Choose a Business Name
Determine and Set Up the Business Structure
Here are the types of structures typically considered:
- Sole proprietorship
- Limited Liability Corporation (LLC)
- S Corporation
- C Corporation
An Internet search using “compare business structures” will reveal several different charts from several different vendors that show the benefits and disadvantages for each.
Here are some tidbits to help you with your decision:
- Although a sole proprietorship is often the easiest structure, it puts you at a higher risk for personal liability (e.g., you can lose all of your personal assets if the business fails or you are sued). We don’t recommend it for any business.
- LLCs are easy to start and eliminate the liability risk, but you will have to convert to a C Corporation to accept any outside investment money.
- If you expect to generate more than $100K/year in sales and don’t plan to take on outside investors, an S-Corp can be a very efficient tax structure.
- You can change the structure of the business as it evolves.
Obtain a Federal Employer Identification Number (EIN)
You have to get a federal tax ID if your business is anything other than a sole proprietorship. Instructions for online registration are at the IRS website.
State of Tennessee Requirements
All business types that have employees (regardless of the structure chosen) must get a state tax identification number, and register for both income tax withholding and unemployment Insurance tax. The State of Tennessee has a One Stop Business Resource website that can help you decide on a name, file a business charter, obtain a state tax ID number, and obtain an unemployment insurance number.