Congratulations on starting your own business! You’ve made the brave decision to work long hours for little or no money, but at least you won’t have to listen to your old boss. If you are forming an LLC simply to buy a property, please feel free to skip ahead.
Before you begin forming your LLC, here are a few brief, unsolicited words of advice.
Start with a ton of Research
There is an amazing amount of data available online regarding any business, yet many people do not research enough, study pro-forma’s or take the time to learn about the profit margins involved.
If you are not aware, according to data from the Bureau of Labor Statistics;
- 20% of small businesses fail in their first year
- 30% of small businesses fail in their second year
- 50% of small businesses fail after five years in business.
- 70% of small business owners fail in their 10th year in business.
Many businesses fail because they skip or miss basic items that would help them succeed, whether that is a tax, insurance coverage, or not having a contract reviewed, which leads me to my next thought.
Form a Great Team
It helps to have a great team behind you and I would recommend finding four great partners to help you.
- An Accounting/Bookkeeping Firm – This one comes in #1. It’s not just an annual tax return, but the monthly bookkeeping, consulting, and advice on how to structure and account for different expenses and taxes as well as reviewing your cash flow and profit and loss statements. I have personally made mistakes on this one and highly recommend you plan and pay for proper accounting services.
- A Mentor in the same industry or owner of a similar business. Many groups exist to selflessly share information, and help.
- A Good Attorney. This one may be hard to find :), but ask your other partners for recommendations.
- A Great Insurance Agent or Broker (Me). If you have not worked with an independent agent before, now is the time. Of all commercial or business insurance, 83% is written through independent agents based on a 2017 study.
Steps to Form an LLC
- Come up with your name and then search for the Business Name on the Secretary of State’s website. You can’t file for the name if it’s already taken.
- Have your Attorney prepare an Operating Agreement. Sure, you can skip this and come up with something yourself, but if an issue occurs you will be happy you paid your attorney $200 to $400 to set this up.
- Create a Business Profile on the Ohio Secretary of State’s website
- File form 532A with the Secretary of State online for Domestic For-Profit Corporations for $99.
- File for an Employer Identification Number or EIN on the IRS website
There are many more additional items that will come up in terms of taxes and IRS filing status, which is why having the great team is so important.
Good luck and let me know if I may do anything to help. If you are ready to begin working with a great insurance agent such as myself & my team, please reach out in any of the following ways;