I'm Ben Gruber

2013 / 10 May

Opening a Business and Business Account


A few months ago I started the process of legally forming my business. ┬áThe first part was actually extremely easy. I went to LegalZoom and read about the different types of business formations and combined that with my prior knowledge of startups. I was going to own 100% of the company, I wanted to report the LLC earnings as part of normal income and I never planned on selling the business – so after a little bit of debate, I decide to go with a single member LLC. I filled out a 10-12 page form from LegalZoom online, paid about $300 and waited. A couple of weeks later I received my EIN number.

An EIN number is like a social security number for your business and once you have it, you can begin to build up your business entity. My first step after receiving my official papers was to get a business bank account to make all my transactions with my potential customers more professional. It turns out this is also fairly easy. You have to fill out a single page form, give your EIN and personal social security number and wait for approval. Once approved, you get an email from the bank, which contains your online banking id and account number. However all of the passwords and pins necessary to use this information are sent in the mail about 3 weeks later. Once, I got those, I hit the bank and went online to check my account, added my startup capital and was on my way. I also hooked my Paypal, Square and all of my monetary based transactions to the account.

About a month later, I got a letter from LegalZoom. I still had a couple things I had to do. I had to sign a bunch of official papers from the Federal government and one from my registered agent (everyone needs one of these that has a business – it’s about $90/yr on the cheap end). I also needed to complete the final piece of formation from New York State. I had to publish notice of my business in two New York publications.

This is were the process is not as easy or at the very least, does not make sense. From my understanding I ran into a straight up government shake down. Here are the basic stipulations. You have to publish notice of your business in two publications for 6 weeks at the cost of $1,200-$2,000 (for NYC). The notice must contain your official LLC name, contact information and basic information about what type of business you will be conducting. On top of the actual ad space you are buying you have to file a certificate of publication for both newspapers which costs about $50 each.

The concept I get. It is to let the community know that there is a new company in town, so that they can beware of scams. However, who looks for this type of thing in a physical newspaper or any publication for that matter nowadays? But, it is even more silly. You can not just advertise in any publication. You have to do it in one approved by the state. So, you have to call the state office and they tell you where you have to run the ad and when. Basically, you are just giving money to the state government that then skims a little off the top and gives the rest to a publication that is in good graces with them (note: this is just me venting, I am not sure of the actual detail of how it works and I don’t mean to be casting any bad light that is not warranted).

Anyway. I decided to hold off for the moment on publishing in order to save on the money until I got things going. So, I investigated what it means to have an official EIN which is a Federal Tax ID but not complete the State registration process. There is not a lot of information on this unique area at all, but from what I can gather, my business is protected by federal laws, but not by State laws. This seemed okay at the time when I had a job and was not concentrating on the business, but now that I have things going forward, I am going to pull the trigger, bite the bullet and pay the $2,000 and get officially registered.

 

 

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