Do you have a great idea for a product or service and want to turn it into a profitable business? Do you want to take advantage of the huge market and opportunities in the US? If so, you might be wondering how to start a business in the US, especially if you are not a citizen or resident.
Starting a business in the US is not as complicated as you might think. In fact, anyone can form a business in the US, regardless of their nationality or location. However, there are some steps and requirements that you need to follow to make sure your business is legal and compliant.
In this blog post, we will show you how to start a business in the US in seven easy steps. We will also give you some tips and resources to help you along the way. By the end of this post, you will have a clear idea of what you need to do to launch your business in the US and achieve your entrepreneurial dreams.
Step 1: Choose a Business Structure
The first step to start a business in the US is to choose a business structure. This is important because it will affect how your business is taxed, regulated, and protected. In the United States, there are four main ways to set up a business. These are known as business structures.
- Sole proprietorship: This is the easiest and most frequently used way to set up a business. It means that you are the only owner and operator of your business. You have full control over your business decisions and profits, but you also have full liability for your business debts and obligations. You don’t need to register your business with the state, but you might need to obtain a business license or permit depending on your industry and location. You will also need to report your business income and expenses on your personal tax return using Schedule C.
- Partnership: This is a type of business structure where two or more people share the ownership and operation of a business. You can have a general partnership, where all partners have equal rights and responsibilities, or a limited partnership, where some partners have limited liability and involvement. You will need to create a partnership agreement that outlines the terms and conditions of your partnership, such as how profits and losses are distributed, how decisions are made, and how disputes are resolved. You will also need to register your partnership with the state and obtain a business license or permit if required. You will also need to file a partnership tax return using Form 1065 and report your share of the partnership income and expenses on your personal tax return using Schedule K-1.
- Limited liability company (LLC): This is a type of business structure that combines the benefits of a sole proprietorship or partnership with the protection of a corporation. It means that you can have one or more owners (called members) who have limited liability for the business debts and obligations, but also have flexibility in how they manage and operate the business. You will need to choose a name for your LLC that is unique and not already in use by another business in your state. You will also need to file articles of organization with the state and pay a filing fee. You might also need to create an operating agreement that defines the roles and responsibilities of the members, how profits and losses are allocated, and how the LLC is taxed. You will also need to obtain a business license or permit if required. You can choose to have your LLC taxed as a sole proprietorship, a partnership, or a corporation, depending on your preferences and circumstances. You will also need to report your LLC income and expenses on the appropriate tax forms, such as Schedule C, Form 1065, or Form 1120.
- Corporation: This is a type of business structure that is separate and distinct from its owners (called shareholders). It means that the corporation has its own legal rights and obligations, such as the ability to enter into contracts, sue and be sued, and issue shares of stock. It also means that the shareholders have limited liability for the corporation’s debts and obligations, but also have limited control over the corporation’s decisions and operations. You will need to choose a name for your corporation that is unique and not already in use by another business in your state. You will also need to file articles of incorporation with the state and pay a filing fee. You might also need to create bylaws that outline the rules and procedures of the corporation, such as how directors and officers are elected, how meetings are held, and how dividends are paid. You will also need to obtain a business license or permit if required. You will also need to elect a board of directors and appoint officers to manage the corporation’s affairs. You will also need to issue shares of stock to the shareholders and keep records of the ownership and transactions. You will also need to file a corporate tax return using Form 1120 and pay corporate income tax on the corporation’s profits. The shareholders will also need to report their share of the corporation’s dividends on their personal tax return using Form 1099-DIV.
Each type of business structure has its own advantages and disadvantages, depending on your goals, preferences, and situation. You should consult with a business lawyer and a tax professional before choosing a business structure to make sure you understand the legal and financial implications of your decision.
Step 2: Pick a Name for Your Business
The next step to start a business in the US is to pick a name for your business. This is important because it will identify your business to your customers, suppliers, and competitors. It will also affect your branding, marketing, and online presence. Here are some suggestions to help you pick a great name for your business.
- Make it memorable: You want your business name to stand out and be easy to remember. Steer clear of names that are lengthy, hard to understand, or too common.
- Choose a name that is catchy, unique, and reflects your business personality and values.
- Make it relevant: You want your business name to communicate what your business does and who your target market is. Avoid names that are too vague, misleading, or unrelated to your business. Choose a name that is descriptive, specific, and appealing to your potential customers.
- Make it available: You want your business name to be available and not already in use by another business in your state or industry. You also want to make sure that your business name does not infringe on any trademarks or copyrights. You can check the availability of your business name by doing a name search on the state’s website, the US Patent and Trademark Office’s website, and the internet. You can also register your business name as a trademark to protect it from being used by others.
