Starting Your Own Firm – Part 2

(Link to Part 1)

Having my own firm has been a dream of mine since childhood. Executing that dream, however, is a much more challenging undertaking. In my previous blog, I shared some general tips on how to start your own firm. In this post, I would like to spend some time discussing the technical aspects and paperwork involved in setting up a business.

Since I reside in California, the procedures and steps discussed in this article are based on my experience establishing a company in California. I understand that many of our readers are located in different parts of the country, and it is important to consult your accountant and/or attorney when creating a company. Although many of the steps are similar, there are state- and city-specific documents that must be completed in order to successfully register your business. In addition, the procedures described here are based on my experience as a U.S. citizen and may not be applicable to readers who are not U.S. citizens. Non citizens or visa holders may be able to establish firms here in the U.S. as a foreign company. However, additional requirements and constraints might apply and an attorney should be consulted before starting the application.

Employer Identification Number (EIN)

The first step in setting up a company is applying for a federal Employer Identification Number (EIN). This number allows the Internal Revenue Service (IRS) to identify you, your business accounts, tax returns, and other related documents. This step is essential for all business entities, regardless of the state in which you are located.

You can apply for an Employer Identification Number (EIN) online through the IRS website or by mail using Form SS-4, which is also available for download from the IRS website. To complete the application, you will need either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN) if you do not have an SSN. You must also identify your business entity type during the application process, which can be confusing for first-time business owners. I will discuss the pros and cons of the different business entity types in more detail in a future post on the IAC Blog.

Once your application is approved, the IRS will assign you an EIN and send a confirmation letter by mail. This letter also lists the forms you are required to file with the IRS at a later date. It is often much easier to hire an accountant to help navigate this process and to remind you of the forms you need to file throughout the year.

Registering Your Business with the State

The next step is to properly register your company with the state in which you are located. Using California as an example, you can complete the initial filing through the Secretary of State’s website. However, the process can be complex, and it is recommended that you engage a licensed professional to help prepare the documents and complete the filing.

Below is a summary checklist provided by the California Secretary of State:

1. Prepare and plan (conduct market research and create a business outline)

2. Secure financing (if necessary)

3. Choose an entity type (e.g., LLC, Corporation, LP, LLP, GP, or Sole Proprietorship) and business name

4. Register your business with the Secretary of State (LLC, Corporation, LP, LLP, or GP)

5. Register a fictitious business name (if necessary)

6. Choose a location and check local zoning regulations

7. Obtain specialty licenses and permits (if necessary)

8. Employer responsibilities (if applicable: EIN, workers’ compensation, etc.)

9. Tax information (FTB, CDTFA, EDD, IRS, BOE)

10. Ongoing Secretary of State filing requirements (Statements of Information)

There may be additional requirements depending on your type of business and the name you choose for your company. For example, architects in California cannot form a Limited Liability Company (LLC). If you choose to form a California Professional Architecture Corporation, there are also specific naming requirements to consider. Ownership, licensure, and entity rules can vary significantly by state and may also be affected by immigration status. For these reasons, I strongly encourage readers to contact their state licensing board and consult with an attorney to determine any additional requirements they may need to meet.

Doing Business As (DBA)

Many companies choose to use a Fictitious Business Name (FBN) for branding and privacy purposes. Counties and states have different requirements for obtaining a fictitious name. For example, in Los Angeles County (where I am located), you must file an FBN either online or at one of the county offices. Once the paperwork is filed and the fee is paid, the owner must publish the filed statement once a week for four consecutive weeks in an adjudicated newspaper within Los Angeles County. These requirements vary by county and state.

Registering Your Business with the City

Last but not least, do not forget to register your business with the city in which your company is located. This step is important for establishing a local tax account and for legally conducting business there, even if you are operating from a home office. The process is usually straightforward, and many firm owners can complete the city filing on their own. However, it is important to check your lease (if you are a renter), your homeowners association, and city regulations to confirm that operating a home office will not result in any violations.

As mentioned earlier, establishing a company can feel overwhelming. My advice is to meet with your accountant and seek guidance before filing any paperwork. In my case, I was fortunate not to need an attorney, as my accountant was able to handle the process. However, in more complex situations, such as setting up trusts or companies with multiple owners or stock options, working with an experienced legal team may be necessary. Please stay tuned for future posts in this series.

---

ABOUT THE AUTHORS