are local to Detroit, I recommend Erin Bonahoom of Canvas Legal.