- Make it web-friendly: You want your business name to be compatible with the internet and social media. You also want to secure a domain name and a social media handle that match your business name. You can check the availability of your domain name and social media handle by using online tools such as Namecheap, GoDaddy, or Namechk.
Once you have chosen a name for your business, you will need to register it with the state and obtain a business license or permit if required. You will also need to display your business name on your business premises, website, and marketing materials.
Step 3: Apply for an EIN
The third step to start a business in the US is to apply for an Employer Identification Number (EIN). This is a nine-digit number that is assigned by the Internal Revenue Service (IRS) to identify your business for tax purposes. If you have plans to:You’ll require an EIN.
- Hire employees
- Open a business bank account
- File business tax returns
- Apply for business loans or credit cards
- Form a partnership, LLC, or corporation
There are four ways to get an EIN: online, by mail, by fax, or by phone. The quickest and simplest method is to apply online.You will need to provide some basic information about your business, such as your business name, address, structure, and purpose. As soon as you finish the online application, you’ll get your EIN right away. You can also download and print your EIN confirmation letter for your records.
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Step 4: Apply for Business Licenses and Permits
The fourth step to start a business in the US is to apply for the necessary business licenses and permits. Depending on your business type, location, and activities, you might need to obtain various federal, state, and local licenses and permits to operate your business legally and compliantly. Some of the common types of business licenses and permits are:
- Business license: This is a general license that grants you the permission to operate your business in a certain jurisdiction. You might need to obtain a business license from your city, county, or state, depending on where your business is located and what it does. You will need to pay a fee and renew your business license periodically. You will also need to display your business license on your business premises or website.
- Professional license: This is a specific license that certifies your qualifications, skills, and expertise in a certain profession or occupation. You might need to obtain a professional license from a state board or agency, depending on your industry and services. You will need to meet certain educational, training, and testing requirements to obtain and maintain your professional license. You will also need to follow certain ethical and professional standards and regulations.
- Sales tax permit: This is a permit that allows you to collect and remit sales tax on the goods and services that you sell to your customers. You might need to obtain a sales tax permit from your state or local tax authority, depending on where your business is located and what it sells. You will need to register your business with the tax authority, file sales tax returns, and pay sales tax on a regular basis. You will also need to keep records of your sales and tax payments.
- Zoning permit: This is a permit that ensures that your business location and activities comply with the local zoning laws and regulations. You might need to obtain a zoning permit from your city or county planning department, depending on where your business is located and what it does. You will need to check the zoning map and code to see if your business is allowed in your area and if there are any restrictions or conditions. You will also need to apply for a zoning permit and pay a fee. You might also need to attend a public hearing or obtain approval from your neighbors or other authorities.
- Health and safety permit: This is a permit that ensures that your business premises and operations meet the health and safety standards and regulations. You might need to obtain a health and safety permit from your state or local health department, fire department, or environmental agency, depending on your business type and industry. You will need to comply with the rules and requirements for sanitation, ventilation, fire prevention, waste disposal, and other aspects of health and safety. You will also need to undergo inspections and audits and pay fees and fines if necessary.
These are just some examples of the business licenses and permits that you might need to start a business in the US. There might be other licenses and permits that are specific to your business or industry, such as liquor license, food service license, or building permit. You should research and consult with the relevant authorities to find out what licenses and permits you need and how to obtain them.
Step 5: Register with State Agencies
The fifth step to start a business in the US is to register with state agencies. Depending on your business structure and location, you might need to register your business with the state secretary of state, the state department of revenue, and the state department of labor. Here are some reasons and benefits of registering with state agencies:
- Secretary of state: You will need to register your business name and entity with the state secretary of state if you form a partnership, LLC, or corporation. This will ensure that your business name is unique and protected in your state. You will also need to file annual reports and pay fees to keep your business in good standing. Registering with the state secretary of state will also make it easier for you to open a business bank account, obtain business loans or credit cards, and conduct business transactions.
- Department of revenue: You will need to register your business with the state department of revenue if you plan to collect and remit sales tax, income tax, or other taxes from your business. This will enable you to obtain a tax identification number, file tax returns, and pay taxes on time. Registering with the state department of revenue will also help you avoid penalties and interest for late or non-payment of taxes.
- Department of labor: You will need to register your business with the state department of labor if you plan to hire employees, pay wages, or provide benefits to your workers. This will enable you to obtain an unemployment insurance account number, file unemployment tax returns, and pay unemployment taxes. Registering with the state department of labor will also help you comply with the labor laws and regulations, such as minimum wage, overtime, workers’ compensation, and anti-discrimination.
