Startup Guide: Launching Your Own Business
posted Jul 19, 2013 in the Business Blog
You’ve come up with an amazing idea and developed a sound business plan. Now it’s time to take your idea to the next level and officially start your company. Below you will find a checklist of some items that you will need to be familiar with as you traverse the startup landscape.
- Selecting a business structure - Startup companies are commonly structured as a C Corporation (and not a “pass-through” entity such as a Partnership, S Corporation or Limited Liability Company). While pass-through entities provide certain tax benefits, if your business will be seeking future funding the C Corporation is the most common acceptable entity structure for most investors. Many business structures can be established online for reduced costs but I always recommend working with a qualified attorney on this step. Remember it’s important to get the foundation of your new idea set up properly.
- State of formation - Most C Corporations are formed in Delaware (regardless of physical presence). Delaware has well-established case law (215 year old business court), a Court of Chancery (judge decides cases instead of jury) and overall business friendly flexible laws in the structuring of business entities and the allocation of rights and duties among founders and shareholders. [note: Even if you incorporate in a foreign state like Delaware, your company may still need to register as a “foreign entity” and comply with the laws of the state you transact business in.]
- Apply for an Employer Identification Number (EIN) - The EIN is like a social security number for your company. The IRS uses this number to identify your business for tax filing and reporting purposes. It is easy to apply online with the IRS and the application is free.
- Register your business with the state - All business entities need to register with the Secretary of the State in which they operate before beginning business in that state (regardless of whether your business formed there or not). This will include the articles of organization and an annual report for domestic or foreign corporations.
- Open a business bank account - It’s very important to segregate your business banking activity from the owner/founder’s personal banking. Too often owners co-mingle the business and personal activity making a proper accounting at year-end a messy and costly endeavor. Save yourself the headache and keep business activity separate from your other accounts.
- Set up Your Business Accounting - Set up a simple accounting system. The system should allow you to track business disbursements, payments received, accounts receivable, accounts payable, etc. There are several low cost options available for startup companies. QuickBooks Online is a popular option and can be linked to your business bank accounts and credit card to automatically download monthly activity.
KLR, one of the leading accounting firms in Boston, offers a wide range of services to assist startup companies in creating business models and navigating through the early stages of development. Benefits include bookkeeping services and financial statement preparation, talent recruiting, business valuations and general consulting, and assessments from trusted advisors