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After you have formed your idea using the techniques I described in the
previous post, its time to get legal. If you are selling a service, you
can begin selling right away and simply pay taxes on the money you
receive. If, however, if you will be selling products (even if you are
reselling small products as part of your service), you have to get a
vendor’s license. In order to get a vendor’s license, you have to have
a “real company”. In any case, I recommend forming your company legally
right away because it keeps things clean, and provides you with some
extra motivation.
Here is where you need to make a decision. You can either hire a
professional to help you through this process, hire a lawyer to do
everything for you, or do it all without assistance. Whichever you
choose, you can do some research first. The central website for all
things legal in starting a business in Maine is www.maine.gov.
There, you will find a plethora of information regarding starting a
business, raising capital, paying taxes, etc. The problem with the
website is that it is still pretty unclear which forms you are supposed
to file to simply start a business.
Before you can know which form you need, you have to decide which
type of business you want to start. Much has been written about each
type, so I will allow you to do further research on your own. The
following are the basic types along with a quick definition.
Corporation- Limits the liability to the company,
not the owners. Corporation pays taxes, owns assets, assumes debts.
Requires annual meeting of shareholders and more paperwork than other
forms of organization.
Partnership- Two or more people share ownership of
the company. Owners pay the taxes on earnings. Each partner assumes
total personal liability for company debts and legal action.
Sole Proprietorship- Singe owner. The company and
its owner are the same thing. Revenue is filed on personal income
taxes. The owner assumes all liabilities and debts. Homes, vehicles, or
other assets are at risk in this type of company, although this is the
easiest way to start.
Limited Liability Company- Limits company
liabilities to the company, owners pay taxes on earnings. It is simpler
in structure, and requires much less paperwork (annual meetings, etc.)
than a corporation.
Limited Liability Partnership- Limits company liabilities to the company, but it is organized like a partnership.
Once you decide, you will need to file your articles of organization
(or certificate of partnership). The fee is between $145 and $175. Once
this form goes through, you are a real business! Now you can get a
federal id number, a bank account, and more. Don’t worry- I will work
through the next steps on my next post.
There is only one problem with all of this: in order to file you
articles of organization, you need a name! I’m sure you have lots of
ideas for possible company names, but this can be the most agonizing
process in starting a business. This part is up to you, but a few of
pointers: make it easy to remember, keep it simple, and make sure you
can get a decent domain (website address). For the domain, go to www.godaddy.com,
and check some of your ideas with possible website addresses. Remember,
you are likely going to be giving your website orally, so spelling
things too awkwardly or using hyphens will make things difficult in the
long run. But remember, above all, to have fun! Once you have your
business name and your articles of organization filed, you will feel
official, and things will start taking shape quickly.
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