How to make your business legit in seven steps

1. Choose a business structure

One of the most important steps you can take is picking a business structure. It formalizes your business and lays the groundwork for other important decisions. Your chosen structure will impact how you pay taxes, raise capital, and protect yourself from risks.

Options include sole proprietorship, partnership, limited liability company (LLC) and several kinds of corporations. Consider consulting with tax and legal professionals to help determine which business structure makes the most sense for your business.

2. Get a business address

Protect your personal privacy by getting a separate business address. If you use your home address, it will be publicly listed as the business address after you register your business. If you don’t have a physical office, consider opening a post office box instead. Some government entities may still require you to provide a physical address instead of a post office box, so check your local requirements.

3. Sign up for a business tax ID number

Similar to a Social Security number for individuals, businesses need an Employer Identification Number (EIN) from the Internal Revenue Service. Head to IRS.gov to sign up for an EIN, or federal tax ID number, for your business. This number comes in handy when you open a bank account, apply for business licenses and pay federal taxes.

Check with your state’s Department of Revenue to determine whether your business needs a state tax ID, too. Not all states require them.

4. Register a business name

Once you've chosen a name, make it official by registering it with your local and state governments. Do your research, too, to ensure there aren’t existing businesses with the same moniker. Most states have a business name availability tool as part of their online business services pages that you can use to make sure your business name isn’t already taken. The Small Business Administration (SBA) recommends registering your business in four ways:

• An entity name to protect you at the state level
• A trademark to protect you at the federal level
• A “doing business as” (DBA) to show you’re the real deal
• A domain name to protect your web address.

5. Apply for business licenses and permits

Business licenses and permits demonstrate legitimacy to your customers. Check with federal, state, county and local governments to see if your business requires this authorization. If a federal agency regulates your type of business activity, then you will need a federal license or permit, the SBA explains. States generally license more broadly, covering everything from restaurants and retail to construction.

6. Open a business bank account

Don’t combine your personal bank account with your business funds. It’s smart to separate your personal and business finances, making it easier to track company expenses and income.

Account options include business checking, savings, credit card and merchant services, which allow you to accept credit and debit card transactions. Having a business account also helps your company establish a credit history and can offer limited personal liability protection for you and your customers.

7. Get business insurance

Consider insurance to safeguard your personal finances and assets. In the event of unexpected occurrences such as property damage, liability claims, or employee injuries, insurance can provide financial support. Note: Workers’ compensation laws and regulations differ by state. For small businesses, a business owner's policy can offer comprehensive coverage by combining property, liability, and business income insurance. This can help mitigate income loss if your business experiences disruptions due to unforeseen events.

By taking these steps, you can set yourself up for success by reassuring customers of your business's trustworthiness and legitimacy.