After you create a legal entity by either incorporating (C or S corporations) or forming an LLC, it’s important to know what to do next. Some states have extra requirements after you’ve completed all of the paperwork for your legal entity to become activated, and depending on the type of legal entity you chose you’ll want to make sure you’ve setup your bylaws or operating agreement. 

Regardless of where your business is located, it’s important to know how to start operating with your new entity at the front of your processes. Registering your business with a trusted partner can take away the worry that often comes with the laws and requirements being different in every state. However, below we’ll briefly cover the things to think about when you’re registering your business by yourself. 

What Every Business Should Do After Legal Formation

After you’ve completed all of the paperwork and filed it with your state, both corporations and LLC have a few similar steps that everyone needs to think about. Next, we list out the ones that every single business should keep in mind as you start operating under your new legal entity. 

Open a Business Bank Account

One of the best protections a legal entity can provide you personally, as the business owner, is the separation of business assets and personal assets. This financially helps keep you and your personal property safe from any poor business performance. In order to fully protect your personal assets, you’ll need to make sure that your finances aren’t mixed with your business finances at all. 

Creating a business bank account allows you to easily pay your bills and know how much cash your business has on hand at any given time. It’s a good idea to immediately open a business bank account as soon as you have all of the legally required paperwork. This includes both the registration of your business with your state and typically your federal employer ID number. 

Obtain Your Federal Employer Identification Number (FEIN)

Your federal employer identification number, or your federal tax identification number, is a unique nine digit number given to you by the IRS. This gives the government an opportunity to know who you are when you pay taxes and pay your employees. This is a requirement to obtain if you have and pay any employees at all, including yourself (unless you pay yourself only through profit distributions). 

You can apply online through the IRS website, via fax, or by mail. If you’re an international business owner you can apply via telephone during specific times. The responsible party for each business looking to obtain a FEIN must be an individual and not another legal business entity. 

Setup Business Payroll

If you have employees, you should setup your business payroll quickly upon receiving your federal employer identification number. You don’t want to get behind paying employees and you also don’t want to personally pay anyone out of your own account once you’ve incorporated or filed the paperwork for your LLC. You don’t want to give any reason to believe your personal and business assets should be mixed together. 

Setting up business payroll can be done a number of different ways but we recommend finding a software that you like and using it to help you through the process. Various software products will do all the payroll calculations and tax filings on your behalf so that you don’t have to add another headache to your business operations. 

Notify All Business Partners of Your Legal Entity Change

If you’ve been operating under a partnership then you’ll need to make sure every single partner receives written notification of the change of your business’s legal status. This should include copies of all the paperwork, showing exactly what it means for each partner and how much of the new business everyone owns. 

Start Operating Your Business

Now that you’ve legally formed your business, it’s time to start operating with your legal name or DBA (a name you’ve registered with your state for “doing business as”)! All of your practices moving forward should take into account the fact that you’ve now registered your business. 

This will mean something different for every business but outside of the clear financial changes (such as operating from a business bank account), your business may need to change the name you’re using on all communications. Your state may have unique rules that you’ll need to be aware of before operating your business so that you stay compliant, so it’s likely best to check with an attorney or a partner who specializes in business formations.

What to Do After Incorporating

If you’ve formed an S or C corporation, then your requirements after you incorporate differ slightly from other business types. The things that these types of businesses will need to do after they file include: 

• Review Incorporation Documents: Make sure everything you’ve filed was inputted and filed correctly. You don’t want to rely on information that wasn’t included in your incorporation documents. 
• Make Sure You’ve Completed All Steps: Some states might require additional steps to make your incorporation complete. Make sure you fully understand what those requirements are, or if your state even has any. 
• Create a Corporate Minute Book: Keeping meticulous records will be very important for your business moving forward. This starts with keeping minutes of each board meeting, which can be kept inside of your new corporate minute book. 
• Hold an Organizational Meeting: You need to hold your first organization meeting to formally announce the business structure and to adopt bylaws, which is an important step to finalize your incorporation.
• Adopt Bylaws: Adopting bylaws by which the business will operate is a legal requirement for all corporations. These will become important as the business operates moving forward and none of these should be taken lightly. 
• Issue Shares of Stock: Ownership in corporations is given via the issuance of shares of stock. When you incorporate you need to decide how many shares the business has (you can create more in the future) and who owns how many shares, based on the percentage of ownership each person or entity has in the business. 

What to Do After Forming Your LLC

Forming an LLC is a bit different than incorporating. If you’ve created an LLC, then it’s important to do these things after you’ve finalized the paperwork with your secretary of state’s office: 

• Review LLC Documents: This is similar to incorporating, but you need to make sure that all of your paperwork was completed correctly and that you understand what it all means. 
• Make Sure You’ve Completed All Requirements: When you form an LLC your state may have requirements to finalize your formation and make it legally valid. For example, some states require you to make a public post in a local newspaper that your business has been formed. Make sure you fully read your state’s requirements after you form your LLC to make sure you’ve abided by all requirements. 
• Create an LLC Minute Book: Formally documenting everything that happens in your business, or at least your big decisions, will be important moving forward. This is especially important if your business has multiple owners. The difference from a corporation is that LLC’s are not legally required to hold annual meetings and keep minutes. It’s still a good idea to organize the decisions of the business though. 
• Hold an Organizational Meeting: Every new business should have an initial meeting to layout the organizational structure of the business. For an LLC, this is a good time to adopt an operating agreement. 
• Adopt an Operating Agreement: Most LLCs will be required to draft and execute an operating agreement which the business will live by. Check out our article to understand the differences between an operating agreement and corporate bylaws. 

