This question originally appeared on CoFoundersLab: Can we register now our start-up company? And where can we register it here in the US?
Answer from Paul Garcia, President of The Association of Bar & Lounge Establishments (TABLE)
Deciding when to register your company depends on when you start paying people and how your company is structured. If you are a sole proprietor and you have no direct employees, you generally have the ability to delay registering your company for tax purposes until you want to file a loss on your taxes, start buying things wholesale or start paying contractors. But if you want to legitimize your business and engage customers, then you’ll need to incorporate.
Registering in the U.S.
Regarding the registration of your business in the United States: You should know that most domestic American entrepreneurs start with an LLC, either single-member or multiple-member. Some states do not allow single-member LLCs and require you to have at least two corporate individuals. Starting a C-corp is little more costly and hands-on. And while there are particular advantages to C-corps (e.g. being able to sell stock to investors), there’s also a higher price to pay in time, taxes and maintenance/administration.
You can convert an LLC to a stock corp later if you get to that point. Taxes are handled differently between different incorporation types. How your company is structured will affect your liability and tax structure.
Registering in Another State
While you have the ability to register your business in most U.S. states, sometimes you may need a local agent to represent you if you are incorporating in a place where you don't live. I personally feel that incorporating in a "business friendly" state such as Delaware may not be worthwhile until you plan to do a significant amount of business there. Dealing with your home state’s laws is a more straightforward process. You can always re-incorporate later in another state if the advantages of doing so become important to your business.
This isn’t legal advice. It’s merely general information. You should always consult an accountant or lawyer before deciding how and where to incorporate. Although you don't have to use a lawyer to set up your company, talking to one may help you sort through issues that could affect your company in the future -- before they become problematic.
More from CoFoundersLab.com:
- Can 3D Printers Catch On With Consumers?
- How Much Does It Cost To Develop A Simple App?
- How should technical co-founders evaluate business ideas?
Can we register now our start-up company? And where can we register it here in the US? originally appeared on CoFoundersLab — the place to connect, meet, and collaborate with like-minded entrepreneurs.