How to Set Up a U.S. Business

If you’re setting up a U.S. business, you’ll have many decisions to make, from deciding the type of business structure that fits with your company’s goals to figuring out when and how to register for an employer identification number (EIN). In this article, we’ve outlined everything you need to know to navigate these steps along with a few key takeaways.

swirling imagery

How to open a new company in the U.S.

When opening a company in the U.S., building a solid foundation can ensure your long-term success. We’ve outlined the steps you need to follow below.

1. Choose which type of business entity to form

Choose a business structure that fits your goals. The legal structure you choose will impact your registration requirements, how much (and how) you pay in taxes, and your personal liability or risk. We’ve outlined common business structures and their benefits for international business owners: 

  • C-corporation: C-corporations, commonly known as corporations, are separate legal entities from their owners. They consist of shareholders, a board of governors, officers, directors, and employees. Most business owners choose to incorporate their businesses because corporations offer unlimited stock and are typically more attractive to outside investors. 
  • S-corporation: S-corporations can only be created by U.S. residents. They offer the same advantages as traditional corporations but with more tax flexibility. In an S-corporation, profits and certain losses can avoid corporate taxes, which are instead passed through to business owners' personal income tax. 
  • Limited Liability Company (LLC): An LLC is a hybrid between a C-corporation and a partnership. LLCs are legally separate entities from their owners and limit personal liability. LLCs have flexible taxation, meaning that business owners can choose to pay business taxes on their personal income or pay as S-corporations.

After submitting your registration requirements, the government will review your information and decide whether to approve your business. This process can take days to months depending on factors like the state you’ve registered in and whether you’ve opted to pay an extra fee for expediting processing.

2. Register your company name

Once you've chosen a company name that your team is on board with, check if it’s being used by other businesses. All U.S. businesses have the legal right to protect their name from other businesses, and it’s important to establish that you’re not encroaching on another company’s territory. This is also a good time to check with the state you are operating in for rules on how to register your business name. Registration may be a legal requirement depending on your business structure and location. 

There are four different ways to register your business name, each of which serve a different purpose: 

  • Trademark: A trademark can protect your business, goods, or services at a federal level by preventing others in the same or similar industries from using your name or logo. Without a trademark, another business can claim your name and logo before you do. That means they will own the associated legal rights and can even sue you for using them.

    For example, if you run an online coffee subscription service called Ana’s Coffee Beans and one of your products is called Rise and Shine, you must trademark both of those names to prevent other coffee businesses from using them. Your trademark will also protect your logo from being used by other businesses.

    All businesses in the U.S. are liable for trademark infringement, which can be costly. To keep yourself in the clear, search the U.S. trademark database for currently registered names for all businesses, goods, and services.
  • Entity name: In some states, entity names are required in addition to trademarks. States identify your business through an entity name. They protect the name of your business within the state you’ve registered in—with a few exceptions. Some states ask that your entity name reflect the type of business you have (e.g., Ana’s Coffee Beans).
  • Doing business as (DBA) name: Also known as a trade name, fictitious name, or assumed name, a DBA name is a registered name that a business operates under that isn't its legal business name.

    You might opt for a DBA if you have registered a formal business entity, but are looking to brand your products and services under a different name.  For example, John's Baked Goods might go by John's Cookies.  Many states require you to register a DBA if you use one.

    A DBA doesn’t provide legal protection by itself, and trademark infringement laws can still apply. But because more than one business can go by the same DBA within a state, you have fewer restrictions on the name you choose and how it relates to your business. For example, a small business owner could use Ana’s Coffee Beans for its entity name but use Brew & Sip for their DBA. 
  • Domain name: Also known as your website address or URL, a domain name helps establish an online presence for your business. It doesn’t need to match your legal business name, trademark, or DBA. Once you register your domain name, it can not be used by anyone else for as long as you own it.

    Domain names are registered through accredited registrars or website builders (more information on this in step #9), and need to be renewed on a regular basis.

3. Get an EIN

An EIN is a nine-digit code that identifies your business for tax purposes. EINs are a requirement for several important business procedures, including registering your company as an LLC or corporation, hiring employees and contractors, and opening a business bank account. 

Getting an EIN is relatively easy. The IRS provides a free online registration service to set up an EIN for your business. 

The EIN can act as a valid Taxpayer Identification Number (TIN). If you have already registered for a separate TIN in the past, you can still apply for an EIN on behalf of your business, but it must be by mail or fax (where the form asks for the Taxpayer Identification Number, enter foreign/none). 

4. Select a state to form your business in

Choosing where to form your company is an important decision. Every business is different, and there are several factors to keep in mind when making your choice. Remember that you can do business outside of the state you form your business in, but you’ll have to keep track of varying tax rates and compliance rules across states.

Let’s say you own a skateboard company. You might want to look at: 

  • Demographics: Los Angeles is often cited as the headquarters of skating in the U.S. 
  • Competition: Texas also has a thriving skateboard scene, with less competition than in California  
  • Supply chain: Nevada offers affordable, accessible skateboard manufacturing options 
  • State taxes: Delaware is a famously low-burden tax state for businesses 
  • State laws: Alabama has made it illegal to skateboard in commercial areas

Your decision should meet your company’s business objectives in a cost-effective manner without sacrificing the quality of the goods or services you provide.