This is a pretty inclusive list of all the things you should be thinking about to either finalize the formation of your business or to start operating after your legal paperwork is complete. Using a service, like ours, takes a lot of this out of your mind because we provide the information and packages necessary to get all of the requirements out of the way. Register your business with us today and we’ll provide the peace of mind that your work is being fully completed!

Frequently Asked Questions After Incorporating or Forming an LLC

You may have more specific questions about whether or not you should do something after incorporating or forming your LLC. We’ve put together a nice list that’s inclusive of pretty much anything that you might be thinking about, which is relative to this type of activity. Check out our frequently asked questions if you don’t see the answer you’re looking for in this article.

Below is an excerpt from our book Startups Made Simple: How to Start, Grow and Systemize Your Dream Business. Learn more about the book here. 

Leadership should be easy if you have a clear vision and you communicate clearly to your team what needs to get done and it will just get done, right? Wrong. Welcome to human behavior in the 21st century. You would be amazed at how hard this can be in the modern workplace. Business is suffering from an accountability crisis in my opinion. It is sometimes hilarious the extent to which some employees will go to avoid accountability or even making the most simple of decisions and how leaders let them get away with it. 

Remember, if your employees are also not owners in the company, there’s little motivation for them to work beyond the bare minimum unless they are incentivized in other ways. I would estimate that 80–90% of employees do not like to be held accountable or go beyond the bare minimum. This is not me being mean or pessimistic, it’s just the new normal and the reason why the definition of a good leader can be different depending on if you’re an owner or employee. Employees often think someone holding them accountable is being a jerk, or at best, too demanding. Ask anyone who manages people for a living, and you will not likely get much disagreement on this. 

Most employees don’t understand the sometimes existential terror of owning a business, making payroll, the threat of lawsuits, being responsible for the livelihood of others, and the dozens of various other issues business owners go through. A lot of people only want their paycheck and to “clock out” at the end of day and not think about work. (And business owners are certainly jealous of this some days!) There’s nothing wrong with this, but we do need to find a good middle-ground between “clocking out” and having basic accountability for the job during working hours. We don’t expect them to be responsible for the company, just accountable for their particular job so you can count on them to get the job done. 

Building an Accountable Team

How do we fix this? Almost every modern book, article, or guru tends to hold the employer responsible for this and recommends all kinds of engagement tools to make people want to do their jobs. I’m sympathetic to this mindset, especially in poorly run companies where you have dysfunctional management, unclear goals, or five different bosses. 

However, I’m going to recommend something radical for a startup with limited resources: Hire people with an accountability mindset from the beginning and then build accountability into your company. You don’t have the time or resources to prod or beg people to do their jobs and deliver on promises; you need people who can get things done correctly and on time.

1. Hire for accountability. If you want people to be accountable, make sure you hire for it. This means putting exactly what needs to get done in the job description along with the standards they will be held to. Mention accountability in the job description, in interviews, and when training. Make it clear this person is accountable for the defined results, and if they do not achieve them, there will be consequences. People who like to be held accountable will usually tell you, and in fact, are eager to demonstrate that. 
2. Define accountability. Related to the above, it would be insane for you to hold someone accountable for something that is not clear, defined, and measurable. Make sure you’ve written and trained on exactly what you expect, what standards you have, and how you will measure them. For example, if you have a receptionist, describe how visitors are to be greeted (what to say, how quickly you greet someone, etc.) and seated, or how phones are to be answered (what to say, number of rings to pick-up, etc.). You can only blame yourself if you’re not clear and haven’t defined correct behavior.
3. Use the language of accountability, and get it in writing. Vague language gets vague results and confuses. Don’t say “get that to me ASAP;” say “I need that by close of business Thursday.” Don’t say “we should fix this;” say “okay, write me up a one-page summary of this problem and your recommended solutions and have to me by close of business Friday via email.” When assigning tasks, make sure you both agree what the final result looks like and it’s written down, whether it’s a final design or 20 cold calls per day, it needs to be something concrete that you can say: Is this done, yes or no? 
4. Reward accountability. There’s a lot of disagreement on the effectiveness of bonuses, gifts, and “spiffs” to employee motivation and accountability, but I believe they are effective if used properly. If you can reward the staff for work done correctly (no missed deadlines or standards) and especially beyond the standard (for example, great client testimonials), then I think that’s one way to help build an accountability mindset in a small business.
5. Correct lack of accountability. Nobody likes to punish anyone, and in fact, I think a lot of accountability problems are the leaders’ fault for allowing bad behavior to continue; they don’t like holding people accountable themselves! As discussed in The New One Minute Manager by Ken Blanchard, correction can be as simple as a quick conversation, a written warning, and a well-known, documented “three strikes” rule that means you will likely be terminated if we have to revisit a problem after three times. 
6. Pay and treat them Well. As we’ll discuss more in Step 5, you can’t expect to pay bottom dollar and get top-dollar performance. At the minimum, try to provide the many non-compensation benefits I recommend. If you’re a complete jerk, then you’re going to have a hard time, as we’ve discussed earlier in this chapter. 
7. Teach the Founder Superpowers. As mentioned many times, if you can create a founder mindset in your staff with things like Agency, Productivity, Good Decisions, Good Communication Skills, etc. then they will naturally tend to be more accountable because they will start thinking like a founder, which means thinking like a problem solver.

