I am regularly surprised by how many people don't realize they are running a business. If people pay you for a product or a service, you are running a business. It's that simple.
I'm a musician in addition to a lawyer, and musicians, I have found, are quite keen on maintaining this blind spot. The trouble is, the laws around businesses don't care whether you acknowledge you're running one. Kind of like that officer doesn't care if you meant to speed through that school zone. The laws are going to apply regardless of whether you acknowledge them.
Anyone running a business should form a business entity to protect themselves, to practice safe business. That way, if you find yourself in trouble, it's not your personal money/car/house/guitar collection on the line, it's just the whatever the business owns.
Why are so many people resistant to this idea? Here are a few of the responses I've gotten:
"Sure, ya, I'll get to that when I have more money to spend on it."
"That sounds like a lot of work; I'm not really interested in keeping up with all of that."
"I just don't have the money to hire a lawyer to do it."
To the cries of poverty, I say, BS. I get that you have to make priority decisions for your money. But I've also seen the bar tabs and the equipment purchases just for fun; they belie the claim that you don't have enough money. Which leads me to believe the primary resistance is that it feels foreign and big and daunting to think about legal words like "business entity" and "secretary of state registration." And I get it, but they're just words to describe a fairly simple process.
Do you renew your vehicle registration every year?
Have you ever signed a lease for an apartment?
Do you have a drivers' license?
I'm guessing you said yes to at least one of those questions, if not all. So, basically, you've already participated in the types of activities you would as owner of a registered company.
Renewing your registration is like fling your annual franchise report, it's a super short simple form you fill out online.
An apartment lease is a contract, and you'll enter into many contracts as a business owner, the only question is, are you signing as yourself (and putting your personal assets and future income at stake), or are you signing as a business entity.
It may have been a while since you got your first drivers' license, but there are way more hurdles to getting a drivers' license than to registering your company, which requires one simple form.
Just do a little Googling to find all of the information you need. And if you're still not feeling confident moving forward by yourself, many lawyers offer free initial consultations, so go ask some questions. But please don't pay services like LegalZoom. You're basically paying them to do what you could have done on your own without the extra fee. It may even be worse than figuring it on your own - lawyers like me have to clean up LegalZoom messes all the time.
Here's a checklist to get you started if you're gonna tackle it on your own:
Pick a name.
If there are names similar to yours already registered with the state, pick a new name.
Decide on your registered agent.
Register your LLC on SOSDirect. The registration fee is $306.10. Wanna see what's on the form before you get online - it's here. You can also mail this in, but it will take weeks to be registered. Online, it typically takes 48 hours.
Prepare a company agreement. While I suggest hiring a lawyer for this (especially if you have partners), there are a ton of company agreement templates online. Look specifically for a Texas company agreement. Something is better than nothing - a court could invalidate your limited liability if you don't have a company agreement.
Open a new bank account for your business and run your income and expenses through the bank account. Pay yourself like an employee. Mixing your business and personal funds could also invalidate the protection from registering your business.
You can do this.
You are a rock star.
You are a kick-ass businesswoman/businessman who is fully equipped to take on whatever challenges lay before you.
You have got this.
...... but if you're still not sure of your ability to tackle this work solo, talk to someone who is. If that's me, you can reach me click here.
Disclaimer: Ashley is only licensed to practice in Texas and this advise applies to business registering in Texas. If you're not in Texas, there are probably some pretty baller small business lawyers in your state - go find one.