Opening a business bank account is a simple four step process that can typically be completed in less than an hour, if you have prepared beforehand. You can open a business bank account either online or in-person, but doing so online will typically take longer and could require additional documentation. 

Before you open a business bank account you’ll need to provide an employer federal tax identification (FEIN or EIN) and your legal registration documentation. If you haven’t yet incorporated your business, MyCompanyWorks can do this for you with a simple three step process that only takes you a few minutes to order online.

You can open your business bank account by following these four steps: 

Step 1 – Determine What You Need in a Business Bank Account

There are many things you should consider before you move forward with opening a business bank account. First of all, what type of bank account do you need? While most businesses start with a business checking account, a savings account might also be a consideration if your situation dictates. The fees your bank will charge should also be a strong consideration on which type of account is right for you. 

The most common types of business bank accounts are: 

• Business Checking Account: This is an account you can freely move money in and out of as your business needs occur. If you have lots of transactions that you need to make with deposits and bill payments then this is the account that is most likely right for you. This is also the most common type of business bank account.
  
• Business Savings Account: This is an account that you can make deposits to where you’ll earn extra money every month for keeping it in your account. You’ll be limited on the number of withdrawals you can make though, so this is only for businesses not looking to make frequent payments out of the account.
  
• Free Business Checking Account: This type of account operates just like a normal checking account but there are no maintenance fees and may not have a minimum account balance requirement. These accounts are typically online business checking accounts so it is right for newer businesses that don’t need a physical branch nearby.

Once you’ve determined the account that you need then you should determine how much you’re willing to pay every month for maintenance and security. Having a physical branch nearby is important for businesses that take on a lot of cash that needs to be deposited on a consistent basis. If you just need a business checking account to sign up for affiliate programs for your online business or to get your business off the ground then an online free checking account may suffice. 

Step 2 – Find the Right Bank for Your Business

Now that you know the type of account you’re looking for, you can narrow down which bank you’d like to work with. Oddly enough, the bank choice is made by proximity more than anything else for the majority of small businesses. Most businesses just want a bank with a name they can trust that is close to their base of operations. This makes transactions easy in the event the business owner has to go into the bank. 

While many business owners are satisfied with proximity, you probably should consider other things when choosing the right bank to partner with. There are a number of factors that should be considered when picking the bank, such as the banking fees and other costs. The factors we recommend include: 

• Bank Network: How convenient is the bank’s network to your operations? Are there plenty of free to use ATMs and deposit locations that meet the needs of your business? This is especially important to investigate if you’re opening a business bank account with an online provider without close proximity to a branch location because you need to know where you can withdraw funds from without paying a fee.
  
• Online Experience: How easy is it to transact business using an online website or phone app? Considering how much business is transacted online these days, this should be an absolute must that meets the demand level of your business needs.
  
• Costs: How much are the fees? Are you going to be paying a maintenance or security fee, and if so how much do you pay? Do your fees increase if your balance dips below a certain amount? These are all important things you should ask before signing on the dotted line and making your first deposit.
  
• Integrations: Small businesses typically use an accounting software like Quickbooks. Your bank should make your life easier, not more difficult. So, you should make sure that whatever accounting software you need, it integrates with your bank. If it doesn’t then you, or your accountant, will likely regret it later.

Once you’ve taken these things into consideration, and all other important aspects of the banking relationship that is important to you, then you’ll be ready to make a decision. Remember, the right bank doesn’t need to have a big name to be the right partner for you. For example, many credit unions and online banks have been great partners for businesses of all sizes. 

Step 3 – Gather the Right Documentation

Before you open a business bank account you’ll need to make sure that you’ve correctly incorporated your business. The bank will ask for your corporate documents before you’re able to make your first deposit. Having the right documentation with you at the time of application will speed up the entire process, and enable you to walk away with a business bank account the same day you apply, in many cases. 

The documentation that you’ll need to gather could include (call the bank before you visit to make sure you have it all): 

• Employer Identification Number (EIN)
• Social Security Number (if you’re an unincorporated sole proprietorship)
• Business Licenses
• Business Name Filing Document (if applicable)
• Partnership Agreement (if applicable)
• Articles of Incorporation or Organization (and appropriate banking resolution)
• Explanation of Your Business
• Funds to Deposit
• Some online banks may require more documentation to verify your identity

You can obtain most of this by incorporating your business ahead of time. MyCompanyWorks has been trusted to complete more than 60,000 business formations and counting. In just three easy steps you can be on your way to receiving all of your documentation so that you can immediately open a business bank account. 