You can find the contact information and registration forms for the state agencies on their websites or by calling their offices. You will need to provide some basic information about your business, such as your business name, address, structure, and purpose. You will also need to pay some fees and submit some documents, such as your articles of organization or incorporation, your EIN, and your business license or permit.
Step 6: Open a Business Bank Account
The sixth step to start a business in the US is to open a business bank account. This is a separate account that you use to manage your business finances and transactions. Having a business bank account will help you:
- Keep your personal and business finances separate: This will make it easier for you to track your income and expenses, prepare your tax returns, and avoid personal liability for your business debts and obligations.
- Establish your business credibility and identity: This will make it easier for you to obtain business loans or credit cards, accept payments from your customers, and pay your suppliers and vendors.
- Protect your business assets and information: This will make it safer for you to store your money, access your funds, and prevent fraud and theft.
To open a business bank account, you will need to choose a bank that offers the services and features that suit your business needs and preferences. You’ll also have to give some papers and details, like:
- Your business name and address
- Your business structure and entity
- Your EIN or social security number
- Your business license or permit
- Your articles of organization or incorporation
- Your partnership agreement or operating agreement
- Your personal identification, such as your driver’s license or passport
You will also need to make an initial deposit and pay some fees, depending on the bank and the type of account you choose. You can compare different banks and accounts online or by visiting their branches.
Step 7: Understand Your Compliance Requirements
The seventh and final step to start a business in the US is to understand your compliance requirements. This means that you need to know and follow the laws and regulations that apply to your business at the federal, state, and local levels. Some of the common compliance requirements that you need to be aware of are:
- Tax compliance: You need to file and pay your business taxes on time and accurately. This includes income tax, sales tax, payroll tax, and other taxes that apply to your business. You also need to keep records of your income and expenses, issue invoices and receipts, and send tax forms to your customers and employees.
- Labor compliance: You need to comply with the labor laws and regulations that apply to your business and industry. This includes minimum wage, overtime, workers’ compensation, unemployment insurance, anti-discrimination, and other laws that protect the rights and welfare of your workers. You also need to keep records of your payroll, benefits, and taxes, and report any accidents or injuries that occur in your workplace.
- Environmental compliance: You need to comply with the environmental laws and regulations that apply to your business and industry. This includes air quality, water quality, waste disposal, and other laws that protect the environment and public health. You also need to obtain any permits or licenses that are required for your business activities, and report any spills or leaks that occur in your premises.
- Industry-specific compliance: You need to comply with any industry-specific laws and regulations that apply to your business and services. This includes health and safety, licensing, certification, and other standards that regulate your profession or occupation. You also need to follow any codes of ethics or best practices that are established by your industry associations or organizations.
You can find out more about your compliance requirements by researching online, consulting with a business lawyer or a tax professional, or contacting the relevant authorities or agencies. You should also stay updated on any changes or updates that might affect your business compliance.
What are the costs of starting a business in the US?
According to various sources, the average cost of starting a business ranges from $3,000 to $40,000, depending on the type, size, and location of the business. However, the actual cost can vary widely depending on many factors, such as the industry, the products or services, the store location, the equipment, the inventory, the marketing, and the legal fees. Here are some examples of the costs of starting a business in different industries:
- Cleaning business: This is considered one of the cheapest businesses to start, as it requires minimal equipment and inventory. The main costs are cleaning supplies, transportation, insurance, and marketing. The average cost of starting a cleaning business is around $2,000 to $6,000.
- Online store: This is another low-cost business idea, as it does not require a physical location or inventory. The main costs are website development, hosting, domain name, e-commerce platform, payment processing, and marketing. The average cost of starting an online store is around $3,000 to $10,000.
- Restaurant: This is one of the most expensive businesses to start, as it requires a lot of equipment, inventory, staff, and licenses. The main costs are rent, utilities, kitchen equipment, food and beverage supplies, furniture, décor, permits, insurance, payroll, and marketing. The average cost of starting a restaurant is around $100,000 to $300,000.
- Software company: This is another high-cost business idea, as it requires a lot of technical skills, equipment, software, and staff. The main costs are computers, software, servers, internet, office space, payroll, legal fees, and marketing. The average cost of starting a software company is around $50,000 to $500,000.
These are just some examples of the costs of starting a business in different industries. You should do your own research and budgeting to estimate the costs of starting a business in your specific niche and market. You should also consider the potential revenue and profit of your business to determine if it is worth the investment. You can use online tools and calculators to help you with this process.