How to Start a Business in Guam
How do you start a business in Guam? Start selling a product or service in Guam, of course. Once you’ve made your first sale, you’re officially a sole proprietor. But as you might have guessed, there’s more to running a business than just selling stuff. It’s also a good idea to protect yourself from potential lawsuits and debts, and to learn how to cut through bureaucratic red tape. To make the process a little easier, we’ve created a thorough guide to starting a business on the island of Guam.
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Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get Guam Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
File the Guam Sworn Annual Report
Build Your Business Website
Apply for Trademarks
1. Pick a Business Structure
If you don’t register your business with the Government of Guam and simply start selling your wares to Guamanians, you’re a sole proprietor by default. If you’re doing business with a partner—or two—you’re operating a general partnership. The only problem with that is, in the eyes of the law, you and your business are one in the same. If your business gets sued or defaults on a debt, your personal assets (including your life savings, car, or house) are up for grabs.
In order to protect your personal assets, you need a business with limited liability protection, which means you have to make your business a separate legal entity. Business entities with liability protection have their own assets, debts, and liability, legally separate from that of their owners. The most common entities with limited liability protection are LLCs and corporations.
Guam Limited Liability Company (LLC)
LLCs haven’t been around for as long as corporations, but they’ve become a popular entity choice for small businesses because of their flexibility and strong liability protection. LLC owners have a lot of freedom in how they choose to structure and manage their business. Plus, LLCs can be taxed either as corporations or pass-through entities. If you want to start a Guam LLC, you must file paperwork with the Guam Department of Revenue and Taxation (DRT).
Corporations have strict rules for how the need to function: shareholders appoint a board of directors, and the board elects officers who manage the daily operations of the company. Regular meetings are a requirement, and there’s a lot of paperwork involved. Because corporations are required to be so organized, investors tend to prefer them over LLCs. To start a Guam corporation, you’ll file paperwork with the DRT.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about a Guam nonprofit?
A Guam nonprofit corporation is corporate entity that exists to create a social good, rather than to make a profit. To form a Guam nonprofit, you’ll file Guam Articles of Incorporation for Non-Profit Corporations with the Department of Revenue and Taxation.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
Choosing a business name is one of the first major decisions you’ll make as a business owner, so choose wisely. If you’re operating as a sole proprietor, your legal business name is your first and last name. So if you don’t want to call your landscaping business “John Cruz,” you’ll need to register a “doing business as” name (DBA). Then you can use something more creative, like Lawns by John.
Guam LLCs and corporations need to follow Guam’s legal naming requirements:
- Must be distinguishable from any other Guam business name.
- For LLCs, must contain the words “limited liability company,” “limited company,” or the abbreviation “LLC” or “LC.”
- For corporations, must contain “corporation,” “incorporated,” “company,” or “limited,” or an abbreviation thereof, such as “corp.”
Guam doesn’t have a convenient online search tool to find out if a business name is in use. Instead, to find out if your preferred name is available, you can either call the DRT General Licensing and Registration Branch or file an application to reserve your business name. If your application is accepted, you’ll know your name is available.
How do I reserve a business name in Guam?
To reserve your business name for 120 days, file an Application for Reservation of Name with the Department of Revenue and Taxation and pay the $25 filing fee.
What is a DBA?
A DBA is any name a business uses to operate that isn’t its legal business name. Sole proprietors need to register a DBA if they want to use a business name other than their own first and last name. LLCs and corporations will often use a DBA when re-branding or expanding into a new industry. For example, “Greg’s Grocery Outlet, Inc.” might use the DBA “Gregorio’s Italian Cuisine” when branching into the catering business.
In Guam, a DBA is called a fictitious name. To use a DBA in Guam, you must first file a Certificate of Transacting Business Under a Fictitious Name with the DRT, which costs $25.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
This is the step that officially forms your LLC or corporation. (Sole proprietors and general partnerships can skip this step. However, they will still need a Guam business license.)
Guam LLCs and corporations need to file formation documents with the Department of Revenue and Taxation. Filing this paperwork officially brings your business entity into existence.
- To start your Guam LLC, file Guam LLC Articles of Organization.
- To form your Guam corporation, file Guam Articles of Incorporation.
Before you fill out your formation paperwork, you’ll need to appoint a Guam registered agent to accept legal mail on your business’s behalf. When you’re ready to submit your articles, you can do so by mail or in person.
Note: The names and addresses you share on these forms go onto the public record, meaning anyone will be able to find this information online when they search for your business.
What is a registered agent?
A registered agent is a person (or business entity) appointed by a business to accept service of process on behalf of the business. All LLCs and corporations in Guam are required to have a Guam registered agent. Your registered agent must have a physical address in Guam where they can accept legal mail in person during standard business hours. You can be your own registered agent, but only if you live in Guam year-round and don’t mind putting your address on the public record.
How can I keep my information off the public record?
The best way to keep your information out of the public eye is to avoid sharing it on public documents as much as possible. To do this, you’ll need to hire a professional registered agent who will allow you to put their business address on the public record in place of yours.
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the Guam Department of Revenue and Taxation. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
Guam LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a Guam LLC Operating Agreement template that you can use as a solid foundation.
Guam Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in Guam (see 18 Guam Code §28204).
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a Guam Corporate Bylaws template you can use to get started.
Starting a nonprofit? Learn about Guam nonprofit bylaws.
