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If you're going to turn your hobby into a legitimate business, you need to accomplish a number of tasks to get yourself up and running. Just like any other business, there are special filings to submit, accounts to be opened and laws that need to be checked.

Let's look at some of the basic steps to take when shifting from weekend hobbyist to full-time entrepreneur.

Business Filings

Formation

There are many business entity structures you can choose for your business. The most common are sole proprietorships, limited liability companies (LLCs) and corporations.

As a sole proprietor, there is no separation between you and your company. They are, for all intents and purposes, the same thing. However, most sole proprietors still want to operate under a business name that suits their company. To do so, you would file a Doing Business As (DBA) registration with your Secretary of State. Doing so allows you to do business as Jane Doe's Bar and Grille, instead of just Jane Doe.

To form an LLC or corporation, you must file formation documents with your Secretary of State. Many states (although not all) allow online formation. You will need to appoint a registered agent on your formation document. A registered agent accepts service of process on behalf of your business.

Drake's Tip: Look up your business name online before filing. If you try to register a name that is already in use, your filing will be rejected.

EIN

An Employer Identification Number (EIN) is obtained from the Internal Revenue Service and is used when filing federal taxes.

Not every business needs an EIN. A sole proprietorship, for example, does not. Corporations and partnerships, on the other hand, must have one. The IRS provides specific EIN guidelines regarding which entities need to apply.

To apply for an EIN, you visit the IRS website. There is no charge for an EIN, and the process takes less than ten minutes.

Bank Account

Your company will need a business bank account to process monetary transactions. To set up one, contact a local bank branch, and ask which documents they will need to set up a business account. Most banks will want to see copies of your formation documents, your EIN, a business plan, and your operating agreement or corporate bylaws.

If you intend to accept payments online, you should also consider opening a PayPal account. PayPal allows your customers to pay without supplying their private banking information.

Self-Employment Insurance

Most Americans are aware that health insurance can be obtained through the Health Insurance Marketplace as mandated by the Affordable Care Act. Self-employed entrepreneurs are no different. However, there are specific programs and credits you may be eligible for as a self-employed individual:

SHOP Marketplace

Medicaid and CHIP Programs

If your business qualifies you for a professional or trade group, you may be eligible to purchase insurance through an industry association. The National Association for the Self-Employed provides insurance options to members and will work with you to find the best plans in your state.

For entrepreneurs over 50, AARP offers insurance plans.

Zoning Laws

Many hobbyists who launch their own business start from home. Home-based businesses are bound by the same laws as any other business. To check what laws apply to your business, call your local City Planning Office.

Most cities place restrictions on the types of physical changes you can make to your home, the types of signage you can display, the number of visitors and employees allowed in your home and space for customer parking.

In addition, certain types of business activity is prohibited in residential zones.

Website

If the idea of managing a website intimidates you, don't worry. Every company starts from the same place and faces the same challenges online. The best way to think of the internet is that it is a means by which you can connect to your customers.

Domain: Your first step is to check on the availability of your domain name (the name of your website). If the domain you want is already taken, you may need to get creative. It's important to remember that a domain name is like the name of your business. A simple, clear domain will be easier for your customers to find than something complex and overly-clever.

Software: Software services like WordPress and Joomla allow you to build your website using pre-designed templates. This saves you from having to understand coding. Think of your website software as the tool you will use to construct your virtual storefront.

Web Host: A web host (such as Siteground, InMotion or iPage) provides a physical location where your website is stored. Think of a web host as the digital land where your digital storefront stands. Services like WordPress offer free web hosting, but you are only “renting space” through their system. You don't “own” the hosting, and your site can be taken down at any time without warning. Paying for a web host gives you total control of your website.

Directories: Listing your business with online directories like Yelp and Yellow Pages not only allows your customers to find and review your company, it also aids search engines like Google in identifying your business.

Drake's Tip: Make sure all your contact info is the same across the internet. This allows search engines like Google to properly identify your company's various sites and pages

About the Author(s)

Drake Forester

Drake Forester writes extensively about small business issues and specializes in translating complex legalese into language everyone can understand. His writing has been featured on Fox Small Business, AllBusiness.com, Score.org and many other websites and blogs.

Legal Strategy Officer, Northwest Registered Agent
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