Walt Disney famously said, “All our dreams can come true, if we have the courage to pursue them.” If your dream is to start your own business, the United States is an excellent option for both investors and entrepreneurs from all over the world. While some of the logistics and paperwork may seem intimidating, anyone and everyone has the opportunity to legally register their business in the U.S. Follow this helpful guide to learn everything you need to know, including expert recommendations and important factors to consider.
Key factors to consider before registering your business
There are several important factors to consider before registering your business. Here are some of the most important things you should know:
There are several misconceptions as to what legal documents are needed to register a business in the United States. Many believe that you need to have a specific visa or be a citizen, however that is not the case! All you need is a valid passport and comply with the regulations that are imposed by the country for your specific business. Needless to say, there are a few types of entrepreneur and business visas that can be helpful in this process:
- EB-1 Visa. This visa is available to importers and exporters from a country the United States has a treaty of commerce and navigation with, who wish to enter the country to manage their business.
- E-2 Visa. This visa is available for individuals who have the means to demonstrate that they can start a successful business or to those who are considering acquiring a business already established within the United States.
- L-1 Visa. This visa is available for temporary intracompany transferees who work in managerial positions or have specialized knowledge.
In most states, registering your business as an LLC or S-Corp can take anywhere between 4 - 6 weeks. However, this time period can vary due to several factors, such as which state you choose to establish your company, your business structure, requirements, processing times, etc.
The cost and fees required to register a business vary on several factors such as the state where it will be established, your business structure, and legal requirements. In general, business registration in the United States can range anywhere between $500 and $2,000.
Contrary to popular belief, you don't have to be a citizen or resident of the United States to open a business. In fact, it isn’t even mandatory to be physically on U.S. territory to register your business. All you need is an official U.S. address; with virtual offices, you can enjoy all the benefits of renting an office from anywhere in the world.
Tips for first-time business owners
Starting a business can be an arduous process, but we can assure you that it’s worth it. Set yourself up for success and follow these five tips for creating a profitable business:
- Do market research. Market research will help you understand the environment and competitor landscape for your new business. This can help you identify opportunities in the marketplace, develop target strategies and maximize your chances of success.
- Create a business plan. A business plan is the roadmap that your business will use to operate. It’s two most important components are the executive summary, business descriptions/structure and market research/ strategies.
- Find your target market. Who is your ideal customer? Leverage your market research and business plan to identify your target audience and tailor your marketing strategies accordingly.
- Stay informed. One of the top characterics of any successful entrepreneur is staying informed. A few ways you can stay informed and competitive as a business owner is to 1) take courses relevant to your area of business, 2) stay on top of industry-specific news and trends, and 3) always be open to learning new skills. At SABEResPODER, we aim to keep our community informed by providing the most up-to-date information and news on topics that matter to them.
What’s the best business entity, an LLC or CORP?
When it comes to deciding on a legal business structure for your company, the United States provides entrepreneurs with several options. Two of the most common business entities are limited liability companies (LLC) and corporations. Deciding on which business structure is right for you can vary on several factors. Here’s what you should know:
What’s an LLC?
Structuring a company as an LLC (Limited Liability Company) means that its assets are completely separate from the personal assets of its owner(s), legally referred to as its members. The separation of assets is one of the most desirable characteristics of LLCs as it provides business owners with these economic advantages:
- In the event of bankruptcy or a company lawsuit, the personal assets of the members will be protected and cannot be used to repay any company debt.
- Company earnings can be transferred to members' personal income without double taxation. This means that the tax rates paid when owning an LLC are lower than those of corporations.
What is a corporation?
Unlike LLCs, corporations (also known as C-corps) pay taxes directly on their earnings before they can be transferred to the personal income of their owners. One of the main advantages of this type of business entity is that it allows you to have investors and sell shares of the company.
How to set up your business in the U.S.
The U.S. Small Business Administration (SBA) advises the following steps to legally register a business in the United States:
1. Pick your business location
Where you register your new company can influence several aspects of your business, as different states have varying state and federal tax obligations and regulations. Remember that you must pay state taxes in the location where your business is registered and those rates are established by the local state government. Some states, however, offer special incentives to attract companies to establish in their region. Take these factors into consideration and choose the state that is most favorable to your business structure and objectives.
2. Choose your business structure
As previously mentioned, LLCs and corporations are the most commonly filed business structures. However, there are several business entity options to choose from and each have their own varying legal structures. Other types of business structures you can choose are: sole proprietorships (which have only one owner), S corps (corporations with special considerations to avoid double taxation), B corps (charitable, for-profit corporations), and non-profit corporations. Review all the different business structure options carefully and choose the one that best suits your business needs.
3. Choose your business name
There are four different ways to register your business name. Each name serves a different purpose and can vary depending on your business structure. Small businesses may try to use the same name for all four registrations, however that may not be necessary. Learn more below:
- Entity name. Filing an entity name protects your business name at the state level. Entity names can only be registered in the state where the business operates and each state may have different rules and regulations to apply.
- Trademark. Filing a trademark with the United States Patent and Trademark Office can ensure that no other company in the U.S. can use the name of your business, goods, or services. This protection is only effective at the national level.
- Doing business as (DBA) name. Companies sometimes operate under names other than their official legal business name. This is known as a “doing business as” (DBA) name. DBA registration can vary depending on state, county, or municipality requirements, so be sure to check out what is needed in your business location. One benefit of registering a DBA is getting access to a federal tax ID number (EIN) and being allowed to open a business bank account.
