Congratulations! You have done the hard work of incorporating your business! While it might be tempting to jump straight to day-to-day operations and begin making a profit, there are a few more processes and requirements that you must attend to. Some of these are one-time tasks, while others are ongoing. These requirements vary depending on which structure you choose to incorporate, but some tasks are universal to all types. Don’t set your company up for failure; read ahead to make sure you don’t miss any of these important steps!
Universal requirements
File for an EIN
The first thing any new company should do is file for an Employer Identification Number (EIN). This federal tax identification number is often required to open bank accounts or credit accounts, and operates similarly to a personal Social Security Number. It is good practice to open your accounts as soon as receive your EIN.
Post public notice
Some states (Illinois, New York, and Pennsylvania, to name a few) require newly formed businesses to post a public notice of their formation in a local newspaper. While this may seem like an outdated formality, it is recommended that you post this notice as soon as possible (if it is required in your state).
Licenses/permits/etc.
Meticulously check to see which federal, state, and local licenses, permits, franchise taxes, and reports need to make sure your business is in complete compliance. These tasks are typically considered “external requirements” when discussing business compliance. Many of these processes or fees must be done, or paid, on an annual basis in order for a business to remain in good standing.
Internal requirements
These requirements are very dependent on the business’s structure, but can include: documenting the company’s organizational, outlining the leadership hierarchy, or various stock distribution requirements. The rule of thumb is that larger, more formally structured businesses are required to document a large majority of their operations, while smaller informal organizations do not.
C corporation (C corp) specific requirements
Because C corporations are usually large entities and may sell stock to the general public, they are more strictly governed than other types of businesses. As soon as a C corp forms, the directors must hold an initial meeting, write and file a set of internal bylaws, and distribute stock to all initial shareholders. These companies are also required to hold annual meetings of directors, shareholders, and officers, formally documenting each meeting.
S corporation (S corp) specific requirements
The post-incorporation steps for an S corp are nearly identical to those of a C corp, with one noticeable difference: Due to an S corp’s ability to qualify for “pass through” taxation, the company must file a special form with the IRS. This form (Form 2553) should be filed as soon as the corporation decides to elect for S corp status.
Limited liability company (LLC) specific requirements
An LLC is most informal business type that is often categorized with other corporations. As a result, several of the post-incorporation internal requirements imposed on other types of corporations are not necessary for LLCs. However, it is highly recommended that they observe as many of those requirements as logistically possible, as doing so will help the company defend itself in the event of any legal proceedings or tax audits.
Limited liability partnership (LLP) specific requirements
Limited liability partnerships are usually professional service businesses that offer highly specialized services. Because of the importance of their work, LLPs usually require a many certifications. Medical practices, law offices, and architectural firms are some examples of businesses that would likely elect to structure themselves as an LLP. The results of their work can often have very serious implications. As a result, they need to make sure that they acquire all relevant malpractice insurance, and permits, before beginning to see clients.
Limited partnership (LP) specific requirements
Limited partnerships are typically created by businesses that either expect to exist for only a short time, or will be taking on a great deal of “silent partners”. These silent partners are free from any personal liability resulting from the business’s actions. In order to ensure that these partners are properly protected, LPs must formally document their leadership and ownership structures in great detail soon after their formation. It is also highly recommended that each owner (partner) is given an official document outlining their responsibilities and role.
Nonprofit organization specific requirements
Nonprofit organizations are subject to a few unique post-incorporation requirements, due to their potential tax-exempt status. As a result, any nonprofit looking to become tax-exempt should file federal Form 1023 to apply for this status as soon as possible after incorporation. There may also be some state level forms to file during this process, depending upon where you are located. Nonprofits also need to formally document their leadership structures, much like C and S corps, as well as create a documented set of bylaws.
Swyft can help!
No matter what type of organization your new business may be, it is of prime importance that you understand all of the post-incorporation processes required of your organization’s structure. If you have any questions regarding these processes, or those required to be upheld on an ongoing basis, it is always best to talk to a licensed and knowledgeable professional. The experts at Swyft are ready and waiting to assist you.Contact us today!