A depressing fact for employees who don’t like accountability is that outsourcing and other market pressures are only going to make jobs more competitive, so there will be little room to hire people who can’t get the job done. There are literally millions of educated, English-speaking people coming online every year from all over the world, and they’re incredibly eager to work. There are now overseas accountants that charge $5/hour online, yes $5/hour, which is one tenth what I used to pay a bookkeeper just a few years ago.

While I don’t personally prefer this, in the fragile startup phases, you sometimes need to look overseas for the help you need if you cannot find it or afford it domestically. Personally, I recommend building accountability into your organization, and if you can hire great domestic people, they will outperform the overseas employees, and many times the cultural fit is so much better that it’s worth the added expense. Either way, there’s little excuse for hiring staff who don’t believe in accountability.

This was an excerpt from our book Startups Made Simple: How to Start, Grow and Systemize Your Dream Business. Learn more about the book here or see our previous excerpts here.

Below is an excerpt from our book Startups Made Simple: How to Start, Grow and Systemize Your Dream Business. Learn more about the book here.

Communication can be seen as a way for you to get results, connect with your team, and make sure everyone is one the same page and rowing in the same direction. Good communication skills are critical to a startup; those who cannot communicate quickly, clearly, simply, and effectively will be at a massive disadvantage. A lot of companies are starting to realize that good communication skills, especially written (which is very important in the age of digital and remote communication), is one of the top indicators of an employee’s success. I believe good communication skills are even more important for founders. 

Why is communication important? You might have the clearest vision, solution, expectations, or insight in the world, but if you can’t communicate that to others (customers, employees, vendors, bankers, etc.) then you can’t persuade them to follow you, to understand your point, or why they’re even showing up for work everyday. 

Also, as your company adds people, the complexity of communication explodes exponentially. The book Scaling Up by Verne Harnish discusses this: 

“Think back to when your company was just the founder and an assistant with a plan on the back of a napkin. This start-up situation represents two channels of communication (degrees of complexity), and anyone in a relationship knows that is hard enough. Add a third person (or customer or location or product), and the degree of complexity triples from two to six. Add a fourth, and it quadruples to 24.

Expanding from three to four people grows the team only 33%, yet complexity may increase 400%. And the complexity just keeps growing exponentially. It’s why many business owners often long for the day when the company was just them and an assistant selling a single service.”

If there’s one thing you can expect from a successful CEO (and his or her managers) it’s that they focus on a very few things and tend to say the same things over and over. This is not because they’re boring or close-minded, it’s because they know that they need to repeat these things over and over so they become part of the culture of the company and gets everyone rowing in the same direction, especially as communication gets more complex. 

Communicating things like the company vision and goals, the company values, and the best practices over and over is how you get these things in the DNA of everyone working with you, and it’s effective. It’s why your parents likely said the same things over and over as well and why you can probably quote many of those from memory. 

Finally, a good founder will detect when communications are bad or are going badly (perhaps in a confrontation among your team) and step in to improve the situation or call a time-out for consideration at a later time when things are calmer. 

Writing Skills

Communication skills, especially reading and writing, are becoming more and more valuable for many reasons. Most of our communication is written, more now than ever, even in text messages and chats. It’s also expensive and a huge time waste to have to repeat or clarify yourself and to answer the same questions over and over. If you’ve ever been on an email thread, chat, or text with someone who just “doesn’t get it,” you know how frustrating and wasteful this can be. 

While it solves many quick issues, try to avoid your instinct to pick up the phone so you can develop your written skills. Improving your writing is usually a simple matter of increasing the volume of your writing. Tell your team to put things in writing so they can clarify their ideas and thinking. Writing is so powerful that writing this book actually greatly clarified and simplified many systems I already had in place. Read that again. I’ll provide some helpful information on this in the Chapter Resources. 

Persuasion

There are very few founders who would deny that being persuasive is a great skill to have. Every great salesperson is persuasive, and while it’s not fair, all things being equal, if there are two people competing, the person with the best persuasion skills will get the contract, the sale, the partnership, or even the date. If you’re persuasive, you can probably sell something even before it exists. This is a big part of selling your idea to others, and we’ll revisit this in Step 4. People underestimate the power of persuasion, in my opinion. 

Style and Tone

Electronic communication and social media have been both a blessing and a curse. While these new ways of quickly communicating and connecting have brought about many great things, one thing that has definitely fallen on the wayside is the subtlety of face-to-face and even phone conversations. Here’s an example from Cameron Herold in his book Double Double:

“I didn’t say you were beautiful.” 

Now, I have no idea how you read that in your mind but there are many ways to interpret this text, and it usually depends on the mood of the person reading it. Now, re-read it, but put the emphasis on a different word each time. Example: “I didn’t say you were beautiful” has a much different vibe than “I didn’t say you were beautiful”. 