Step 4 – Deposit Funds With Your Bank

Once all of your documentation is verified, the bank will process your application and open your account. To finalize the account opening process you’ll be required to deposit funds into your new business bank account. Many banks will not require a certain deposit amount while others will require up to $1,000 as the minimum opening deposit even if they don’t require a minimum balance during the life of the account. It’s important to check with your bank before going through the process so you’re prepared to finalize this portion of the process. 

Once your funds are confirmed into your account then you’ll be able to immediately access them through the checks that your bank will provide. Some banks will immediately provide a debit card while others will send them in the mail within 7-10 business days. The length of time it takes for your funds to show up in the account will depend on the bank you choose and the method you choose to deposit your funds with. For example, cash will be available a lot faster than a wire transfer from another bank (even if it’s your personal bank). 

Benefits of Opening a Business Bank Account

There are many benefits for both you, as a business owner, and for your business when you open a business bank account. The most important one is that you should always keep your personal and business funds separated. This can protect you from personal liability in the event that something goes wrong in your business. For example, if your business files for bankruptcy in the future then mixing your personal funds with your business funds could put your personal assets at risk and attainable by the business’s creditors.

Other than the legal ramifications of opening a business bank account, you can also benefit from being able to easily pay your business’s bills and making it easy to pay your employees. It keeps your money safe and allows you to start building a banking relationship that you could utilize for needed loans to grow your business in the future. 

Getting Started

If you’re ready to take advantage of the benefits of having a business bank account, you can get started today by registering your business. MyCompanyWorks will do this for you and you can get started immediately with our simple three step process. All you have to do is select a company type and your state, fill out a quick online form, and then you’ll receive the needed documents to open a business bank account. 

One of the most popular ways to protect businesses from potential legal liability is to use multiple business incorporations. This typically entails a business putting assets in different LLC’s or corporations. The biggest benefit to business owners is that if you have a big mess up, or financial loss, in one part of your business it doesn’t have to impact all of your assets. 

How Multiple Business Entity Strategies Work

A multiple business entity strategy typically includes two different types of entities. The first is an operating company and the second is a holding company. The operating company as access to, and typically possession of, the assets but doesn’t have ownership of them. The holding company owns the assets but does nothing else. 

This is beneficial because if the operating company takes on legal liability during the course of their operations, it is very difficult for anyone to get access to the assets the holding company owns. So the business can continue to operate after surviving a lawsuit since the assets are protected because the operating company takes all the risk. 

For example, retailers use this multiple business entity strategy on a per location basis. This is often done by retailers to protect each physical location as its own business, with its own assets. So if one location has a massive slip and fall lawsuit, the results are limited to an impact on that individual entity.

It’s important to make sure that your holding company doesn’t actually do any business outside of creating and funding any needed operating companies. If the holding company starts doing day to day operation activities then the corporate veil can be pierced, causing the holding company to be liable for many wrongdoings. 

If the operating company needs to purchase additional assets after operations have begun, the holding company can act as a lender in order to fund the activity. This should be done with a lien that runs back to the holding company to show the loan, and paid back in the same manner any other business loan would be. This is done so that it doesn’t look like the holding company is responsible for operating activities. 

How to Create a Multiple Business Entity Strategy

The first thing you need to do is to create a holding company. This can be an LLC or a corporation (but not an S-Corporation which is not able to own or be owned by other entities), depending on your personal situation. After consulting with your attorney and/or accountant, you should create and fund your holding company. We recommend using an industry expert to get your business incorporated.

Once the holding company is created then that company should create and fund the operating company, as needed. This way the operating company is directly owned by the holding company so that the holding company can maintain the most important assets. 

This also gives the business owner the added personal protection from any potential debts the business way accumulate. With the holding company funding the operating company, there won’t be any personal guarantees on any debt that is required. This is a huge benefit to owners looking to create and fund businesses without wanting to personally take on debt. 