5. Get Guam Business Licenses
Everyone doing business in Guam needs a business license, including sole proprietors. Here are the most common licenses Guam businesses need:
Guam Business License
Almost every Guam business owner needs to apply for a general business license from the DRT General Licensing and Registration Branch. The exception are professions that require a more specialized license—such as for certified public accountants, doctors, and attorneys. Once your application has been approved, you’ll receive your business license. At the top of your license you’ll see your Gross Receipts Tax (GRT) number, which you’ll need to file your business taxes.
Professional Business Licenses
Professions that require advanced education or training typically require a professional business license. This includes medicine, law, engineering, accountancy, and social work, among others. Professional licenses are issued by the board that regulates that industry. For example, optometrists in Guam need a license from the Guam Board of Examiners for Optometry.
Learn more about How to Get a Business License.
How do I get a Guam business license?
You’ll need to submit a Business License Application with the DRT General Licensing and Registration Branch. Depending on your type of business, you may need additional clearances and permits before you can get your business license. For example, if you own a retail store, it will need to be inspected by the Guam Fire Department to make sure your building is up to code. Fortunately, in Guam you can apply for all clearances in one place: the Business License and Permit Center.
How much does it cost to get a Guam business license?
The price of the business license depends on the gross income of your business. The minimum price is $100, and the maximum is $1,000.
How do I get a professional license in Guam?
You can apply for a professional license through the board that regulates your industry. For example, social workers in Guam obtain their license through the Guam Board of Social Work.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
If you’re planning on hiring employees or independent contractors, you’ll need to set up payroll. Here’s how:
- get an EIN
- Get a GRT number by applying for a business license
- determine whether you’re hiring employees or independent contractors
- prepare the forms your employees will fill out
- choose a payroll service or software
- decide on a payroll schedule
Most business owners use a payroll software or professional service to help them set up payroll. A good payroll software will automatically withhold payroll taxes, file tax returns on your business’s behalf, and pay your employees via check or direct deposit (employer’s choice).
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn everything you need to know about hiring independent contractors.
How do I get a GRT Number?
You get your GRT Number by applying for a Guam Business License through the DRT. Your GRT number will be printed at the top of your business license.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
How do you know if you need business insurance? Ask yourself what risks are inherent to your business and how willing you are to take those risks. If you have clients who could potentially injure themselves at your place of business, it’s a good idea to get liability insurance. If you own a commercial building or work with expensive equipment, you probably want commercial property insurance.
Here are the most common types of business insurance:
Workers’ Compensation Insurance
All businesses with employees in Guam need to purchase workers’ compensation insurance. The only exception is for employers of domestic workers, who aren’t required to purchase this insurance. The purpose of workers’ comp insurance is to pay out benefits to workers who are injured or become ill on the job. Guam doesn’t have a government-run workers’ compensation fund, so you will need to purchase this insurance from a private company.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers’ compensation insurance in Guam?
Business owners aren’t required to cover themselves on their workers’ comp insurance plan, but it might be a good idea. That’s because personal health insurance plans won’t always cover work-related injuries.
Do employers need to pay unemployment insurance tax in Guam?
No, Guam doesn’t have an unemployment insurance system, so employers don’t pay unemployment insurance (UI) tax.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
As a US territory, Guam is a separate taxing jurisdiction from the United States. The tax laws in Guam mirror the laws in the United States, and Guam has the same income tax rates as the US federal tax rates. If you’re a full-time resident of Guam and only receive income from Guam sources, you will only need to pay taxes to the Government of Guam—with the exception of taxes for Medicare and Social Security, which you’ll still pay to the US.
However, if you’re receiving any income from the States, you’ll need to pay US federal taxes.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
- Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps in Guam pay a 21% corporate income tax to the Government of Guam. C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
Guam Business Privilege Tax
Guam LLCs and corporations are subject to a business privilege tax called the Gross Receipts Tax (GRT), which is a 5% flat tax on gross income. Businesses must pay this tax every month to the Department of Revenue and Taxation. The GRT tax return can only be filed online.
9. File the Guam Sworn Annual Report
LLCs and corporations in Guam need to file the Guam Sworn Annual Report with the DRT every year. This report asks for basic information about your business, including contact info for the members/managers or directors/officers and registered agent information. Corporations also need report the number of shares authorized, their class, and their par value.
The report must be filed between July 1st and September 1st every year, starting the year following the formation of the business. The filing fee is $100.
Read more about How to File the Guam Sworn Annual Report.
What if I don’t file the Guam Sworn Annual Report?
If you don’t file your Sworn Annual Report within 60 days after the due date, you’ll be charged a $50 late fee. If you still fail to file, your business will lose its good standing and could be dissolved by the Department of Revenue and Taxation.
10. Build Your Business Website
If you want Guamanians to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the territory of Guam or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Guam is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Guam.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.
How do I register for a trademark in Guam?
To register a trademark in Guam, you’ll need to file a Guam Trademark and Service Mark Application Form with the DRT and pay the $100 fee. On the form you must state whether you have already used the trademark in your business or whether you intend to use it in the future.
If you have already used the trademark, you must attach three examples of your business using the mark—such as on a business website, social media page, or business card.
If you intend to use the trademark but haven’t yet, you’ll have 365 days to use the mark. Within those 365 days, you must provide the DRT with three examples of your business using the mark. Otherwise, your trademark registration will be revoked.
Keep in mind that registering a trademark in Guam only protects your mark in Guam. To have exclusive rights to your trademark, you’ll need to register it at the federal level.
Can I register a federal trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.