Starting and registering your own business may seem to be a daunting task. But if you go about it one step at a time, it is not so bad.
You don’t have to be a green card holder or citizen to start a business in the US. What you do need to have is a good business plan and marketing plan. Decide if you are working from home or if you need an office space. This depends on whether you have clients visiting you, is your neighborhood zoned for home businesses, how will it affect your family life with regards to space and time and do you have the temperament and discipline to work from home. Once you have all that in place, the steps listed ahead will help you get the ball rolling.
Step 1: Defining your Business Structure
Sole proprietor/Independent contractor: You will be in total control of the business and not hire any employee
Partnership: Partners are not employees, they contribute money, property, labor or skill, and expects to share in the profits and losses of the business. Each partner includes his or her share of the partnership's income or loss on his or her tax return.
Limited Partnership/ Limited Liability Partnership: The partners have a fixed liability structure and can raise capital (e.g.: bank loans), with the latter exempting you from personal liability
C/S Corporation: They allow you to raise money from investors and have state defined management structures, with the latter being limited to 100 shareholders
Non-Profit: If you are opening a charity which will accept tax-deductible donations
Step 2: Create an Employer Identification Number (EIN):
It is a Tax ID for the IRS to identify your business, just like an SSN is issued to people. The EIN also allows you to open a business bank account, apply for permits and licenses, file taxes and hire employees. Apply for your EIN here - IRS Official website.
Step 3: Register your business to get a license
Register your business from the state where it has a physical presence/employee or where a large part of the revenue is generated or where you are located. You will need a US address to get the license.
Think of a unique name that is available not only as an entity but also as a website/on social media. These are the 4 registrations you will need to set up and renew annually:
Entity name: It protects you at state and local government level
Federal Tax ID/ Trademark: It protects you at a federal level Employer’s Tax Guide (not mandatory)
Doing Business As (DBA) License
Domain name: protects your business website address
Step 4: Open a US business bank account
You will need to provide appropriate documentation to open a checking and savings account. This includes your SSN, 2 other photo IDS, IRS registration certificate and Business License. Depending on the type of business other documents may be required such as operating agreement /Declaration of Unincorporated business/ Certified Articles of Incorporation /Corporate Charter.
Step 5: Open a business merchant account
For online transactions, merchant services are needed to accept credit/debit card payments. If you have a cash register at your physical shop, you will have to purchase the equipment and software for keep a tally.
Step 6: Get Business Insurance
This is not mandatory, but if your business is prone to accidents, natural disasters, and lawsuits, this is highly recommended so that your personal and business assets are protected from unexpected catastrophes. The federal government requires every business with employees to have workers’ compensation, unemployment, and disability insurance.
Step 7: File your taxes
File annual returns if you are a company. If you are self-employed, you have to file an income tax return if your net earnings from self-employment were $400 or more. If not, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 instructions. Make your payments using the Electronic Federal Tax Payment System (EFTPS).
Pay estimated quarterly tax Form 1040-ES, Estimated Tax for Individuals
If you use a portion of your home for business, you may be able to take a home office tax deduction.
If you are using a vehicle for your business, you can register it as a commercial vehicle and get a commercial driver's license (CDL) from the state motor vehicle agency.
If you made or received a payment as a small business or self-employed (individual), you are most likely required to file an information return to the IRS.
If you are working with your spouse as a partner or employee, you are eligible for certain social security benefits - Election for Married Couples Unincorporated Businesses
There’s nothing like the freedom of working for yourself and the thrill of making your first sale. A successful entrepreneur and thriving business start with a good idea. In the first year, it is advisable to hire a tax consultant/business lawyer, but the rest can easily be done by yourself. The US is very business friendly, so dream big and get started!