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How to start a company in the US

Starting A Business In The US

Budgeting

How to start a company in the US

There are a lot of unknowns about starting your own company. If you haven’t done it before, the entire concept seems expensive, time consuming, complicated, and maybe a little risky. The good news? It’s pretty easy.

A few simple steps are all that separate you from owning a company. If everyone knew how easy it was to set up the legal and financial part of a company, well, I think a lot of small business lawyers would be looking for work. The hard part comes after you set up the legal structure – the actual work!

The first thing you’ll want to do is determine which sort of business structure you need. If you’re just soloing, you actually aren’t required to do anything – you can operate as a sole proprietor and pay taxes on self-employment income without any other paperwork or hassle. However, it’s usually a good idea to incorporate an actual company. An LLC (limited liability company) will help you shield yourself from liabilities, enable you to purchase business equipment, set up business banking accounts, and look a little more professional while you do so.

It doesn’t cost a lot. The annual registration cost depends upon your state, but we pay around $150 a year. The process? Go to your secretary of state’s website, fill out a form, pay the fee. Then go to the IRS and request an Employer Identification Number (EIN) which you can use in the stead of a social security number for your tax forms.

Once you’ve got your company registered and an EIN (this usually takes a couple hours at most) you can open a business banking account. Head to your local bank and hand them the paperwork – I think it took me about 15 minutes before I had an account and a stack of temporary checks. Within a week you have a business debit card and a real checkbook and you’re ready to go.

Of course, this is only part of the process – because you’ve got to get paid, as well. It’s fairly simple to deposit a check, but in the digital world these are fading away fast. You can either get paid by bank transfer (really only used in the United States for larger amounts), checks, credit card, or PayPal. 

We find that PayPal is incredibly useful to have, since many clients prefer it. However, it’s also more expensive (with rates around 4.5%) than other credit card processors (like Stripe, which is usually around 3%). At Discosloth, we use Wave for our credit card billing. The total cost is under 3% and has been extremely reliable.

Why bother with credit cards and these relatively high fees?

When I freelanced, the ability to invoice via credit card wasn’t really there yet. It was extremely difficult to set up a merchant account and there weren’t any services like Stripe that enabled you to easily set up an invoicing environment. So I depended upon checks, PayPal, and bank transfers. My typical time between invoicing and collecting payment was between 2-4 weeks.

That’s a difficult amount of time when you have to get a project done and you want to get paid. And it’s even more difficult when people don’t pay, and you have to chase them down, and it takes days or weeks before you even know if it went through. That’s the benefit of credit card billing: at Discosloth, the technical marketing company I cofounded, our average time from invoiced to paid is now 3 days. That’s great for cash flow. Most of our clients are set up on automated billing so it’s an easy monthly process that runs itself – less hassle for them and for us. The downside is that we spend thousands and thousands a year on credit card fees, but I think the benefits outweigh the cost.

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