A Common Legal Mistake With Multiple Businesses

One common mistake that many businesses make is that they only consider the tax consequences of how to set up their businesses. There can be a nice tax advantage in creating a single LLC and then registering different DBA’s (doing business as) instead of creating a unique legal entity for each one. The problem with this is that you don’t get the same legal protections so if one struggles then you could be risking the assets of all the others. 

Assets the Holding Company Should Own

The most basic answer to the question on what assets the holding company should own is that it should own all of the important ones. If you have something you don’t want to lose if everything were to go wrong, then those things should be owned by the holding company. Below is a list of things that you should consider the ownership for. 

1. Real Estate – Office buildings, investment properties, or land. 
2. Proprietary Software – Software you currently sell, or would like to in the future.
3. Patents – Patents for any product you’ve established can be leased to the operating company. 
4. Websites – If the websites are vital to the process or existence of your operating business. 
5. Trade Secrets – Anything that may give your business a competitive advantage and be considered an asset. 
6. Trademarks – You don’t want to have to rebrand your business if your operating company loses the ownership rights to a valuable name. 
7. Any asset that doesn’t have to be owned by the operating company

Thinking about the legal structure when you’re setting up the company assets could save you a lot of unnecessary headaches later. The key thing to remember is that even if the operating company needs an asset in their day-to-day work, it doesn’t mean that entity has to own it. you can always set up the holding company on a consulting or leasing basis to provide the other entities for what is needed. 

Who Should Use a Multiple Business Entity Strategy

A multiple business strategy is typically right for entrepreneurs or businesses with assets from multiple operations. While this isn’t an all-inclusive list, there are a few specific types of situations that will find this strategy to be helpful. Those who should consider using a multiple business entity strategy include: 

• Serial Entrepreneurs: Chances are if you like to start businesses pretty regularly then you’ll have a holding company to house your ownership in each of the businesses. As a serial entrepreneur, most of your businesses likely won’t have anything to do with one another so it wouldn’t make much sense to house them all together. This strategy is a natural fit with this situation.
  
  
• Businesses That Own Real Estate: Regardless of what your core operation might be, owning real estate is a nice way asset to have to secure the future of your business. If something were to go wrong, you wouldn’t want to lose the real estate that has grown in value since you purchased it. Instead, keeping the asset in a holding company and leasing back necessary space to the operating company is a much safer strategy to protect your real estate as the value continues to increase.
  
  
• Businesses Selling a Proprietary Asset: Many businesses are only operating in order to sell something that they’ve created. These days, that routinely means a piece of software that they’ve developed. Keeping the ownership of the software, or other asset, in the holding company instead of the operating company can mean better overall protection and decision making since you know that your most important asset isn’t at risk. Sadly, many businesses have lost those assets during rough times because it was the only asset the operating company could monetize to pay off creditors.
  
  
• Businesses Wanting to Start a New Product or Service: Sometimes businesses decide that their customers have a need that isn’t being met by anyone else. This can result in a new product or service offering. For example, a software company that decides they can adequately consult with the same customers they currently target. These businesses should separate the two operations, as they are different businesses. This is a good operational strategy and a good legal strategy.
  
  

These are the most common instances where you’d want to use this multiple business entity strategy, however there are more. You should consult with a lawyer to know how your legal setup will impact your business strategy going forward. 

Multiple Business Entity Frequently Asked Questions (FAQs)

The multiple business entity strategy can be complicated but if you’re planning on owning multiple types of assets or businesses then it is a vital one to adopt. We’ve put together a few of the most common questions to help you better understand the process so that you can better use it to protect your assets. 

What’s the primary purpose of a multiple business entity strategy?

Asset protection. If you own assets then you want to have a holding company that has no liabilities other than to you personally, and that has no direct interaction with customers of your operating company. 

How many LLCs are too many? 

There isn’t a limit to this legally, but you should use as many as you can operationally and financially manage. We’ve seen retail businesses use an LLC for every single one of their hundreds of locations because that’s what makes the most since for them. 

Can I use this strategy to protect my personal assets? 

Kind of. You can use something very similarly personally where you put your personal assets into LLC businesses to protect yourself, but this strategy is designed to protect business assets more than personal ones. 

How does my operating company get access to needed assets in my holding company?

The holding company can lease assets to the operating company so that proper access to run the business is established. For example, if your holding company owns your office building then the operating company can rent out the space. 