People will read things in their mood (they may be having a terrible day) and misinterpret even simple sentences, so it’s important to review your communications for tone and how they may be perceived. It’s not what you say; it’s how you say it. 

It still amazes me how short or rude some people communicate these days (even employees); it’s killing your chance at getting what you want (for example, a promotion). At the very least, use basic “please” and “thank you” etiquette every time in written communication to make sure nothing is misunderstood. People have been fired or lost friends for less, believe me; style and tone are important.  

Finally, you as a founder have to set the example and make sure the communications themselves are not overwhelmingly negative to begin with. For example, if you find out your team is not following a clearly written rule or procedure, there are a couple of ways to inform them:

1. You can do an in-person or phone meeting and rip their heads off. The point will be taken and perhaps will stick, but since there’s no written record of it, you can’t reference it again, and your team is probably either scared or mad now, making things worse. They were probably so terrified that most of the message was lost. It wasn’t written, so it’ll likely be forgotten in a week or two, and there’s no record to refer to later. 
2. You can do an in-person or phone meeting and be incredibly nice and gracious. The point will be taken and perhaps will stick, but since there’s no written record of it, you can’t reference it again. Your team may or may not change their behavior, but who cares because you heard one thing and somebody heard something else. Search online for “Yanni vs Laurel” to see what I mean about people hearing different things from the exact same sounds.  
3. You can write the team an email or memo that says, “Hey, geniuses, nobody’s following the XYZ procedure, and I’ve told you like ten times about this. Anyone not following procedure going forward will be terminated.” The point will be taken, and there’s now a nicely written record of you informing everyone (which is good, meaning you can reference it later if the behavior has not changed), but the tone will probably just terrify everyone and likely be counterproductive. 
4. You can write the team an email or memo that says, “Team, we’re having some issues with the XYZ procedure not being followed, and it’s creating problems both for us and our clients. The procedure is attached to this email, and we’ll discuss at our next team meeting. Please be prepared for questions.” This is a) in writing for accountability b) clear and short, explains why the procedure is important c) puts the responsibility on the employee for reading the procedure d) subtly warns that they had better read it and be prepared because we’re discussing it at the next meeting (but does not berate them). That’s when the in-person component will be the most well received and effective. 

Now, Option 4 above doesn’t always work, and that’s when a formal written warning and perhaps even anger may be appropriate. The main point is that effective communicators have a clear, direct, but usually friendly style about them, and this seems to get better results overall. 

Improving Communication Skills

Everybody has their own particular style or preferred method of communicating, and they all can be made effective. Here’s what I’ve learned are the best ways to improve your communication skills. Note that this is always a work in progress (I’ve made huge mistakes on this front), and the key is to keep improving. I know some great CEOs who can communicate in one sentence what can take others a paragraph. That’s a sign of a great communicator. 

