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Forming a New Company


Thinking of starting a new company? Here are a few things to think about. The type of company you want to form, legally speaking.

Here's a basic list of what I see that are most common. Of course speak with an accountant or your attorney to see what is best in your case. There's not a one size fits all type of company formation.

SOLE PROPRIETOR

An individual who owns and operates a business normally in his or her legal name and in which there is no legal distinction between the owner and the business. In some jurisdictions the proprietor can use a trade name or business name other than his or her legal name, but the individual is also required to file a ‘doing business as (dba)’ statement with local authorities. Every asset of the business is owned by the proprietor and all debts of the business are his or hers as well.

PARTNERSHIP

A voluntary contract between two or more competent persons to place their money, effects, labor, and skill, or some or all of them, in lawful commerce or business, with the understanding that there shall be a proportional sharing of the profits and losses between them.

CORPORATION

An artificial person or legal entity created by or under the authority of the laws of a state or nation, composed, in some rare instances, of a single person and his successors, but ordinarily consisting of an association of numerous individuals, which is regarded in law as having a personality and existence distinct from that of its several members. Corporations may own assets, and incur liabilities that do not pass to its shareholders personally.

LIMITED LIABILITY COMPANY (LLC)

A business structure type that combines corporation limited personal liability with partnership or sole proprietorship single taxation. Each shareholder files his or her own separate tax return. Profits and tax benefits are split any way the stockholder and shareholder entities choose.

LIMITED LIABILITY PARTNERSHIP (LLP)

A partnership in which some or all partners (depending on the jurisdiction) have limited liability. In an LLP, no partner is responsible or liable (directly or indirectly) for an obligation of the partnership due to another partner’s misconduct or negligence, thus shielding innocent members of these partnerships from liability.

Here are a couple of resources to think about when forming your company.

  • LegalZoom.com

  • Secretary of State in your base state [google Secretary of State]

Once you have your company formed with your base state the next step is to file for a tax identification number often referred to as an EIN, TAXID or FEIN.

This is simple and easy to do right on the IRS web site.

If you're thinking of starting a trucking or broker company set up your company formation first! THEN apply for authority. It makes the whole process simpler when you begin this way.

Trying to file for a name change is not always as simple as it may sound. The hiccup in the process is usually insurance. Insurance companies may require a new downpayment and often increase your premiums in the process.

I see many applicants who enter the wrong information in the Legal Name and DBA fields. DBA stands for Doing Business As, like another trade name for example.

Your account could read: Express Trucking LLC dba ET Trucking

Here are examples of what NOT to do when filing for authority:

  • Legal Name: None

  • Legal Name: Self

  • Legal Name: No

  • Legal Name: Personal name when in fact the company is an LLC

  • DBA: Date of birth

  • DBA: Tax ID Number

  • DBA: No

  • DBA: None

These are not company names but rather a response if the applicant simply does not know how to answer the question.

Just remember the legal name is the name you chose as your company name. If it's an LLC it should be filed with your Secretary of State.

DBA is not often used. But if you do have a trade name other than your legal name enter that in that field. Otherwise leave the field blank.

We know the application is not intuitive. If you're ready to apply for your authority click below for the type of account you wish to apply for.

Let us know when you're ready to file for your authority! We will make sure the application is completed correctly the first time.

Feel free to give us a call and we can chat about your new venture. Our number is 303-482-2965.

by Rex Evilsizor & Penni Royston