What Is Needed To Start A Corporation – The United States ranks high on the ease of doing business scale (91.6/100 by the World Bank).
To add some context, the US is ranked 6th out of 190 countries. Therefore, it is not surprising that every year more and more companies are established in this country.
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In 2021 alone, there were 5.4 million applications to register new businesses in the United States. In fact, the pandemic has a lot to blame – since it started, more and more people are interested in starting their own startups.
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And maybe you are one of them. If the answer is yes, we are sure you have asked yourself these questions
First you need to decide which direction you want to go. Below are the three most common options.
A sole trader is a one-man show – meaning you are responsible for all profits, losses and risks arising from your business.
And if you want to have full control over your business plans, initially and in the future, they are literally the “cost of doing business.”
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One of the biggest advantages of this business model is that it is easy to get up and running, especially if you are a small business or startup.
However, if you are not comfortable making all the decisions, taking all the risks and managing all the responsibilities in your company, we recommend choosing a different business structure.
It is possible to convert a sole trader into a limited liability company (LLC) or corporation (or any other business structure for that matter) whenever you want.
A limited liability company (LLC) is a combination of a partnership and a corporate model. This usually means that you can run your business with multiple partners.
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It also means that you and your company are recognized as two separate and distinct entities in the eyes of the law.
The most common reason people open an LLC is to avoid being burdened with any liabilities from their business. However, the grass isn’t entirely green here – you may struggle to raise capital if you’re an LLC.
PepsiCo, Unilever, BMW and Microsoft are all examples of corporations. A corporation can have many advantages, including the right to legal protection of liabilities, transfer of ownership, and employee stock options, to name just a few.
It should be noted that other business structures exist, such as partnerships, nonprofits, and S corporations. The above are just some of the most common business structures.
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Also, the company name must be prepared at the company registration stage, as the same number of documents are required to start operations.
For example, even if you are a sole trader who has moved abroad to do business, you still need to file US tax returns because your business is incorporated there.
A license or permit is simply a document that shows the government’s approval to do business in a country. There are many different types of licenses in the United States, each operating at a different level (federal, state, or local).
Here are some of the most common types of business licenses needed to do business in the United States.
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A general business license is essential for any business owner, whether it is a commercial or home business.
The cost of this document varies by country and may change over time, so be sure to know the required fees for your specific location.
Renewals are usually annual or renewable every two years and can take anywhere from a few days to a few months to receive.
For example, if you are a Jane Doe sole trader and want to run your own business under the name JADO Enterprises, you will need a DBA license.
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OK, so it’s not exactly a permit, but almost every business needs an Employer Identification Number (EIN) for tax, identification, and security purposes, among many other reasons.
If you do direct sales (door-to-door or MLM) over $25, you will need to carry multiple direct sales licenses.
In addition to the basics like a business license and a DBA, you may also need an attorney’s license and a dealer’s license.
A special business license is an additional requirement to the general business license if your business deals in firearms, antiques, tobacco, mobile electronics, meeting groups and similar services.
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And as mentioned above, the cost of a particular business license will vary by state and may include additional fingerprinting fees, so be sure to check with local regulators.
Some jobs require a professional license to assure the government and clients that they are authorized to do the job.
These professions include real estate agents, architects, CPAs, electricians, and more. This license is issued by the “Department of Occupational and Professional Licensing”.
A sales tax license is required if your state has economic nexus laws (ie, if your state has a threshold for the products you sell – in most states the threshold is greater than $100,000 or 200 units of product sold per year).
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If this is the case, you must collect sales taxes on the sale of your products by your customers.
Some businesses are regulated by the federal government, so you’ll need a federal business license to work in this niche.
On the other hand, there is a possibility that you may need other documents like trade license, vendor permit, health department permit, etc. — again, it all depends on your type of business and the areas where you operate.
Before we get started, here’s a quick reminder that operating agreements (or terms) depend on the type of business you run.
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If you’re a sole trader, chances are they won’t be useful to you. However, if you have a limited company, you may need them.
And then it is not necessary to deliver them to the Secretary of State, but for your own benefit.
The reason most organizations prepare an operating agreement is because it is useful when trying to get a business loan.
Operating agreements can also be useful if you don’t want to enforce your country’s default rules – agreements help you set the rules yourself.
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For example, if you want someone to inherit your business assets after you die, they will automatically go to your relatives, unless your operating agreement says otherwise.
For example, your management may have no idea what to do at a crucial decision-making moment; Your business will look like a sole trader instead of an LLC, and funds may suffer, and there will be no clear rules about roles and responsibilities.
In general, your business will be very lean, which is the main reason why almost every LLC has an operating agreement.
An operating agreement is an agreement between the members of an LLC to manage its business, financial and management rights.
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And we think that partnership agreements allow you to determine the percentage of rights, obligations, liabilities, ownership, profits and interests that each partner has.
Just like an operating agreement, it’s not always required by law, but it’s certainly nice to have.
Another added benefit of such an agreement is that it helps reduce money disputes – you have both an entry plan and an exit plan and set out clear responsibilities and rights for each partner. So overall, it’s a win-win.
Take the example of Tobias Frey Jones and Jonathan Hofler, two business partners who operated without a partnership agreement, resulting in a $20 million lawsuit.
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Here’s the story: In 1999, Jonathan Hofler met Tobias Frey Jones, a business rival, when they both tried to buy a catalog for a German type foundry.
Later, speaking at a grill, Hoefler proposed a 50-50 verbal partnership with the Hoefler Type Foundry. However, no formal partnership agreement was concluded.
Fast forward a few years later, the lawsuit has now been settled out of court. But it certainly makes us think twice about what could go wrong without a partnership agreement.
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Some of the documents on this list depend on the nature of your business and the current stage of development of your company.
However, these are very important (and, most importantly, legally binding) documents that you should know before starting a new business.
Invoices, if accompanied by a contract, can help you pay them on time without the hassle of jumping through multiple hoops.
Here are some of them: it will help with bookkeeping and inventory; it will help you get paid on time and reduce billing issues (since all the information is already there); and helps with taxes (like the IRS
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