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How to start a business - part 3

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This article is the third in the How to Start a Business series. Please read Part 1 and Part 2 before proceeding.

Step 4: Determine the business structure and register the business’ name with the Secretary of State

Every business owner faces the question of what type of business entity he wants to establish, as each business entity comes with different tax obligations.

The different business structures are:

• Sole Proprietorship
• Partnership
• Corporation
• S Corporation
• Limited Liability Company (LLC)
• Non-profit Corporation

The federal government levies income taxes, self-employment taxes, taxes for employers, and excise taxes. States levy corporate income taxes depending on a business’ legal structure.

Once the entrepreneur determines a business structure, he is able to officially register his business with his Secretary of State. Each state has different requirements and associated fees for registering a new business. Usually these forms and fee schedules are clearly laid out on the State’s website.

Alternatively, a business owner may choose to employ the services of a third party, such as My Corporation, to handle all the paperwork for him.

Step 5: Get an Employer Identification Number and establish a business bank account

An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a number assigned to each business by the IRS as the corporate equivalent to a Social Security number. This number allows an organization to report withholding tax and open a business bank account. The IRS allows business owners to apply for an EIN online.

An entrepreneur should establish a business bank account as soon as he receives his EIN. The bank account will allow him to begin saving for start-up and operating expenses and being to build business credit.

More on how to start a business

The next steps in the start-up process involve choosing a business location, drafting a business plan and registering for state and local taxes.

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