How to Start a Business
Corporate Compliance by Local Corporate Guides®
Starting a business isn't anywhere near as complicated as most online guides will make you think. That's because most websites talking about how to start a business are regurgitating old ideas and ways of thinking. Starting a business used to involve a brick-and-mortar storefront, getting a loan from the bank, and taking on massive amounts of 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. Below, we take you through the steps you need to get your business up and running, 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.SMALL BUSINESS IDEAS
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.
You can receive these advantages with either a corporation or LLC. However, these entities are not exactly the same—each offer unique benefits for your business.
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 can also form your LLC or corporation for you, so you can get started fast.GET STARTED NOW
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 in your state.
|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 DCRA 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|