Steps to Take After the Incorporation of a Business

The incorporation of a business is often a wise decision for a sole proprietorship. Among the many benefits of incorporating are limited liability status, tax savings, and establishing a higher business profile. But after the incorporation process is complete, business owners must be vigilant to ensure that they adhere to the requirements of maintaining their protected status.

After the incorporation of a business, owners must typically take action to address a wide variety of items and plan on performing regular duties as required by state and federal law. Although requirements vary based on the type of business structure (S corporation, C corporation, LLC, LLP, LP, or nonprofit), in general owners of all of these business entities should:
Obtain an EIN. Every corporation must have an employer identification number (EIN) when filing state and federal tax returns. An EIN is essentially a company’s social security number. The government, banks, and other companies use it to identify the business as a separate entity. A company typically needs an EIN to open bank accounts and get business licenses.

Setup bank accounts. The incorporation of a business also includes setting-up bank accounts. It is advisable for a company to have its own bank account for depositing income and paying debts. A separate business bank account clearly identifies that the business owner and the business are separate entities. This has many benefits, including the fact that personal and business credit is completely separate.

Know the tax laws. This may go without saying, but the intricacies of business taxes can make the formalities of running a business a frustrating and complicated task. Hiring a reliable accountant is typically the best option. After the incorporation of a business it is important to know whether there are quarterly franchise taxes and, if so, how much is owed.

Run a tight ship. Many new owners hear about the limited liability benefits of the incorporation of a business and assume asset protection is inherent. Not true. For example, if the owner of an S corporation does not comply with all of the requirements, such as filing an annual report, keeping monthly minutes, paying payroll taxes, or paying workers’ compensation insurance, he may be stripped of the corporation status.

Remember that you may have additional specific requirements depending on the structure of your business and the state(s) in which you form a business. Use these steps as a guide to get you started. It’s also a good idea to consult an accountant to make sure your business remains in compliance.