Getting Started

Now that you can see how important it is to protect your assets from any potential liabilities, you can start the process today by either starting your LLC or corporation from scratch or by adding a second entity to make the strategy work. Either way, you should use a business you can trust to get these set up. Use the source over 60,000 other businesses have used and follow our simple three step process today.

Transferring real property, or other assets, into an LLC or corporation can help you protect yourself from personal liability. This is typically done with property you anticipate having another party involved with in some way, such as a rental property. Transferring property can help protect you from personal legal liability.

The process for transferring property to your LLC is similar to selling your property to a another party. You’ll just need to completely transfer ownership to the corporation instead of an individual, like in the event of a sale. It’s a simple three step process that we detail below.

Step 1: Form an LLC or Corporation

You can’t transfer your real estate property, or any other personal property, into your LLC or corporation until you’ve actually formed a new legal entity. This can be a complicated process if you’re not familiar with the proper documentation or if you’re not up to speed with your state’s rules and regulations. Typically you’ll need to register a business name and file the LLC or corporation paperwork with your secretary of state’s office.

NOTE: For the remainder of this article, when we refer to an LLC, the same concept applies to a corporation.

If you haven’t completed this process before then you’ll want someone familiar with the formation documents involved, especially if you have any partners or other members of your LLC. You don’t want to lose any of your own rights to the property because you weren’t sure how to structure the LLC or what basic clauses you needed in your partnership paperwork.

Using an experienced company,like ours that has completed 60,000+ business formations, is important to make sure you’re completing the LLC formation process correctly. Getting an LLC formed and filed isn’t necessarily difficult but it does require a certain level of expertise to make sure nothing is missed that could hurt you or your business later.

Step 2: Complete a Quitclaim Deed

At this point you may want to consult with an attorney to make sure you complete the right deed for your personal property transfer. If you’re transferring real property than most of the time you’ll want a quitclaim deed that shows this transfer of ownership. When executed, a quitclaim deed transfers any interest the grantor has in the property to a grantee. In this case, you will be the grantor and your LLC or corporation will be the grantee.

There may be certain laws surrounding compensation for the transfer in your state, which is another reason you may want to consult an attorney. The laws would be what compensation is required when transferring property from one party to another. There also could be a transfer tax, depending on your state, if there is no compensation paid from the LLC for the property.

Step 3: Record Your Quitclaim Deed

In order to receive full legal protection for your personal assets when you transfer the property to your LLC you’ll need to record the deed at your local city or county clerk’s office. This recording creates a public record of the property transferring from you to the LLC, so the world is put on notice that you no longer own it and can’t be held responsible for anything that happens with it.

Recording the deed requires either going down to your local clerk’s office or mailing the paperwork, depending on the rules of your state, and then paying a nominal fee. This is an important step that must be done because otherwise there is no notice to third-parties that may have a legal dispute with the owner of the property in the future, which is a legal requirement to pass legal liability to a new owner.

Other Steps to Take When Transferring Property to Your LLC or Corporation

While the required steps to transfer property to an LLC don’t make for a long list, there may be more things you need to consider and take care of that depend on your situation. Not every single person looking to transfer property to a legal entity will need to complete these tasks, but they should be understood to make sure they aren’t a necessary step for your process.

Additional steps you should keep in mind if you decide to transfer personal assets to an LLC include:

1. Change Any Property Leases: If your property is being rented out, and you’re already under contract with a tenant, then you need to make sure you change all legal documents and leases to note who now owns the property (the LLC). In fact, you may want to just get brand new leases signed that are in the name of your LLC instead of yourself.
   
   
2. Notify Your Lender: If you have a mortgage on the property then it is likely that you have some language in your agreement that stipulates a requirement of you notifying them when ownership changes. This could cause a rate increase, but you always want to make sure you’re being compliant with previous agreements.
   
   
3. Obtain a Tax ID Number: You may not have to obtain a tax id number, but chances are that if you’re wanting to move property into an LLC then you’re likely doing something that requires this to happen. If your LLC has more than one owner, if you have employees, or if you meet other requirements that vary by state then you’ll need to get this tax ID number when you create your LLC.
   
   
4. Open a Business Bank Account: Opening a business bank account will help you further separate your personal assets from the assets in your LLC. If you move personal assets into an LLC to protect yourself legally then you won’t want to put that at risk by mingling your personal and business funds into a single account. Instead, open a business bank account to keep it all separate and keep your other personal assets safe from anything that happens with the LLC.

