So you have taken the big decision of launching your Startup. That’s great!. But sometimes the process of registering your business can be too cumbersome, thanks to the plethora of rules and regulations. Though the process of registering a business entity in the United states may differ from state to state, in this post”How to register a Startup in USA”, we have jotted down the most basic steps you need to follow irrespective of the state you are in.
There are several important steps before launching your startup like securing all of the requisite permits, claiming a business name etc.Many startups ignore these basic prerequisites and end up in trademark disputes and tax problems. So before you formally launch your Startup, keep the following points in your mind when you are registering it as a business entity.
1. DETERMINE THE LEGAL CONFIGURATION OF YOUR BUSINESS
Your registration requirements will be determined by the legal structure of the company chosen by you.Once you have decided the legal structure you may have to file registration forms with your state and/or local government. In the United States, different states have different requirements and you need to be aware of the rules applicable in the state where you are planning to launch your business. Various legal configurations that you can choose from are;
- A corporation
- A nonprofit organization
- A limited-liability company or partnership
Depending on the level of control you want to have on your business and other financial considerations, you can select the right legal configuration. For example, initially you can register your business as a sole proprietorship. In time if your business expands and your personal liability risk goes up, you can then change your business to an LLC.
For example, choose a C Corporation if you think your business will scale in future .It also provides formal legal structure and unlike LLCs, C Corporations can go public. Moreover, and if you are looking for investors, they prefer a C Corporation.
2. SELECT A NAME FOR YOUR BUSINESS
It is possible that if you do not put due diligence in selecting your company’s name, you might end up changing it. This has various unwanted ramifications. For example, changing the name in the business cards, packaging etc. Thereby increasing the cost of operation.
“Doing Business As,” “DBA,” “Assumed Name,” and “Fictitious Name” are some of the references used while describing a legal name for your business.
Before choosing a name, it would be wise to do a search in the United States Patent and Trademark Office database and check if that name already exists.
Generally, the legal name of your business is the name of the owner/s. For example:
- If you are the sole proprietor of your business, your full name will be the legal name.
- If your business is a partnership then the legal name is the last names of the partners or the name provided in your partnership confirmation.
- For liability corporations (LLCs) and corporations, the legal name is the one that was given to the state government.
As more and more online startups are cropping up, chances are that you will also need a website. Choosing a business name and domain name should go hand in hand. Imagine a situation where you have registered a business but you do not find a domain name anything close to your registered business name!. Do your homework in this regard.
In the nutshell, corporations, LLC and limited partnerships must file with their state. Others may be considered sole proprietorships or general partnerships by default and have unlimited liability.
3. GET A FEDERAL TAX ID
Most businesses, even if they do not have employees, will need a Federal Tax ID. In some cases, social Security numbers can also be used. For example, by sole proprietors.
Companies employing people will need a Employer Identification Number (EIN) from the U.S. Internal Revenue Service. You will typically need EIN for local tax registration forms, federal tax returns etc. Getting EIN from the IRS is fairly easy. You just need to contact them.
4. REGISTRATION AND PERMITS
In most cases, small businesses are required to acquire a general business license / permits from state and local government agencies. Depending on the nature of your business, you may be required to be licensed at the federal, state or local level. Apart from operating license, in some cases, you might need permits. This enables local governments to keep track of businesses. In most of the cases you will have to pay a fee upfront in this step. and in some jurisdictions an estimated tax is required to be paid.
For example, in many states some businesses must obtain a seller’s permit that allows them to collect sales tax from customers. If you do not comply with this rule, you might get in deep trouble in future. So it is very important to know the permits applicable for your business and most importantly to obtain them.
These were some of the basic steps on How to register a Startup in USA. If you believe if we have missed any important step, do let us know.