Starting A Startup
The first client, first sale, the website launch, the availability of the first prototype…throughout the course of starting a startup, there’s no shortage of exciting milestones. Yet, I’m fairly confident that your first encounter with business and tax laws won’t make the list.
While company filings and regulations may not be the most glamorous parts of your startup, they’re absolutely critical to the success of your business, and safety of your personal savings.
Here’s a quick rundown of the laws and regulations you need to consider when creating a startup. Of course, depending on your type of business, hiring a tax accountant and/or good attorney with specific experience in your industry can go a long way to helping you steer clear of trouble.
Name your company
Everything starts with picking a business name. But before you start ordering business cards or creating a Facebook page, make sure that great new name isn’t infringing on the rights of an already existing business.
For example, calling yourself ‘McDonalds’ won’t work; choosing the name ‘McDowells’ should be okay, unless you’re going into the restaurant/food business. In most cases, you don’t need an attorney for this task, as you can perform a free search online that looks at business names registered with the secretary of state.
In addition, make sure a good domain name is available and purchase that domain (along with any similar variations) right away.
Register your DBAs (“Doing Business As” aka Fictitious Business Name)
If you have a sole proprietorship/general partnership, a DBA registration must be filed when your company name is different than your own name. For an LLC or corporation, DBAs must be filed whenever you conduct business using a name that’s different than your company — i.e. CorpNet.com vs. CorpNet. Depending on where you live, DBAs are filed at the state and/or county level.
Incorporate or form an LLC
You’ll also need to determine the best business structure for your startup. Depending on your specific circumstances, you might choose among an LLC (great for starting a startup that wants legal protection, but minimal formality), an S Corporation (for startups that will make a profit soon after incorporation and that profit will be distributed to the shareholders), or a C Corporation (for those startups who plan to reinvest profits back into the company or seek funding from a VC).
Unless your business is particularly complex, you should be able to file for incorporation online, without having to retain a business attorney.
One word of advice.
While Delaware and Nevada are hot states for incorporation, if your startup has less than 5 shareholders, it’s best to incorporate in the state where the business has a physical presence (i.e. where you live). Otherwise, you won’t reap any benefits, and you’ll be dealing with added hassles and costs of operating ‘out of state.’
Get a Federal Tax ID Number (aka an “EIN” or “Employer Identification Number”)
To distinguish your startup as a separate legal entity, you’ll need to get a Tax Identification Number, referred to as an EIN (Employer Identification Number). Issued by the federal government, the Tax ID number is similar to your personal social security number and allows the IRS to track the company’s transactions.
Read Part 2 of Eight Steps When Starting A Startup…
About our guest author
Nellie Akalp is CEO of CorpNet, her second incorporation filing service based on her strong passion to assist small business owners and entrepreneurs in starting and protecting their business. Through the various “Do-It-Yourself” and “Business-Startup” services she has founded since 1997, she has formed over 100,000 corporations and LLCs. As CEO of CorpNet, she helps educate small business owners to incorporate a business, Form an LLC, or File a DBA, in any state, and in any county across the U.S. To learn more about Nellie, view free guides on starting and running a business, receive a special discount, and see how she can help your business get off the ground quickly and affordably visit CorpNet today.