Pros & Cons of Moving Property Into an LLC

There are things you need to keep in mind when you decide to transfer personal assets to an LLC. For example, your actions may result in certain tax consequences, which we’ll summarize below. While the legal protections are nice, it’s also important to note that you may end up hurting yourself financially if you decide to transfer a property you currently have a mortgage on. We detail the most important pros and cons of transferring personal property into an LLC below.

Pros of Moving Property Into an LLC

The pros for moving property into an LLC include:

• Personal Liability Protection: If you’re dealing with another party with your property, like having a renter, then it makes a lot of sense to use an LLC or corporation to shield your personal assets from anything that may happen with the property. This way if there is a lawsuit later over an event on the property, like an accident, then no one will hopefully be able to come after your personal assets, like your personal home, for damages.
  
  
• Protect Your Property From Your Property: If you have multiple properties that you’re renting out then it is a benefit to keep each one in a separate LLC or corporation in order to shield each one from potential liability of the others.
  
  
• Tas Advantages: There can be certain tax advantages to owning real property in an LLC and running any money making activities with that property as a business. This is something you should consult a CPA on to determine what could be the most beneficial to you.
  
  
• Better Defines Partnerships: If the property you’re moving is jointly owned by more than just yourself, then moving it to a multi-member LLC or corporation is beneficial. Not only can there be tax benefits this way but it also clearly defines the ownership and management responsibilities within the legal entity. This makes your partnership much more clean and easy to navigate, especially if anything goes south later.

Cons of Moving Property Into an LLC

The cons of moving property into an LLC include:

• Tax Consequences: While there can be certain tax benefits, there can also be certain tax consequences of moving property. You may incur a delayed tax consequence or if multiple people own the property then you could trigger a tax event for someone else. Make sure you speak with a CPA to fully understand how this could help or hurt you from a tax standpoint, and consult with any partners to make sure it works for them.
  
  
• Mortgage Rates Could Increase: Many owners of rental property will get a good rate on their mortgage by purchasing the property as an individual. If you later transfer the ownership over to a business, then you would likely no longer qualify for the much lower rates your lending institution gives to individuals. You probably have a legal obligation to share this transfer to your lender, but when they find out it could cost you a lot of money by your rate being increased.
  
  
• Insurance Costs Could Rise: One thing that many people don’t consider when transferring property to an LLC or corporation is insurance. If the ownership of your property changes to a business then your insurance carrier could make you change any current personal insurance policy to a commercial policy. These commercial policies typically have much higher premiums, because of the nature of businesses to litigate more frequently than individuals.

Getting Started

As we mentioned above, the first step to transferring property to an LLC or Corporation is to register your LLC or corporation. You can do this today by letting us help. It’s a simple three step process where you select your company type and state, you fill out a simple online form, and we send you back all of your paperwork. Get started today so you can realize the legal protection of an LLC with your property!

Funding your company can be difficult as a new LLC or corporation because you don’t have a financial history for potential lenders to make a lending decision from. Instead, you’ve got to find creative ways to fund your company in order to get the capital you may need to either launch or grow your business. The best funding methods for you will likely depend on where both you and your business currently are financially.

From bringing all of the money yourself to using your retirement funds or getting a large bank loan, we’ve summarized each of your best options below to help you find the method to use when funding your company.

9 Best Ways to Fund Your Business

The form of financing that is right for you will depend on a number of factors that include your business’s history, future strategy, and whether you want to take on business debt. Traditional loans available to new businesses will typically all require personal guarantees, which means if your business folds and can’t meet the debt obligations then you could be required to repay the funds personally.

Before deciding which funding method is for you, it’s important to go over each one in greater detail and know exactly what you’ll be getting your business into. Once you’ve chosen one, make sure you understand your agreement and read through all the fine print before accepting any money so that you can identify your obligations and what you might be giving up.

1. Bootstrapping

Bootstrapping is essentially self-financing. You, as the business owner, are utilizing everything you currently have available to fund your company. This typically means depleting your personal savings account and possibly cashing in your retirement accounts in order to finance your venture.

The best thing with bootstrapping is that there are no limits to how much of your own money you pour into the business. If you’re wealthy then the sky’s the limit and you don’t have to make any debt payments, which could handcuff your business early on. This is the best scenario for all business owners willing to put a significant amount of their personal money into the business.

