The most attractive market for entrepreneurs has always been and continues to be America. Even if the project isn’t aimed at the US market, having a Delaware business and a San Francisco mailbox adds to the karma and increases the odds of getting into the next round.
Choose a Corporate Form and Register a Company
You can sometimes get by without having a legal entity, but if you do, the decision is between a limited liability company (LLC) and a corporation (C-corp).
Due to the complexities of the tax system, professional investors will not invest in an LLC. What is the best way to pick between them? The following is the rule: You’ll need a C-corp if you want to attract outside investment, including through the passage of an accelerator.
LLCs are subject to “pass-through taxation,” which means the company itself is not taxed, and owners pay taxes on the firm’s earnings. If he does not receive dividends from the company, an investor who purchases a share in an LLC may be obliged to pay tax on the growth in the value of his claim. On the other hand, corporations pay taxes on their profits, whereas shareholders only pay taxes on dividends and capital gains on stock sales.
An LLC is ideal if you don’t need to make any investments and run a business. For example, MailChimp, the world’s largest email marketing business, was founded as an LLC and has never received outside funding.
State to Register
In every state, both corporate forms are available. However, most businesses are registered in Delaware due to favorable tax conditions, relative secrecy, and well-developed corporate legislation.
Both corporate types are available in every state. However, most businesses are registered in Delaware due to excellent tax conditions, relative anonymity, and well-developed corporate regulations.
Registration Process
The registration procedure is straightforward and does not necessitate the presence of a notary. It’s best to hire a registered agent who can do the following.
Sends paperwork to the state authorities for company registration; lists their contact information for publicly available information about the firm on the state website; has the right to receive official company communication; and offers a standard bundle of internal corporate documents (charter, minutes of decisions of the board of directors).
In a strict sense, the founders do not need to engage a lawyer to register the company because lawyers are contractors.
On the other hand, a corporate lawyer can help you avoid costly blunders when forming a business. For a prospective investor, it will be critical that the documentation relating to the firm’s founders’ acquisition of shares in the company, the relationships between shareholders and employees, and the transfer of intellectual property rights in the company’s favor be completed appropriately.
Stock Confusion
The certificate of formation must indicate the number of authorized shares, an outdated feature in Delaware corporate law (authorized stock). The maximum number of shares that a corporation can issue is referred to as this.
The founders frequently distribute all shares at once (leaving no shares for future investors) or even more than the declared number of shares. This type of distribution isn’t valid.
Administrative Matters
Following the registration of a business, the following stages are to obtain a tax identification number, create a bank account, and, in some cases, purchase insurance.
Tax Number
If someone in the organization has a Social Security Number, an Employer Identification Number, or EIN, it can be obtained online in less than 10 minutes. If no SSN is available, they must receive the tax number via fax, mail, or telephone.
Bank account
You can open an American bank account once you have a tax number. Most banks require you to be physically present; however, some allow you to open an account remotely, such as Silicon Valley Bank. Another alternative is to appoint a company secretary in the United States so that he can represent your startup in a bank while still working for the company. You’ll need to gather information about the company and its significant stockholders.
Insurance
US Startup Accelerators
Founders consider going through acceleration programs, widespread in the United States, shortly after registering a company and looking for finance.
Many startups in the United States begin their journey by completing training programs at specific accelerators. Simultaneously, accelerators can act as first investors, offering “elevating” cash for starting in the United States.
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