5. Get a registered agent

A registered agent’s role is to receive legal documents for your company within the U.S. The state you’ve registered in will send your agent annual reports and tax notices, as well as other important legal notices that require urgent action. State laws require corporations and LLCs to maintain a registered agent in every state in which your company does business. 

A registered agent may be a member of your company who has a physical address in a state where you’re doing business—with the exception of California, the only state that requires a third party agent. Even in states where company members are allowed to be registered agents, many choose to go with a third party, like a lawyer. If your company fails to properly maintain a registered agent, you might miss an important legal notice or tax filing document, impacting your ability to do business.

A registered agent service will typically:

  • Receive and forward any official documents or tax notices from the Secretary of State to your company
  • Accept any legal service of process and forward it to your company

Some registered agents are more knowledgeable and are better fits for your business. It’s important to research the right agent before making a decision: shop around, ask questions, and learn what average costs are in your state. 

6. File articles of organization

Once you’ve found a name for your business and selected a registered agent, the next step is to form your business. Many ecommerce businesses form LLCs. The benefits of LLCs include a flexible taxation structure and personal liability protection, which protects your personal assets if your business encounters an accident it can't pay for.

LLCs are formed by filing documents known as articles of organization with the Secretary of State in your chosen location. Articles of organization will ask for your business name, the name and address of your registered agent, and your LLC's management structure—either member-managed or manager-managed.

You should form an LLC in the state you plan to do business in. If your LLC plans to do business outside of its registered state, you will have to register a foreign LLC.

Depending on the state, your LLC will cost between $40 to $500 to form. You will also have annual fees which differ by state. Processing times can vary depending on factors like the state you form your business in, the time of year you file, and how complete your articles of organization are. You can pay an extra fee to expedite filing.

You can also hire an LLC formation company like ZenBusiness or LegalZoom. In some states, you will also have to create an operating agreement, which outlines your LLC's ownership structure and the roles of different members. Although this isn't a requirement in all states, operating agreements are often recommended to have as sources of truth.

7. Arrange a U.S. business address or virtual office

A U.S. business address can legitimize your operations. Your address can be used for mail and to set up company accounts. While you may be tempted to use your registered agent’s address to receive mail, this is not the agent’s intended use. As you select a physical address, keep in mind that some states allow you to use a mailbox service’s physical address, including a P.O. box, while others do not. 

Virtual offices, also known as co-working spaces, offer a professional mailing address to use as your principal place of business, with additional perks such as a phone number, receptionist services, meeting spaces, workspaces, and mail forwarding services. 

8. Open a U.S. bank account

A business account that fits your unique needs can empower your business, complement the way you interact with customers and vendors, and allow you to stay legally compliant and protected.

Some key factors to review before choosing a bank account include rewards, access to online services, the convenience of making deposits, and the ability to earn interest rates on your deposits. You should keep separate bank accounts for personal and business use. Separate business and personal bank accounts can sometimes be required by the state. 

9. Build a website and design a company logo

It’s easier than ever to create a website for your business, regardless of your technical skill level. The most common method is to use a website builder, such as Wix, Weebly, or Shopify. Website builders take care of the back end development and let you focus on design and content, often through templates and drag-and-drop interfaces. Some website builders also let you register a website name.

Once you’ve chosen a website builder that’s right for you, there are a few more steps you’ll need to follow: 

  • Sign up for a monthly or annual plan that suits your business needs and budget
  • Register your domain name or use one you’ve purchased on a different site
  • Pick a design template that speaks to your brand
  • Customize your template design, using online tutorials when needed
  • Upload and format copy and content that clearly explains your value
  • Preview and test your website with feedback from trusted third parties
  • Publish your website

If you’d like to create a website with more complex technical abilities or design is not your strong suit, you can find a well-reviewed web developer on a reputable freelance services marketplace like Freelancer, Upwork, or Fiverr

Key takeaways

No two businesses are the same. The research you conduct to open your business in the U.S. should be checked (and double checked). We’ve outlined a few key takeaways to help you get started on your journey: 

  • When you name your company, product, or service, ensure it is not already trademarked in the U.S. 
  • Choose a business structure and location that suits your long-term goals
  • Check the required steps in your state when hiring a registered agent, filing for incorporation, registering for an EIN, and setting up a U.S. business address 
  • Think carefully before designing your website and logo, and bring in professional help when you need it

Banking built for startups
Scale with real bank accounts, custom made tools, & our entire investor network.
Learn More
Banking built for ecommerce
Open an FDIC-insured U.S. bank account without stepping foot outside your door.
Learn More

 


Next chapter
What Documents Do I Need to Open a U.S. Business?
Chapter
2
/
9

More Articles

Read the latest news and more, delivered right to you.
You are subscribed!
Please submit a valid email.