2. Friends & Family Loans & Investments

This is the same as bootstrapping except you’re relying on other people who you are close to in order to get the money you need. Essentially you will ask for a loan from your friends or your family members who have money to invest. This can also be structured as an equity investment where your investors will get ownership in the business in exchange for the money they provide.

This is a tough way to get the money you need because if your business fails then it could damage your relationships with people you’re close to. Many business owners also don’t know individuals with significant disposable income to invest. If you go this route you need to make sure that you document every transaction so that there aren’t any negative tax implications down the road for your business.

3. Rollover for Business Startups (ROBS)

A ROBS allows you to invest your deferred retirement funds into your business without paying income taxes or early withdrawal fees. This is not a loan but if your business fails then you could lose the funds you invest. ROBS financing is not widely-known but if you’re willing to risk your retirement accounts then it could give you the capital you need without strapping your business with expensive debt payments.

A ROBS has setup fees that you must come up with on your own (about $5,000) and there will be a small ongoing fee to make sure that your transaction is monitored correctly. This financing method is typically right for individuals with at least $50,000 in a deferred retirement account and are willing to risk it for their business. Due to the specialty of the transaction you’ll need to make sure you partner with a firm that is experienced in ROBS transactions, which many accountants and lawyers are not.

4. Home Equity Loan (HEL)

A home equity loan is given to you based on the equity you’ve built in your personal home. This is something you must personally guarantee, but the proceeds can be used to fund any business. With a HEL you can typically borrow all of the equity you’ve built in your home up to 80% of the home’s current market value. You’ll need a minimum of 20-30% equity in your home in order to get a loan at all.

This isn’t a way to get large amounts of cash into your company but it is a way to get the startup capital you may need to get off the ground quickly. This is a loan so there will be monthly loan payments that you’ll personally be responsible for. Make sure you understand your obligations before accepting any money. This is one of the most affordable loans you could potentially qualify for that allows you to put the money in your business.

5. Angel Investors

Plenty of angel investors, on sites like angel.co, look to invest in businesses that they believe will be successful for the long haul. Angel investors are similar to venture capitalists in that they invest money in growing businesses and they look to eventually exit the investment with a profit. They differ in that they’ll likely ask for less involvement on a day-to-day operations than a VC. Angel investors also typically invest less than $1 million and they don’t need immediate growth like many VC’s require.

The problem with angel investors is that they don’t invest in many businesses. Many investors that have the capital may only invest in a single deal per year, if any, so finding the right match can take a very long time. You’ll need a proven business model that has huge growth potential. This is great for businesses that meet those standards because it is an investment and you won’t have to take on debt to get access to the capital you want.

6. Credit Cards

Credit cards are almost always the first form of debt you will be able to qualify for. If you have even average credit then you could get access to these revolving lines of credit to help cover the costs of business expenses as they pop up. When your business starts to get income for a few months then your business could qualify for credit lines that may be larger than what you can qualify for personally.

These cards carry large interest rates (12 – 29.9%) and can weigh down on your business in the early days if they’re not managed properly. Credit cards are best used as ways to cover unexpected expenses as opposed to funding initial business costs. In other words, these are good to apply for and have on hand in case something happens but the other funding methods will typically be a better fit for a new business.

7. Bank Loans

Your local bank may be your best bet to fund your business plan if you’re building a brick and mortar retail business. Local banks love to invest in their community and if you have a solid business plan, a good credit history, and are going to keep the business in your community then you could qualify. Bank loans are more difficult to get for new businesses today than they were 10 or 15 years ago, but they are still available. This is a great way to fund larger business costs that involve real estate because banks love lending on real estate.

You will have to personally guarantee any bank loan so it is imperative that you know what you’re agreeing to before you take the money. You’ll need to make sure you feel comfortable with the loan payment in the event your business fails to make the payments. These loans will also likely be secured by your own assets, such as your personal home. This is a great way to get access to larger funding amounts of $500k – $1 million, but they can be risky for the business owner.

8. SBA Loans

SBA loans are guaranteed, but not given, by the Small Business Administration (SBA). These loans are difficult to qualify for but carry some of the lowest business loan interest rates in the country. They are great for growing businesses looking to get access to capital to fund growth or to purchase needed real estate.