- Domain name. Web domains (also known as URLs) are the web addresses that users type in the browser to visit a specific website on the Internet (for example, our domain is saberespoder.com). If you plan to create a website for your business, consider registering your domain as soon as possible. Once your domain is registered, no one else can use it unless you stop paying for it or voluntarily transfer it.
4. Get federal and state tax ID numbers
Most small businesses are not required to be registered with the Federal Government unless they want to protect their brand nationally or take advantage of special tax breaks.
Both LLCs and corporations need to be registered with the state governments where they will operate. Most states require you to register with the Secretary of State’s office, a Business Bureau, or a Business Agency. You can find your state registration requirements on the SBA website. Here’s what you should know before filing:
- Registered agent. When you register your company, you will need to designate a registered agent in your state. Any person (over age 18) or company can be a registered agent. Their role is to receive all official government documents addressed to the company. Registered agents must have a physical address in the corresponding state and be available during normal business hours to receive any form of communication. If you reside in the state where you are operating your business, you can appoint yourself as your business’s registered agent. However, many businesses choose to hire the services of registered agents, especially if they reside outside the state or use a virtual office.
- Required state documents. Be sure to have these documents and information on hand:
- Business name
- Business location
- Ownership, management structure, or directors
- Registered agent information
- Number and value of shares (if you’re a corporation)
- Articles of organization for your LLC or or articles of incorporation for your Corporation (you can see a list of all the documents needed for each type of business structure and a description of them here).
- How to file for foreign qualification. Su empresa será clasificada como local únicamente en el estado en donde la haya registrado. Para llevar a cabo operaciones en cualquier otro estado, deberá solicitar una calificación como empresa foránea. Para esto, lo más común es que deba presentar un Certificado de Autoridad y un Certificado de Vigencia; sin embargo, tanto los requisitos para obtener estos documentos como el proceso de calificación como empresa foránea varían de un lugar a otro, por lo que le recomendamos visitar las páginas de las Oficinas de Estado correspondientes.
5. Get the Employer Identification Numbers (EIN) for your new business
The Employer Identification Number (EIN) is used to identify a business entity by the IRS. There are federal and state EINs. At the federal level, your business will require an EIN if one or more of the following is true:
- It has employees.
- It operates as a corporation or partnership.
- It files tax return, including:
- Employment tax
- Taxes on specific consumption
- Taxes on alcohol, tobacco or firearms
- Withholds income taxes (other than wages) paid to a nonresident alien.
- Has a Keogh plan.
- It’s related to the following types of organizations:
- Trusts, except certain grantor-owned revocable trusts, individual retirement accounts (IRAs), or organizations exempt from filing business income tax returns
- Inheritance collections
- Real Estate Investment Mortgage Businesses (REMICs)
- Nonprofit organizations
- Farmers co-ops
- Plan administrators
If after reviewing the list above you note that your business requires a federal EIN, you can begin the process here. You’ll need to provide the necessary information required, and at the end of the process you’ll have an EIN.
At the state level, whether or not you need an EIN depends on the characteristics of your business and the local laws. We recommend that you familiarize yourself with the applicable laws and that you contact your local government office to determine if this procedure is necessary. The process is normally very similar to the federal one, but it varies from state to state.
6. Obtain the necessary licenses and permits
Depending on the commercial activity your business falls under, you may need additional licenses or special permissions to operate. There are federal permits for specific activities such as the sale of alcohol or firearms, aviation, or mining. We recommend that you review the list of regulated activities here.
State and local governments require a wide variety of licenses and permits that depend on the specific characteristics of your business. Check your local laws to find out if you need any special licenses or permits. Take into account that some of these permits have a designated lifespan, so you’ll need to renew them periodically to avoid fines or suspensions.
7. Open a bank account
A bank account is very important for any business as it allows you to make and receive payments on behalf of your business, as well as obtain credit that can help you develop your business further. There are many options on the market, so we recommend that you compare different products and evaluate them based on your needs.
You’ll need a number of documents in order to open a bank account for your business. These can vary between financial institutions, but they typically include:
- EIN of the company or your Social Security Number (SSN) in case you are the sole owner.
- Organizing documents filed with the state.
- Certificate of assumed name/DBA.
- Business license.
- Personal identification, such as a passport or driver’s license.
8. Find the necessary insurance for your company
Business insurance can help reduce your risk when taking a leap into entrepreneurship. Some of these insurances may be required by law (so make sure to research appropriately), while others are at your own behest. The most typical federally required insurances are workers' compensation, unemployment and disability insurance.
In addition to those, there are insurances that may be advisable as they protect your company from unforeseen events. Some of the most common types of commercial insurance are:
- General liability insurance.
- Liability insurance for manufacturers.
- Liability insurance for professionals.
- Commercial real estate insurance.
- Home business insurance.
- Insurance packages for business owners (these are policies that package various coverages at a lower cost than purchasing them separately).
As you may have noticed, many requirements for starting a business come from state and local governments so they tend to vary. It is important to emphasize that it is necessary to research the laws and specific requirements for your locality every step of the way to make sure everything is in order and avoid problems.
Register your business today!
We hope this guide has been helpful and you feel confident registering a business in the US. Make sure to cover all the bases and not only register but also find the best insurance, so that you’re prepared for anything. And remember - we’re here to help, and if you have any questions, feel free to contact us by clicking on the chat icon.