Step I

Entity Type

Step II

State

Step III

File

Step IV

Post Filing

Step V

Initial Actions

Step VI

EIN

Step VII

Compliance

 

 

 Step V: Initial Cororate or LLC Actions

 

Sorry, but you are not done yet.  Even though your Corporation or LLC is already filed and you have taken care of any immediate post-filing requirements with your state, now is the time to set up the structure of your entity.  This is most important regardless of state; whether you have an LLC or INC; whether you have one owner or many; and whether your business is going to be large or small.

 

What is compliance and why is it imporatant?

A lot of small business people miss this step after they form their INC or LLC.  Even if you are the only owner of your INC or LLC, you must take some mandatory initial actions.  If you do not, your corporation or LLC is considered not “active”, also known as “not compliant” with your state’s statutes.  If your INC or LLC is not compliant, then it’s owners lose all liability protection and tax benefits.

 

Initial LLC Actions

Just because an LLC does not have the formalities of a corporation, does not excuse from all formalities.  Unlike a corporation which has its formalities laid out for it in the formation state’s statutes, an LLC is left to establish its own formalities or rules of how it will be operated.  This is done through an operating agreement.  Once an operating agreement is created and signed (by all members/managers), you must follow the rules you have established.

 

Initial Corporate Actions

 

After your corporation has been formed, be sure to do the following:

 

Elect officers

Adopt bylaws

Authorize bank accounts

Authorize stock certificates

Issue stock

Authorize S election (if S Corp.)

Formalize directors

Document all of this

 

Separation from you and your entity

Probably the biggest issue is to keep your entity and the business ownership separate from you, personally.  In other words, think of your entity as some other company separate from you.  If that company wanted to lease space from you, pay you, lend you money, or any other activity, you would want to have it in writing and make sure there was a good business purpose for it.

 

 

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Users also found these helpful

 

What is an Operating Agreement?

Your INC or LLC should not be your Alter Ego

 

Once you have taken care of your initial actions
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