1. Same picture in everyone’s head. If I’ve learned anything over many years, it’s that what you know and how you think can be completely different from what your team knows and thinks. Something might be crystal clear to you, and your employees may even say it’s clear to them, but in reality, they have a completely different vision of the concept, idea, project, or task in their head. Knowing this should reinforce how important it is that you make absolutely sure that everyone has the same picture in their head and are talking about the same thing. A good way to do this is to make someone repeat back their interpretation of what is being communicated. 
2. Listen more than you speak. Founders tend to be fast-moving and many have little patience for too much “conversation over action.” Try to overcome this tendency and make sure to listen carefully to people, especially your customers and team. Often, your customers or team won’t speak up unless heavily encouraged (especially introverted employees), so always ask for feedback and for any questions they might have. 
3. Keep it short and simple. The best communicators keep it short and simple for easy understanding by your intended audience, especially in business writing. Remove unnecessary words and information. Don’t overwhelm people with information that is not actionable right away. 
4. Focus on clarity. Ask yourself, “What am I trying to say?” and work from there. 
5. Repetition until it hurts. Your vision, one-sentence strategy, values, principles, best practices, and goals should all be so familiar to your team that they could repeat it word for word. At Amazon, they call these “Jeffisms” because CEO Jeff Bezos endlessly repeats them. 
6. Watch style and tone. As discussed earlier, style and tone can be massively misinterpreted and it’s important to monitor. Light and friendly is best: thanks, no problem, we’ll take care of it, thank you very much, glad to help, sorry, my fault, etc.
7. Be the example and set expectations. If you’re an effective communicator and use proper style and tone, this will filter through your company. Set expectations: If you don’t expect a reply to your emails on weekends, let the team know that. I work best late at night, and everyone knows I don’t expect a reply until their working hours. I’ll call or text if something is urgent. 
8. Over-communicate at first. When starting out a new company, a new job, a new idea, or simply implementing a new policy, lean toward over-communicating so you know the message or ideas are received. You can tweak things later based on feedback or intuition, but this is way better than under-communicating. The billion-dollar merchant account company Stripe requires all their employees to CC a group email address for all internal communications so communication is out in the open and searchable. Employees then learn over time which conversations should be actively monitored or reviewed later.
9. Write things down. As we’ll go over later, writing things down, especially procedures, policies, and FAQs, is a great skill to acquire. There are a lot of “tele-philes” and “in-person conversation” junkies who love to talk all day or use the phone (usually as a crutch for poor written skills), but if you don’t have it written down, there’s no accountability, and you’ll have to repeat yourself over and over until the end of time. Make your team write things down for accountability, and be suspicious of those who resist this. Even an email can be referenced easily. 
10. Make written things discoverable. You’re not a mind-reader and neither is your team or customers. If you get asked the same question more than a few times, then it’s time to put things in writing and post them where they can be easily found. We use an intranet and Google Docs (all searchable) for teams and a thorough, searchable FAQ for our clients on our website. Tip: Have your team set their browsers to an intranet page and post memos, notices, and announcements there instead of email. This keeps announcements “front and center” and unclogs email inboxes.
11. Systemize to reduce unnecessary communication. Jeff Bezos said, “Communication is a sign of dysfunction. It means people aren’t working together in a close, organic way. We should be trying to figure out a way for teams to communicate less with each other, not more.” This may sound counterintuitive, but this is an important point in the world of email, text messages, and constant chat. Too much communication and interruption can massively disrupt workflow and Real Work throughout the organization. It’s important to have clear systems and procedures to handle the never-ending flow of basic questions, clarifications, and expectations of how things work. Writing things down and making them easily discoverable will help reduce the volume of communication and is one reason why they’re critical to a well-functioning business. 
12. Use a daily huddle. You can write things down and be more effective at communication, but this doesn’t stop interruptions throughout the day. The daily huddle is a good solution to this problem. It’s a quick 5–10 minute team meeting (1 minute per person, do a separate meeting for each team) in the morning for everyone to report what they’re working on, and if they’re stuck, have questions on their work for the day, etc. Done properly, this should massively reduce interruptions and issues through the day. 
13. Use communication channel best practices. Not all communication channels are appropriate or ideal for every situation. Learn how your business functions best. Some examples:
    • Chat = Urgent; should last only a few minutes, otherwise the concept is too complex and switch to phones 
    • Email = 2–24 hours (not weekends; use phone/text if something requires weekend interruption). If you need a reply sooner or before close of business, ping via chat.
    • Phone = complex thing easier discussed live, but ping somebody or schedule the call, don’t just interrupt 
    • Urgent/personal to an individual = phone/in-person
    • Urgent to the team = chat via the main or “general” channel
    • Intranet  = not urgent but important for all to see and reminders of memos and updates 
    • Meetings = In-person or video 
14. Use abbreviations and acronyms. One way to speed up communication in your organization dramatically is to abbreviate and shorten long or complex concepts and phrases (this especially helps for speeding up written communication). For example, in my company, our customer management system called “Business Entity Management Application” is just BEMA, “Ready to Process” is RTP, “Turnaround Time” is TAT, etc.   
15. Learn persuasion skills. I’ve never heard someone say they regret getting basic conversation and sales skills, especially a founder. Basic persuasion and sales skills will serve you well throughout life, and are incredibly easy to learn. 
16. Encourage good communication from your team. Coach and help your team improve their communication as well. A poor communicator is almost always a poor-performing employee. If you have to repeatedly ask them to communicate something to others or clarify why they didn’t communicate something properly, then you probably need to start planning for their replacement. 
17. Manage bad communication. Inevitably, there will be a fight, argument, or worse that will require your intervention. Make sure to intervene and de-escalate as quickly as possible. Try to resolve things amicably and get to the root of the problem. 
18. Use righteous anger when necessary. Mostly used as a last resort (and often misused by many as a first resort), and provided you’re doing most of the things above, sometimes people are just not getting the point or understanding the importance of something or are overstepping their authority and righteous anger is justified. “This is not our focus right now” may be ignored but “This is not the fucking focus right now, drop it” conveys a different level of importance. Used sparingly, it can be effective.

This was an excerpt from our book Startups Made Simple: How to Start, Grow and Systemize Your Dream Business. Learn more about the book here or see our previous excerpts here.

By Vance Cariaga

A critical step in getting your restaurant up and running is choosing its legal structure. You basically have four choices here —  a sole proprietorship, a partnership, a limited liability company (LLC), and a corporation — though there are variations within each.

Many restaurants start out as sole proprietorships, which means the owners operate as individuals with no separation between personal and business finances. Partnerships are similar, with the main difference being that each partner is liable for the debts and obligations of all the other partners.

No formal action is needed to form a sole proprietorship, according to the Small Business Association (SBA). If you’re the sole owner, you become a sole proprietorship just by conducting business. Even so, you’ll need to obtain all relevant permits and licenses to operate. Contact your state’s Secretary of State office for more information.

No formal action or paperwork is needed to form a partnership, either. You can create one simply by agreeing to go into business with someone else, according to the Nolo legal website. There are a few steps you’ll want to take before proceeding, however. These usually involve choosing a restaurant name, creating and signing a partnership agreement, obtaining licenses and permits and getting an EIN.

Advantages of Incorporating Your Restaurant Business

Even though it’s simpler to form a sole proprietorship or partnership, it’s usually advisable to form a corporation or LLC. That’s because you can separate and protect your personal assets from your business assets and keep from being liable for a partner’s debts. Corporations also get tax advantages not granted to other types of entities.

