Don’t put off starting a new business because you think it involves too much bureaucratic hassle. This is a misconception! In many states throughout the US it is possible to start a company in one day. Here is a list of 5 simple steps to get you started on your new business:
Decide in which state to incorporate
This is a very important decision because it determines under which state laws the company will operate and what its tax burden (if any) will be. Most businesses with brick and mortar operations (i.e. a restaurant or construction company) should incorporate in the state where they are active. Their physical presence may limit their choices. On the other hand, internet or e commerce businesses have the option of choosing the most beneficial jurisdiction. How companies are taxed varies greatly by state. Each state has its own laws and reputation.
Many e commerce companies incorporate in Delaware because of the state’s pro business environment. Delaware does not charge corporate income tax on money earned outside the state. Delaware law does not require that companies list the beneficial owners of the company with the Secretary of State. Furthermore, Delaware case law is extremely corporation friendly. The prestige of a Delaware corporation is recognized worldwide.
Select the name of the business
Choosing a name is your first marketing decision. Good names communicate the nature of the business in a memorable way. Avoid names that tell you nothing about the company and what it does. Keep in mind that businesses cannot use names (and sometimes even similar names) that are already incorporated in your chosen state. Inc. Plan (USA) will be happy to preclear any names you may be considering.
Decide between a limited liability company (LLC) and a corporation
This can be a difficult question for many businesses because there is no one-size- fits-all solution. Corporations are well suited for businesses seeking to attract outside investments. Their share structure allows the company to be divided into many saleable portions which can be efficiently sold on stock markets.
Alternatively, LLCs require less bureaucratic steps to remain in compliance with state law and federal law. The number of owners of an LLC are likely to be fewer and their ownership interests can be reallocated without issuing and repurchasing shares.
It is hard to say which structure is better from a tax point of view.
LLC’s tax returns can be filed as part of personal returns, similar to s corporations. There is also greater flexibility, in that an LLC can be taxed as a sole proprietorship, a partnership, a regular corporation or an s corporation.
Corporations are taxed more formally, either as regular c corporations, or, if certain criteria are met, as s corporations. Corporations can also be subject to double taxation, meaning the corporate profits are charged taxes then owners must also pay taxes on dividends. These situations can be avoided in most situations by owners taking more profits in the form of salary.
One tremendous benefit c corporations have is that profit or loss may be retained in the corporation, to be used in a future, more beneficial time, if that is deemed a better financial course of action.
Choose the right registered agent
In every state a corporation or LLC, to be in good standing, must appoint and maintain a registered agent. A registered agent is a the official point of contact for the business. Registered agents are responsible for receiving tax correspondence from the state and federal government. If a company is ordered to appear in court than a subpoena will be sent to the registered agent’s office.
A good registered agent will do all of this, and be an excellent resource for the company as well. Good registered agents have a wealth of experience and can be very helpful in guiding companies in the best practice for maintaining its good standing. The best registered agents, like Inc. Plan (USA), will provide personal service and availability to their clients.
Open a bank account
An important step for any active business is setting up a bank account. This allows businesses to make and accept payments for goods and services. With a business bank account it is possible to obtain a debit card. Debit cards from US bank accounts work around the world. Opening a bank account is also the first step towards establishing a relationship with merchant services company.
We hope this list of steps makes it easier for you to understand what is involved in starting a company. Inc. Plan USA can guide you through all the steps required to start a company.