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How to Start a Business

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Starting a business isn't nearly as complicated as most online guides make you think. Most websites talking about “how to start a business” just regurgitate old ideas. Starting a business used to involve a brick-and-mortar storefront, getting a bank loan, and taking on massive risk and debt. Times have changed. Now, starting a business is about getting started fast, often online. Making sales as soon as possible. Protecting yourself from liability. Protecting your privacy.

We take you through the steps you need to get up and running and start doing business the right way. Below, we go over everything from making a plan to selecting the right business structure for your company—and your state.

Creating a Business Plan

Most websites and guides overcomplicate business plans. Down the road, sure, you’ll want a fancy, formal business plan to show to potential lenders or investors. But you won’t get lenders or investors without sales. And you won’t get sales until you get started. What you need right away is to answer a few basic questions.

  • What am I selling?
  • Who is buying?
  • How do I connect to buyers?
  • What are my costs?
  • How much do I charge?

On our Small Business Ideas page, we’ve answered these questions for you for different types of businesses. Want to start a home-based graphic design business? How about a cleaning service? We’ve done the legwork for you in our ever-growing list of industry-specific guides. Learn which tools you’ll need, steps you should take and even how much to charge in our free guides.

On this page, you can also find articles on popular business models, such as opening a franchise or selling products online. In addition, we tackle logistical questions you might encounter at every stage of your business, from choosing a business name to hiring employees.

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Choosing a Business Structure

After figuring out what your business is going to do and how it will make money, it’s time to decide what kind of business structure is best for your business. Do you want to start an LLC? A sole proprietorship? A corporation?

The structure you choose will play a major role in how your business is taxed, managed, and owned. It will also determine how much personal liability you have. Each business structure has different benefits and drawbacks. They also require difference processes to get started. Below, we go over the most popular choices for business structures. Ready to explore a particular option? Check out our free “how to start a business” guides for LLCs, corporations and nonprofits.

Sole Proprietorships and Partnerships

Have you made your first sale? Congratulations, you have a sole proprietorship or partnership. Unless you form an entity like an LLC or corporation, your default business is a sole proprietorship (one owner) or a partnership (multiple owners). And your business? It’s an extension of yourself. It’s not a separate legal entity. So all your company’s liabilities are yours personally.

On one hand, sole proprietorships and partnerships are simple. They don’t require state paperwork to formally open or close. They’re cheap (unless you get sued or go bankrupt). There are no state filing fees or annual report fees. On the other hand, there are major downsides. No liability protection for yourself or your investors. No tax flexibility. No stocks. No prestige. No cool name without a DBA.

Because of these downsides, once you’ve proven your concept and made some sales, it’s time to protect yourself and your investors with an actual business entity, such as an LLC or corporation.

Why Form an LLC or Corporation?

With an LLC or corporation, you take on considerably less risk and have better control over how taxes affect your earnings.

LLCs and corporations are business entities formed by filing articles with a state agency, typically the Secretary of State. Because these entities are subject to state filing fees and reporting requirements, they cost more to start and maintain. However, in exchange for extra fees and paperwork, you receive some significant advantages and protections—namely limited liability and tax flexibility.

  • Limited liability: Both LLCs and corporations are legally separate entities from their owners. In other words, owners and investors are not personally liable for the debts and obligations of the business. Not only does this help protect your personal finances, but it also provides a much safer and more attractive scenario for investors.
  • Tax flexibility: Unlike default business structures, LLCs and corporations have multiple tax election options. For instance, both can be taxed as C-corps or S-corps. Even if tax talk bores you to tears, it’s easy to understand that having more options is more advantageous. You can pick the option that will save your business the most money or allow for the greatest opportunities.


What about Privacy?

Many owners have concerns about maintaining their personal privacy when starting a business—and rightly so. Sole proprietors and general partners literally share their personal names with their businesses. LLCs and corporations require public state filings. But, with an LLC or corporation, there is an easy step you can take to better protect your privacy: hiring the right registered agent service.

When you form an LLC or corporation, any personal information you include on your formation paperwork becomes part of the permanent public record of your business. So, if you list your private address for your principal or registered office (or for your member, manager, director or officer addresses), that information is typically available to anyone. Scammers, spammers, solicitors, competitors, data miners, marketers, weird neighbors—anyone.

However, as your registered agent, we can list OUR business address instead of your personal address when we file your formation paperwork. It’s an extra layer of privacy protection that you cant’ get filing yourself—or hiring a standard filing service.

Maintaining privacy is a powerful reason professionals choose Northwest Registered Agent to form their businesses. We practice Privacy by Default® to help protect our clients’ personal information.