SBA loans aren’t a good fit for brand new businesses because you have to be in business for a minimum of two years before you can qualify. Your business will need to show growth and that you’ve been profitable for at least the last three months. While you can get access to as much as $5 million, it could be awhile before you qualify for anything at all.

9. Selling Company Stock

Taking your company public is often a goal of businesses that scale quickly. This means allowing your business to sell ownership shares on the open market. Some businesses use this as a tool to take money out of the company while others do this as a way to raise funds to grow faster. You can raise millions of dollars if your company is large enough.

While this option used to only be available for large corporations, small businesses can now raise money through the sale of company stock. In 2012, Congress passed a bill known as the JOBS Act or the CROWDFUND Act, which enables small businesses to use crowdfunding to issue securities. This makes it possible to raise smaller amounts of cash without having to take your business public.

Getting Started

Before you go down any of these paths to get the right funding for your company, you’ll need to first register with the right business entity. You can get started today by registering your LLC (or corporation) with us. It’s a simple three step process where you select your company type and state, you fill out a simple online form, then we send you your paperwork. Get started today!

One of the most daunting aspects of doing business as an entrepreneur is coming to the realization that your business is failing and needing to decide whether to salvage or close it for good. Business owners must often review their operations to determine how sustainable the business is. When the business is no longer profitable due to a poor economic situation, strong competition or other factors, it is essential that a business owner knows how to close a business the right way.

The dissolution of a business involves a step-by-step process. Knowing how to close a company will save you from any potential lawsuit, loss of business and personal reputations, and excessive charges. Whether it is an LLC or a corporation or a sole proprietorship, this checklist will guide you all the way through the dissolution of your business.

How to Close a Corporation or LLC

Step 1: Think and decide.

Before arriving at the decision to close your company, it is essential to assess the debt obligations and financial strengths of your business.

Review your current situation. Is there any expenditure that you can eliminate to improve your company’s profitability? Check if there is anything you can do to negotiate the lease, reduce the payroll costs or perhaps lower overhead expenses by finding more cost-friendly vendors. By reducing expenditures, you will also have the opportunity to stay in business or even make your business more salable.

Seek expert advice or do research on the internet. Before finalizing your decision to close your business, speak with an attorney, an accountant or other business advisor. Let your accountant review all financial aspects of your company and the possibility of preventing business failure. If closing your business is the last recourse, an attorney can guide you in complying with all legal requirements.

Step 2: Review all documents.

Whether you are a corporation, an LLC or a sole proprietor, you need to review all documents relevant to your business, including articles of organization, bylaws, and other agreements to determine your next step.

LLCs likely require a member’s approval for dissolution according to the operating agreement. Typically, if the majority supports the decision to close the business, then everyone can push through with the process including settling all accounts, paying all employees and filing the necessary paperwork. It is crucial to know the state laws of the state in which your business is incorporated or registered.

Corporations may also need the votes of its shareholders to dissolve the business. The business documents of a corporation will determine the procedures required for closure.

Finally, once you are sure about closing your business, start contacting your creditors and notify them of your plan. This enables your creditors to compute all outstanding debts. Before selling your company’s assets, discuss your liquidation plans with your creditor and talk about how you want to settle your debts.

Step 3: LLC or Corporation Action

Whether it is a limited liability company (LLC) or a corporation, company owners should approve the business dissolution. With a corporation, the shareholders should accept the decision. If you are wondering how to dissolve an LLC, it is important to have the approval of the members. For small businesses, members or shareholders typically take part in the daily operations and usually are aware of what takes place every day.

The corporation’s bylaws and the operating agreement of LLC outline the needed approvals and the dissolution process. Complying with formalities means that the board of directors should create a draft and render approval of the resolution to dissolve. Following this, the shareholders vote on the resolution approved by the director. These actions are documented and kept in the company record book.

Step 4 File dissolution documents.

After the members or shareholders vote for the dissolution, documents should be filed with the state where the business was registered or incorporated. The dissolution of a company starts with the filing of Certificate of Dissolution, also referred to as the Articles of Dissolution, depending on the state.

Some states require the filing of documents before letting the creditors know or before resolving claims. Other states require your company’s tax clearance before filing the Articles of Dissolution. In this case, the company or LLC has to pay the back taxes first.

