Starting a Business in 2022 A Step-by-Step Guide

Due to the unfavorable and worsening coronavirus situation across the world, many would say that now is the worst time to start a business. But, in fact, it has never been better! According to recent estimates, by September 30, 2021, there have been nearly 1.4 million startup applications in the USA alone.

It seems that new problems require new solutions, and the ongoing pandemic doesn’t make those problems disappear. So, if you are sitting on a big idea and considering registering your business online, now is the right time to do it. We have prepared this step-by-step guide, laying a foundation for your upcoming business ventures.

Decide on a structure

One of the first steps is choosing a business structure, or strictly speaking, a business entity. Keep in mind that this choice will affect the way you file for taxes, run everyday operations, and risk your personal asset. 

Here is a brief overview to get you familiar with the most common business entities:

Sole proprietorship

Also known as individual entrepreneurship, a sole proprietorship is an unincorporated business featuring only one owner responsible for paying personal income tax on the profit they earned. Due to the lack of government regulations, this type of entity is the easiest to establish, and it’s particularly popular among consultants, individual self-contactors, and sole business owners.

Partnership

This business structure is based on a formal agreement made by two or more parties to oversee business operations and share its profit. There are several types of partnership, including limited partnerships (LP). There is one general partner managing and running the business and limited partners who don’t participate in overseeing the business.

In this case, it’s important to mention that the general partner has unlimited liability for the debt, while general partners have limited liability up to the amount they invested. There is also an LLP or limited liability partnership that protects all partners from debt.

Limited liability corporation

LLC protects its business owner from liability. Basically, owners aren’t personally pursued for the company’s debt. These are essentially hybrid companies that combine features of sole proprietorship and corporation. However, profits and losses are taxed as personal income.

C-Corp

When it comes to C corporation, the company’s shareholders are taxed separately from the entity, ensuring the highest level of protection for owners’ personal assets. However, be aware that according to the IRS, taxing of profits from the business can happen on both personal and corporate levels, meaning you might be eligible for double taxation.

Pick a location

Once you have the business structure figured out, you need to find the most suitable location. This doesn’t restrict you to having a physical location. But, as far as the registration process goes, your business needs to have an address where you will receive documents from the government and an address will put on your tax return and business bank account.

Deal with business name

Registering a business name might be a bit complicated for first-time owners. This process involves registering separate entities like corporations and LLCs. On the other hand, if you are a sole proprietor or you are starting a partnership that will operate under a name that’s not yours, you need to file for DBA or “doing business as.” For instance, your name is Mary Smith, but you want a different name for your business.

DBA can also be applied to existing corporations and LLCs. In this case, you can register other businesses under them. For example, if you own a coffee shop but want to open another one under a different name, you need to file for DBA. These two coffee shops are one entity but with different names.

Don’t forget to trademark your name, and keep in mind that DBA doesn’t protect it automatically.

Register your business with IRS

The next step is to register your business with the IRS, to get an EIN or employee identification number. EIN is like a social security number for your business. Without EIN, you won’t be able to file for taxes. This procedure is very straightforward, and you can file for your EIN number online.

Consider registering your business with state and local agencies

Once you are done with IRS and federal technicalities, you will have to register your business with more local or state agencies, like the revenue office. Additionally, if you intend to run a payroll, you might need to check the state agency and register to file payroll taxes. 

Apply for licenses

Ensure you have all necessary licenses and permits to start serving your customers. As it should be, each industry demands different requirements. Luckily, Business Administration has enabled business owners an easy way to search for permits and licenses they need. You simply need to enter your locations and the type of business you plan to start.

Hire a professional

Starting a business isn’t an easy task and requires quite a bit of legal knowledge. While you can find most of the information online, sometimes it is much safer to hire a professional who will provide expert input and make sure your legal and financial obligations are covered.

Some final thoughts… Even though launching a business can be a nerve-wracking experience, it’s also a rewarding one. This is a journey of a lifetime, with ups and downs, but if you plan everything carefully, hardly anything will be able to stop you from succeeding!