LLC vs Corporation

So how are LLCs and corporations different? Mostly in ownership, management and taxation. LLCs are owned by members and can be run by the members themselves (like a partnership) or by managers (like a corporation). LLCs also have the greatest number of tax election options. LLCs are initially taxed as disregarded entities or partnerships but can apply to be taxed as a C-corps or S-corps.

In a standard corporation, shareholders own pieces of the corporation, represented by shares of stock. Stock is easily transferable, making investing in a corporation fairly simple. Shareholders elect a board of directors to make business decisions, including appointing officers. Corporations are automatically taxed as C-corps but can apply to be taxed as S-corps. Many nonprofit corporations can qualify for tax-exempt status as well.

Not sure which entity is right for you? Our LLC vs Corporation page takes a deep dive into the pros and cons of each business structure.

Granted, starting an LLC or corporation takes a little know-how. That’s why we’re here. Northwest Registered Agent is at your beck and call to help fill knowledge gaps and bolster your ideas. We also have a whole team of local experts, our Corporate Guides®, who can answer your toughest questions by phone or email. And of course, we can form your LLC or corporation for you, so you can get started fast with the support and privacy protection you deserve.

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Starting a Business in Your State

Every state has some major pros and cons when it comes to forming a business. Click any state name below to learn more about doing business the right way in your state.

State Pros Cons
Alabama Cheap labor ONLY state where forming a business is a two-step process
Alaska No personal income tax Makes you disclose ownership of companies as public information
Arizona LLCs don’t have annual reports New LLCs have to publish in newspapers
Arkansas Low income tax rates High franchise tax report
California Lots of potential customers $800 minimum franchise tax payment
Colorado Online filings, processed instantly Annoying annual report system
Connecticut Umm… Everything is expensive and redundant
Delaware Famous for being home of many big holding corporations High taxes for businesses actually operating in Delaware
District of Columbia Lots of potential clients needing services Dealing with the DLCP and business licensing departments
Florida No personal income tax Just don’t miss your annual report filing, it’ll cost you…
Georgia Inexpensive fees Pointless newspaper publication requirements
Hawaii Laid back attitude, easy-going lifestyle High gross receipts tax
Idaho No fee for annual reports Finding highly skilled and motivated employees
Illinois Chicago rocks. High taxes, high fees, stifling regulations
Indiana Reasonable fees, reasonable taxes None
Iowa Biennial reports, low costs Unfortunately, there’s just not a lot of business in Iowa
Kansas The SOS is fast and helpful Costs are fairly high compared to the rest of America
Kentucky Cheap place to initially start a business Redundancy, filing at the state level and then the county level.
Louisiana Friendly, helpful people Redundant, complicated procedures
Maine Reasonable fees Weird/confusing lingo about clerks and commercial registered agents
Maryland Less regulatory than DC It takes two months to process filings
Massachusetts They’re actually good with their expedited filings Their nickname is “Taxachusetts…”
Michigan Taxes are pretty low and office space is super cheap now Unless you happen to be an auto-maker…
Minnesota Does not charge domestic businesses an annual report fee Slow to process your filings
Mississippi Not a highly regulated state Horrible filing fees for foreign corporations
Missouri An inexpensive and reasonable place to do business The initial report after your initial filing is purely redundant
Montana Inexpensive, quick filings None
Nebraska Low start-up costs They require original inked signatures, so 1980’s…
Nevada Great asset protection rules It’s become very expensive and over-regulated
New Hampshire No sales tax Original signatures required, slow to process filings
New Jersey Well, at least it isn’t New York Minimum $500 tax, plus prepay 1/2 for the next year
New Mexico Great laws for LLCs Their foreign corporation annual reports are awful
New York There really aren’t any… It’s the second worst state to do business in
North Carolina Umm…. They deny some filings for weird reasons
North Dakota Lots of opportunity these days Their infrastructure has yet to catch up
Ohio No annual reports The Department of Revenue is confusing
Oklahoma A reasonable and cheap place to do business Some confusing regulations, filings and procedures…
Oregon No sales tax High income taxes
Pennsylvania No annual reports Lots of high fees and paperwork
Rhode Island Really, there aren’t any High fees, high taxes, minimum tax payments
South Carolina Low taxes, no annual reports They’re kind of slow, and require original signatures
South Dakota No personal income tax Very aggressive Department of Revenue
Tennessee Umm… High filing fees and taxes
Texas Great for small businesses The SOS charges $1 for name searches
Utah 5% income tax, $70 to start your business They send EVERYTHING to your registered agent
Vermont Low cost registrations and annual fees Original signatures requires, confusing forms
Virginia It’s a little better than DC High taxes and fees for big corporations
Washington No personal income tax Over-regulated and going broke
West Virginia Easy and reasonable state to do business in None
Wisconsin None High fees, weird procedures and the foreign corp. annual report is laughable
Wyoming Low taxes, fees and great asset protection laws They require original signatures

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