A lot of what we provide as advisors is just that – advice. Folks come to us for things that they don’t know how to do or don’t have time to do well, and we take that job and their trust in us very seriously. We’ve been told in the past that once we explain things (and particularly, what to expect/how long each step generally takes) they’re far less scary, so we’ve decided that we should do MORE of that, and are putting together a roadmap series. The first item we’re mapping is starting a business. (Note – this info is specifically for Minnesota businesses, but the general info is pretty similar no matter what state you’re in).
- Prepare and File Organizational Documents: This step is often surprising to folks we work with because it doesn’t actually involve that much. In most (not all, but most) circumstances, the “Articles” that form the business (of Organization if you are an LLC and of Incorporation if you are a corporation) don’t have too much info about the business in them. There is a reason for this. Those Articles are publicly available and become part of your company’s permanent record. You can amend them, but it will cost you each time you do, so in our office, we try to keep the Articles as simple as we can while changing all the things you need from the default rules in the Minnesota Statutes. TIME TO COMPLETE – Can be completed same day if filed online with the Minnesota SOS.
- Obtain EIN for Company. One of the reasons you may want to set up a company (Either a corporation or limited liability company) is to keep your personal assets separate from those of the business and vice-versa. In that way, if someone sues you personally or your business, and you’ve observed all the rules of keeping your business separate from your personal, you should be able to limit what the suing party can collect on if they win to either your personal or business, but not both. Since the goal is to keep the company separate, the company will also need its own identification numbers, or “Employer Identification Number” (EIN). Much like your personal Social Security Number, the EIN allows you to open a bank account for the company and to begin establishing a credit history for the company itself. It is also vital once you reach the point of hiring and paying contractors or employees. TIME TO COMPLETE – The IRS website that issues EINs only operates during certain set hours, and seems to run into downtime more often than many sites, but this can generally be obtained in a day or two after the company is created.
- Open A Business Bank Account – This step is pretty easy once you have your EIN from Step 2, but be forewarned, some banks require particular documents to do this so a pro tip is to call your attorneys before you head to the bank so they can be on stand-by to answer any questions by the banker or to draft or provide any odd documents the bank might ask for. We have more than once been asked by the bank to “Write on your letterhead _________” when a client is opening a business bank account, and depending on the request, we always find a way to fulfill it, but know that different banks have different document requirements, so this step can have some bumps. TIME TO COMPLETE – Depends on how soon you can get to the bank if they require you to open the account in person, but generally a few days to a week after obtaining the EIN.
- Draft Internal Company Documents (Buy-Sell, Operating Agreement, Etc.) Many of our clients are shocked to find that what are often the most important and informative documents related to their company aren’t filed anywhere. Buy-Sell or Partnership Agreements can be most easily explained as the pre-nuptial/will of the business. They should provide most of the answers to the question “What happens if….” and should very clearly explain how a member can be removed from the company, be bought out or what happens if they can’t or don’t want to continue to be involved. Despite the fact that these documents are not filed anywhere, they are vital to have in the event of a dispute or question as to how something should be decided, and are often required by banks or other entities the company may do business with. TIME TO COMPLETE – This can vary depending on a number of factors, including how many members of the company there are and how much they have discussed/agreed to things before drafting begins for the agreements. Generally speaking this step takes between 3-6 weeks to complete.
- Do Some Business! Can you believe it? You’re finally ready to do some business! This step is both the easiest AND the hardest because now it’s all up to you. Get out there knowing that you’ve taken all the precautions you can to make sure that your business runs smoothly. Have fun!