A good initial step is to decide what kind of company you want to form for your restaurant. Here are the most common types:

• LLC: An LLC is considered a “pass-through” entity, meaning its profits and losses pass through to the owners. It is formed by one or more individuals or entities through a written agreement that details the company’s organizational structure, including management provisions and how profits and losses are distributed.
• C-Corporation: A C-Corp is allowed an unlimited number of shareholders, all of whom are protected from the corporation’s liabilities. C-Corps are taxed on their profits, while shareholders are taxed on the distributions they receive.
• S-Corporation: S-Corps cannot have more than 100 shareholders and can only issue a single class of stock. An S-Corporation’s profits and losses are distributed to shareholders based on each shareholder’s interest in the business. To qualify as an S-Corp, you’ll need to file Form 2553 with the IRS.

When you’ve decided what type of corporation you want to form for your restaurant, you’ll usually take some or all of the following steps:

1. Appoint members or directors.
2. Establish bylaws that outline the corporation’s operating rules
3. File articles of incorporation or organization.
4. Issue stock certificates to shareholders.
5. Obtain relevant licenses and permits.

Required Documents for Incorporating a Restaurant Business

Forming a corporation for your restaurant also requires filing various incorporation and financial documents, including those listed below. Just keep in mind that different states have different guidelines, so always consult your state’s Secretary of State office to learn more.

• Articles of Organization (LLCs only): These are required to establish your restaurant business with the Secretary of State. The information you’ll provide here includes the business name, principal street and mailing addresses and the names and address of the person or persons forming the LLC.
• Articles of Incorporation (corporations): These are similar to articles of organization. The data you’ll provide here includes the corporation name, its principal place of business, the name and address of the registered agent, the statement of purpose and the number of shares and stock classes the corporation is authorized to issue.
• Operating Agreement (LLCs): This agreement sets rules for the ownership and operation of the restaurant business. It should include info on members’ percentage interests in the business, members’ voting power and rights and responsibilities, how profits and losses will be allocated, how to amend rules and how the restaurant will be managed.
• Company Bylaws (corporations): Bylaws are used to document how various parties — including shareholders, officers and directors — will oversee the organization and its operations. Among other things, bylaws should include the corporation’s name, address and principal place of business; the names and types of officers and directors; procedures for amending and adding bylaws; procedures for shareholder, board and annual meetings; and the types and number of stock classes offered.
• Shareholders’ Agreement: This is used by stock-issuing corporations and serves as a legal doc that outlines shareholder rights as well as the duties and powers of management and board members. You should also include rules for issuing new shares, rules governing conflicts of interest and guidelines on how to resolve disputes.
• Stock Certificates: Again, these are only necessary for corporations that issue stock. They should include the corporation’s name, the date shares were issued, the signature of the authorizing entity and the company seal.
• Annual Report: In most states, both LLCs and corporations are required to file an annual report with the Secretary of State’s office. This can usually be done online on the state’s website and comes with a fee. The required information typically includes the company name and address, the names and addresses of directors and officers, the Tax ID number, the business purpose, authorized signatures of registered agents and the number of stock shares issued.

The Bottom Line

Every business is unique and has its own goals and priorities. As the restaurant owner, only you can decide which business entity is best for your business. Make sure to review all options and gain a thorough understanding of the tax implications of each so you can choose the right business entity before you open your restaurant. 

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Author Bio

Vance Cariaga is an award-winning writer, editor and journalist. As a journalist he held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. His reporting earned awards from the North Carolina Working Press Association, the Green Eyeshade Awards and AlterNet. Vance’s collection of short stories, Money, Love and Blood, includes “A Slight Difference of Opinion,” winner of the 2015 Creative Loafing Flash Fiction contest. Another short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. In addition to journalism, Vance has worked in accounting and restaurant management. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina.

Below is an excerpt from our book Startups Made Simple: How to Start, Grow and Systemize Your Dream Business. Learn more about the book here.  

“Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes.” – Peter F. Drucker 

What is Leadership? 

This topic is challenging for a number of reasons. First, the formal definition of leadership, “the action of leading a group of people or an organization,” is pretty obvious but not really useful for our purposes. What we usually mean by Leadership is really Good Leadership where somebody leads a group of people or an organization effectively. 

Further, good leaders get consistent results and Leadership is getting other people to Execute effectively on the Vision (and every leader should have a Vision). Almost everything you read about leadership is a tactic of doing that.

But that leads to the issue of how you define “effectively.” If there’s one thing that’s been a constant source of contention since business and other organizations were invented, it’s that the business owners, shareholders, management, and employees don’t usually agree on what Good Leadership is because it depends on your perspective. (Think unions vs. management.) 

Does a shareholder care if the Leader is inspiring, gets their hands dirty, or has empathy (commonly mentioned traits of good leaders)? Employees may love these things, but a shareholder would be wondering why the CEO is cleaning toilets, working on the assembly line, or crying their heart out about their employees’ problems instead of executing on the company Vision. 

