Legal Steps to Start a Business in the USA

If you want a general overview of starting a business in the USA, you can refer to previous article. But if you are done with the general things, and would like to acquaint yourself with the legal steps only, then here is the detailed guide. In this informative article, we will elaborate on the legal steps to start a business in the USA.

Some steps are too lengthy and require you to pay attention to each detail, and hence, we will discuss it in short here. But after you are done here, you can go ahead to the other sites for a detailed description. 

Foreigners are also entitled to conduct a lawful business in the USA, and several start-ups are legendary examples of these. But they have an altogether different procedure. 

A quick overview of the general business set-up process: 

Before we move on to the concrete legal procedure, we would like to summarize the general information for your reference purpose. 

  1. When you or your team member/partner conceive a business idea, you conduct an in-depth market analysis of whether it is financially viable or not. Will customers be interested in the product or service? In which state will the business can fetch more returns? 
  2. The next vital step is to write down an elaborate business plan. Please note that your business plan is the roadmap of your business, and it should be short, concise, and in a formal document. It can also be shown to the investors and hence, do not make it too long to read. 
  3. Once you have a direction for your business through the formal plan, you can now decide how to source finance from reliable sources. Whether you can call for investors or borrow. You already know the estimated amount from the business plan you have drafted earlier. 
  4. Now, as you have a roadmap ready, why not name your business? In this step, you choose a name that is unique and meaningful for your venture. Registering a business name also requires time. 
  5. Your business needs to have a physical presence. It doesn’t have to be a full-fledged store or an office; it can also be your house address. However, you have to be careful if you want to open a business in other states. Just follow the requisite formalities. 
  6. When all the above steps are done, select a business structure that suits you and acquaint yourself with the personal liability involved, tax implications, and registration requirements. 

Legal steps 

Now, as you know the basic process, let us move to the legal steps involved

1. Register your business name

Registering the business name is like offering a strong protective layer to it. There are four ways of registration, and each one has its pros and a legal procedure to follow. 

  • Entity name – It provides protection at the state level. And the rules may differ from state to state. 
  • Trademark – Commonly used by electronics companies, trademark provides protection at the federal level. In this type, you can protect your business and product name as well. 
  • Doing Business As (DBA) – It is a legal requirement but does not offer protection. You can conduct the business from a different name and not your personal name. You can simply get EIN and open a bank account too. However, the legal procedure varies as per the business entity chosen, location, and so be careful. 
  • Domain name – It provides protection to your official website of the business. It is a popular concept, and you can find reputable agencies that offer this service. 

2. Register your business 

The next step is the registration of your business entity itself. You have the plan and the name registered, so let us move ahead confidently. This registration process depends largely on the location and the business entity you have chosen. 

  • Registration of a small business depends on the kind of protection the entrepreneur would like to have. For instance, if a small business registers with a federal agency, it can seek tax relief or trademark protection. Ensure that you register with the correct authorities. 
  • Registration of a small business as an LLC, partnership, or corporation requires registration with the state in which you operate. You might have to go for digital or paper-based registration, depending upon the state regulations. 
  • You will also have to appoint a Registered Agent who takes care of the papers and documents on behalf of your company. 
  • The average registration costs are around $300, and it depends widely on the state and the business structure you have chosen to operate. 
  • The list of documents for registration vary, and you can find it on any trusted website. 
  • Once you have submitted the registration documents, you will have to wait for the specified time. Some states are quick, while some are required to be followed up. 
  • After 30-90 days of the registration of business with the state, you are required to file Initial Reports (or Tax Board registration) with the respective entity. 

3. Tax-related formalities

Whether it is to open a business bank account or pay salaries to the employees, you will need an Employer Identification Number, also known as EIN.  The best thing is it is free to seek EIN and is the following step after business registration. 

When your business entity has an EIN, you can do the following tasks: 

  • Pay compensation to the staff. 
  • Conduct business as a partnership. 
  • File tax returns. 
  • Open a bank account. 
  • Apply for licenses and permissions. 
  • Pay federal taxes. 

In case your business already has an EIN, you need to alter or replace it as per the new business structure you have adopted. 

Whether you should get a state tax ID number depends on the rules and regulations of the state in which you conduct your business. You can visit your state’s website to know more about this aspect. 

4. Seek relevant licenses and permissions

There are two kinds of licenses and permits, federal and state. 

  1. If the business activity you conduct is regulated by the federal agency, then you need to seek licenses and permits from the relevant agency. For instance, if you conduct agricultural business, you can apply for a license from the US Department of Agriculture. 
  2. We suggest contacting the issuing agency to ensure that you complete the formalities correctly and pay the requisite fees. 

You have to apply for licenses and permits as per the state regulations. Researching your state laws is mandatory as the procedure, tenure, and fees vary. 

5. Bank account

Now, move forward to open a bank account as you have the EIN. It is easy to set up one. 

6. One of the last steps is to seek business insurance

Well, this is not the end of the business set-up process. You will have to renew your licenses and permits, carry out bank-related regulations often, and keep a tab on the tax code. So, the process goes on till your business is in an active state. 

As far as the legal steps involved in starting a business in the USA are concerned, the above are mandatory and need careful research and planning. We suggest you seek help from an expert, a consultant, or a mentor to complete these legal formalities properly and successfully.