Creating a business is rarely as easy as you might think. Sometimes it’s as easy as doing work and charging for it. This is called a sole proprietorship. However, most of us would like at least a partial veil of protection, and that requires incorporating in some form or fashion.
I’ve done this a few times, so I thought I would lay out how to do it for those of you who are curious. I’m going to use a real example for this article, only I will change the business name to protect the guilty. Let’s call our fictitious company, EIEIO.
I thought of this article, because I’ve created several businesses, and it has always been a bit of a tedious experience. I have read about twenty books on forming a company/corporation so far and I am still a little out of my league! Anyway, let’s pretend I am starting a company to do computer consulting and I want to name it EIEIO. I want to form a company (as opposed to sole proprietorship), because this will make us take it more seriously. And, it will make others take us more seriously.
If anyone has questions, insight, or whatever, please feel free to respond with a comment and I will try to tackle it.
I decided to make my company a limited liability company (LLC). Why LLC? I selected LLC as the entity type, because it is a “pass-through taxation” (unlike C-Corp, but similar to S-Corp entities). This means that the owner gets taxed, not the company. Also, it is a tad bit easier to run, because you do not have a board of directors or stockholders. Instead of shareholders as owners, you have “members.” Finally, I wanted either Corporation status or LLC, because Sole Proprietor and Partnerships do not offer liability protection
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. In other words, if someone sues my company, they can’t come after my house, boat, savings accounts, etc without “piercing the corporate veil.”
I decided to name our new company: EIEIO, LLC. I chose this name simply because I already own the web domain ( I don’t really own eieio.com, but I sure wish I did!) and it is easygoing for a technology business name. It works.
In this example, I’m going to have sole ownership (100% ownership) for ease of use.
Pretend that I decided on sole ownership for now, because my plan is to apply for an 8(a) status in two years (or sooner, with a waiver) and it will require that I (the “discriminated-against” individual) have a majority ownership in the company. Look for future posts about 8(a) and other special small business types.
Forming the LLC was fairly straight forward. I found the following websites; which all offer LLC creation. My plan is to create the LLC myself, but I wanted to share some good sites and pricing to make it easier for you:
This company will be formed in Maryland. Maryland’s fees end-up being about $200. However, most of the above mentioned “packages” include Article of Organization (which are required documents to start an LLC), a company stamp, documents and agreements on CD, state filing, EIN filing, etc. For the money, I think that these services are worth every penny.
Other BLOGs (and info) About Forming a Company:
Kits can be found here:
Sample pricing for doing this three different ways looks sort of like this:
In light of frugality and the simple curiosity I decided to do this myself and register on my own. This added a little bit of technical jargon to my process, but it wasn’t anything I couldn’t handle.
Using the state of Maryland expedite fax form ( www.dat.state.md.us/sdatweb/charterfax.pdf ), I registered EIEIO, LLC.
Because the fax service is automatically considered an “expedited filing,” it is registered in about seven business days. You can verify that your business was registered at this link: sdatcert3.resiusa.org/UCC-Charter/CharterSearch_f.aspx
The fees were $100 filing fee + $50 expedite fee (this means it will take seven days as opposed to the “normal” six to eight weeks to form an LLC in MD), for a grand total of $150. Maryland’s fees can be found here: www.dat.state.md.us/sdatweb/fees.html
Once I receive the information back from MD, I filed with the IRS for an EIN and also got a DBA (doing business as – or, fictitious name) for EIEIO (along with EIEIO, LLC).
After receiving my EIN, I applied for a merchant business bank account; which will allow me to accept credit cards.
Finally, I purchased a cheapo (that’s a technical term) LLC company kit. Each kit comes with a stamp, stock certificates, record book, and “official” articles of organization.
Also, I registered this business from my home address and I plan on writing work area off.
For accounting, I opted for Quick Books Pro Online (starting at $9.95 per month); which I use as an easy way to share my business financials with partners and my business CPA/accountant.
Here is some good information about Merchant Bank accounts:
After all of that hoopla, I may simply choose to continue to use Paypal via a “Website Standard” business account:
Here are some links to resources that I am using to make sure that I follow all procedures in starting my business:
Small Business Development Center
Maryland Department of Labor, Licencing and Regulation
Legal Zoom’s info on creating MD-based LLC’s
Next, I went to the IRS page and registered my newly formed business. There was no charge associated with this, and the whole process took about four minutes.
I ordered a standard LLC kit; which cost $76.00 + S&H = $83.45
I received the LLC kit/package a few weeks after ordering it and then finalized the “Operating Agreement” for my LLC.
Next, I signed-up for (and received) my business credit card from Capital One.
1. open a business bank account;
2. buy the business domain (if I didn’t already do so);
3. setup simple web page with content for my company;
4. plan and implement some marketing ideas to get some consulting work.
When you start your business banking account, don’t forget to bring your original Articles of Organization (that you originally filled with state), the response from your state, and your IRS EIN documentation.
As planned, I created a Paypal account for EIEIO, so now I can accept credit cards.
For government work (if you plan to work with the federal government) you will need:
A CAGE Code (you get this when you register in SAM).
and you need to register in SAM (System for Award Management); which used to be CCR.
Here is what I have located so far:
By registering for SAM, you will automatically be assigned your CAGE code.
I got my DUNS number by going calling D&B’s dedicated Government Customer Response Center at: (866) 705-5711, or by browsing to:
GSA information can be found here:
And, these guys have some good GSA info as well:
I located this site for Federal Opportunities for businesses: www.fbo.gov
And, here is an SBA link to some additional goodies: www.sba.gov/services/contractingopportunities/index.html
I registered for my DUNS using the SIC code: 7379 (you can search for SIC codes here)
I looked up my NAICS code and came up with: 518210 (Data Processing, Hosting, and Related Services)
More info can be found here: www.census.gov/eos/www/naics
I ordered my company logo from thelogocompany.net
I went with these guys because I liked their portfolio and price. Some of the companies I found cost as much as $1,999.00. I was able to get my logo designed for the web and stationary plus 500 business cards for $289. They will send you five ideas and then you pick one and they work on it until you’re happy with the final artwork.
They will also provide a greyscale version for trademark with the Patent and Trademark Office.
Finally, I finished setting up the initial website: http://www.ThisAintReal.com
I’m (you’re) ready for business…
I realize this was a long article, but I really wanted to cover all of the steps for anyone truly interested.
Have you created a business? Or, do you have experience in this area? Please comment below with your thoughts, ideas, and questions!
Thanks for reading,
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