In another example, imagine there is a very laid back and jolly CEO who never really demands much from his staff. There’s little accountability, he pays them well above market rate, gives great benefits, and has almost no expectations or demands in regard to how things are run. Now, this company won’t last long in my opinion (unless they have some “secret sauce” super-profitable business model), but there are many employees who would absolutely love to have a boss like this and would think the CEO was a great leader because their lives were easy and they like the CEO. It’s like the sports team who loves the old, friendly coach who doesn’t demand much from the team, but has never come close to winning a championship. 

On the other hand, you have dozens of famous military generals who are considered great leaders simply because they won battles and wars. It didn’t matter if the troops even remotely liked the general (more likely feared or respected); the fact was that the general won, and that’s what matters in war. After hearing that Ulysses Grant (the ultimately victorious Union general in the Civil War) was a drunk, Abraham Lincoln famously offered to send him and his other generals a barrel of their favorite whiskey. Lincoln (and most presidents, I assume) liked people that won and didn’t necessarily care about how they did it or if the troops thought their general was cool. 

Are Most Great Leaders Jerks?

“There are no wishy-washy rock stars. No wishy-washy astronauts. No wishy-washy Nobel Prize winners. No wishy-washy CEOs.” – Karen Salamansohn, author of Ballsy

As I mentioned in the beginning of this chapter, there’s a big disconnect between what people imagine to be a great leader and the actual leaders that get consistent results. The more I research this topic, the more I find that many of the great CEOs you read about every day are actually pretty insufferable and difficult to work with, not quite the inspirational leaders portrayed in the media. Sure, there are examples of friendly, warm types, but I’m finding out a lot of that was only public relations. It seems most of the greats had what most would consider a pretty demanding demeanor or outright personality flaws.

Almost every new bit of information, even when I was specifically looking for information on the kind-hearted CEOs, ultimately showed that these people, again speaking in generalities, are hard-driven and demanding at the least. Many are, counter to stereotypes, extreme micromanagers. My company deals with entrepreneurs all day, and let me say that they can be very challenging because they’re usually very demanding by nature. 

Here are a few examples, and remember that most of these are founders that started small.

• Jeff Bezos, founder of Amazon.com (these are just a few from the book The Everything Store by Brad Stone): 
  • “As many of his employees will attest, Bezos is extremely difficult to work for. Despite his famously hearty laugh and cheerful public persona, he is capable of the same kind of acerbic outbursts as Apple’s late founder, Steve Jobs, who could terrify any employee who stepped into an elevator with him. Bezos is a micromanager with a limitless spring of new ideas, and he reacts harshly to efforts that don’t meet his rigorous standards.” 
  • “Jeff Bezos fit comfortably into this mold. His manic drive and boldness trumped other conventional leadership ideals, such as building consensus and promoting civility. While he was charming and capable of great humor in public, in private, Bezos could bite an employee’s head right off.“
  • “Bezos was prone to melodramatic temper tantrums that some Amazon employees called, privately, nutters. A colleague failing to meet Bezos’s exacting standards would predictably set off a nutter. If an employee did not have the right answers, or tried to bluff the right answer, or took credit for someone else’s work, or exhibited a whiff of internal politics, or showed any kind of uncertainty or frailty in the heat of battle, the vessel in Bezos’s forehead popped out and his filter fell away. He was capable of both hyperbole and cruelty in these moments, and over the years he delivered some devastating rebukes to employees.” 
• Steve Jobs, founder of Apple: 
  • Fired people in the elevator and fired people in front of other employees on a whim 
  • Screamed at underperforming executives and chewed out employees at all levels of the company
  • He threw a fit about the color of the vans at his company NeXT 
  • There are stories of him berating reporters, doctors, and others for various reasons 
  • He was so demanding and persuasive that people have called his mindset a “reality distortion field” meaning he could basically convince people that anything was possible  
  • “Imagine that your boss told you straight to your face that your project is dog shit. Next, imagine that this boss is Steve Jobs. Thats what happened to me when I was working as the principal engineer of iPhone software during Apple’s golden years.” – Ken Kocienda
• Bill Gates, founder of Microsoft
  • Got into shouting matches with other tech CEOs
  • Has been described as an “office bully” 
  • Argued with his co-founder Paul Allen so badly that Paul described it “like being in hell” 
  • His successor, Steve Ballmer, was famous for throwing chairs across the room 
• Daniel Ek, founder of Spotify, has been described as “patient yet fueled by an internal intensity that can border on ruthlessness.” 
• Meg Whitman, CEO of eBay, got into a shoving match with a subordinate because she felt she was not prepared properly for an interview by the subordinate. 
• Andy Grove, founder of Intel, “was known to be so harsh and intimidating that a subordinate once fainted during a performance review”. 
• Elon Musk, founder of SolarCity, SpaceX, and Tesla, has been described as “thin-skinned and short-tempered” and that his version of reality is similar to Steve Jobs—completely distorted. He’s been quoted as saying “not enough of you are working on Saturdays.”

You may be thinking surely this is just a few random CEOs, this is not how most other great leaders operate, right? However, as discussed in the book Who: The A Method for Hiring by Geoff Smart and Randy Street, a thorough analysis of 313 CEOs demonstrated that:

“Boards and investors have a tendency to invest in CEOs who demonstrate openness to feedback, possess great listening skills, and treat people with respect. These are executives who have mastered the soft skills. We call them “Lambs” because these CEOs tend to graze in circles, feeding on the feedback and direction of others. Boards love Lambs because they are so easy to work with, and in fact, in our study Lambs were successful 57 percent of the time.”