Step 5: Cancel licenses, permits, and registrations associated to the business and settle your employees’ wages.

Is your business leasing a space? If so, then you will need to notify your landlord of the termination of your lease. Your landlord may require you to either pay the whole amount of the lease or he or she will find a replacement for your space. This is known as mitigating damages. You would be accountable for the leasing fee from the time your contract is terminated until the time a new tenant leases your space. There are times when landlords allow the payment of termination fee, particularly when the location is on high demand.

Settle what you owe to your employees, including any unused vacation leave and wages. Issue a final paycheck to your employees within a specific period. The US Department of Labor offers links to certain state agencies for you to determine whether your state requires you to pay the unused vacation time of your employees. Depending on how big or small your business is, you will be required to notify employees before closing down the business for good.

Part of closing down your company is filing the payroll taxes. Submit your employees’ withheld taxes to the federal and state government within the allotted time. If you fail to comply with these tax requirements, you may be subject to pay a penalty fee and the government has the power to seize your assets to collect the amount owed.

File all the required federal and state tax information. Consult the checklist that the IRS uses for closing a business to make sure that you meet all tax obligations. Talk to your accountant and determine which taxes to pay.

Step 6: Collect the money owed to your business.

Once you have chosen to close your business, collect the money owed to your company so that you can pay off creditors. Consider calling the debtors to politely request the remittance of their payment. Offer a discount as an incentive for the debtor to settle what they owe to your business immediately.

Attempt to collect debts before announcing your business closure. A debtor may attempt to hold out on settling the debt if he or she has the idea that the business is closing. If you have accounts receivable, sell them to a company that purchases account receivables. Such companies will purchase your debt at a lower value and pursue the collection of the debts aggressively for their own profit. Although you will not obtain the full amount of your account receivables, you no longer need to collect any debt and will obtain access to funds quickly.

If you have any outstanding orders, fulfill them. If you are under contract to offer certain products or services, fulfill them or negotiate. It is essential to discuss matters with your clients concerning their outstanding orders and resolve such matters. If you fail to reach an agreement or compromise, you can be held accountable for breach of contract.

If you have assets or business inventory, sell them. It is important to perform a complete inventory of your assets and start selling them. Offer discounts when necessary to move the products at a greater pace. Consider selling your assets at auction. Holding an auction enables you to sell the inventory quickly without added shipping costs. You may also consider selling them to a consignment store. These types of businesses accept goods and sell them. After selling the good, they will give you part of the sale. Consider selling your smaller assets online. Large items will have higher shipping costs.

Step 7: Settling the claims of creditors.

Creditor claims can either be rejected or accepted by your business. Accepted claims should be settled through payment unless satisfactory arrangements are made with creditors for reimbursement. For instance, a creditor may consent to resolve the claim for 80% of the original amount. With rejected claims creditors should be informed in writing that your business rejects their claims. In this case, the assistance of an attorney is needed.

Step 8: Distribution of remaining assets

After paying off the claims, whatever remains of your assets should be distributed to all business owners in proportion to the ownership share. For instance, if 80% of the business belong to you and your partner has the 20% share, you obtain 80% of whatever remains of the assets. Distributions should be reported to the IRS. If the business has various stock classes, corporate bylaws generally summarize the procedure for distribution of assets to these shareholders.

How to Close a Sole Proprietorship Business

A sole proprietorship is a business owned by only one person and without partners. This means that the owner is legally accountable for all decisions concerning the operation or termination of a business. To close a sole proprietorship, below are the step-by-step processes.

Step 1: Inform all employees.

If your business has employees, inform them of your plan to close the business. A company that has roughly 100 employees has the responsibility to give its employees a 60-day written notice before the closing.

Step 2: Notify your clients and vendors.

Send notifications to your clients and vendors of your plan to close your business. Arrange project completion, payment for invoices and fulfillment of any outstanding contracts. Notify them of the final date of business, the final date of services and provide them with copies of any agreements.

Step 3: Cancel all licenses and sales tax identification number.

When closing your company, you should also cancel your sales tax identification number and any business licenses. Do this through the business licensing department of the state where your business is located.

Step 4: Tax work.

File the final tax paperwork. The complexity of filing relies on the scope and size of your sole proprietorship. Report all income including losses and capital gains.