That’s a great success rate, well over 50%! This seems to contradict what we’ve discussed, but then there’s this: 

“The second dominant profile that emerged from our analysis was of CEOs who move quickly, act aggressively, work hard, demonstrate persistence, and set high standards and hold people accountable to them. We call these CEOs “Cheetahs” because they are fast and focused. Cheetahs in our study were successful 100 percent of the time. This is not a rounding error. Every single one of them created significant value for their investors.“

So I think my point is clear: Some of the most effective founders and CEOs in the world aren’t exactly the nicest people, and at the least, are pretty demanding. Again, not an excuse to be a raging jerk, but something to keep in mind if people want to guilt you into changing your ways that have proven to be consistently effective. The key is that you must be effective and deliver results to even think you can get away with outrageous behavior. Also, keep in mind that many people that worked for the above-mentioned CEOs absolutely loved them so a lot of the complaints about these people may include a healthy dose of “sour grapes” or even people who were poor performers. 

That said, in modern business, a jerk or someone who is constantly firing people is very unlikely to get consistent results. An egomaniac who can’t communicate or make good decisions is unlikely to get consistent results. Someone who has no idea what they’re doing doesn’t get consistent results. I say “consistent” because anyone can get lucky or bully their way to one accomplishment. But someone who demonstrates leadership does it consistently year after year. They consistently lead their team to achieve the results they aimed for. 

Many Entrepreneurs are Not Natural Leaders

“If you are a highly charged, hard driving, highly successful entrepreneur, then, quite a bit of the time, you aren’t going to be a lot of fun to be around, especially for the thin-skinned. But you should not change. I’ve come to appreciate that the successful entrepreneur is a unique and delicately balanced combination of dysfunctions, bad habits, and personality defects as well as incredible genius, daring, and drive. You don’t want to tinker with that. What works for you works, and you need people around you who can adapt to the strange creature in their midst; you shouldn’t be adapting to suit them.” – Dan Kennedy

Related to the previous topic, I’m just going to come out and say it: A lot of entrepreneurs, including myself, are not great natural leaders, and frankly, can be pretty disagreeable if not outright insufferable. They vastly prefer working on the Vision of the company and working with ideas, products, or customers instead of managing the mundane day-to-day of the business, especially dealing with the management of employees. I want to reiterate that this is not a license to be a jerk (there are a lot of failed jerks out there), just a notice that many entrepreneurs need to be careful when taking leadership because it might be difficult for them because others usually don’t think like them and that tends to cause frustration. 

The good news is that even the most aloof entrepreneur can learn the basics of leadership, at least until they can hire a “people person” who can take the day-to-day management of the company to the next level. Personally, it took me way too long to pick up the basics, and I still struggle, but after 17 years of consistent profits, growth, and making the INC5000, I’ve realized that I’ve reached the limits of my leadership abilities and need to step aside to focus on what I’m good at and hire someone who actually likes running the day-to-day of the business. Great serial entrepreneurs know this and will hand off their startups as soon as they can. 

The book Rocket Fuel by Gino Wickman goes deeply into this dynamic by separating what he calls Visionaries from Integrators. The Visionary is almost always the entrepreneur who founded the company and typically gets overwhelmed or impatient with the management of the company and dislikes “chasing squirrels” and managing people. An Integrator, on the other hand, absolutely loves managing people: motivating, coaching, and holding them accountable. If this situation sounds familiar to you, then you’ll want to look into hiring an Integrator sooner rather than later, certainly before 17 years go by. Some people are both a Visionary and an Integrator but this is extremely rare. 

So What is Great Leadership? 

For our purposes in a startup, I think we need to consider both perspectives when defining a good leader: the consistent desired results they achieve (which is what the owner and shareholders care about) and how effective they are at getting their team to want to achieve those results. If the team admires or even likes the leader, than that’s even better, but none of those things really matter if you’re not getting results (and especially if you go out of business because then nobody has a job). Or to put it simply, we need results, but we need to remember employees are real human beings, and their opinion and motivation should matter if you want to build a great company. 

Also, there are so many effective leadership styles that it’s important you find your own that works best for you. There’s the stereotypical outgoing “people person” leader who can rally the team to a great cause, the general who gives the rousing speech to the troops. Then there’s people like myself who realize I’ll never be that “people person” but work with what I am good at and try to focus on solving problems, creating clear goals, and removing roadblocks for my team. I think many different styles of leadership can be effective, so don’t limit yourself to the stereotypes you see in media or read about in books. 

So, where am I going with all of this? I’m defining Leadership so that it is clear and also identifying the Leadership Superpowers so you can effectively learn them. If you struggle with some of them, then you may need to hire someone else to manage and lead your company at some point. 

That said, I believe these are the Leadership Superpowers:

• Superpower #13: Good Communication Skills
• Superpower #14: Accountability Mindset
• Superpower #15: Team Development and Motivation
• Superpower #16: Courage to be Disliked

This was an excerpt from our book Startups Made Simple: How to Start, Grow and Systemize Your Dream Business. Learn more about the book here or see our previous excerpts here.