Business Blog – Chapter 7
Throughout the entire process of starting MyClyq, I was constantly stepping out of my comfort zone to learn all the different aspects of building a company. However, for the task of registering a business and opening bank accounts, I got the rare opportunity to do what I know pretty well.
Registering a business may seem pretty simple and easy to do. You can usually do it from the comfort of your own home in minutes. Unfortunately, people who rush in and file businesses incorrectly or in a non-favorable way can find themselves paying huge fees to change the type of business and also paying extra in taxes. My goal is to give you a few pointers to help you save that extra time and money. Of course, this may not be the right rout for your company. I always recommend doing your own research and talking to professionals who can advise you on your companies’ specific needs.
I spent some time working in the business banking division of a major financial institution prior to starting MyClyq. There I learned how businesses were formed and what documents were needed to open bank accounts. There are several different types of businesses that people can open. The most common are LLC, LP, Corporation and Sole Proprietorship. Again, to determine which one is best for you, I would recommend talking to an attorney or other professional who has experience in this field. You can also check out legalzoom.com or lawtrade.com to chat with someone who can tell you exactly what you need. The best option for us was to incorporate the company as a C-Corporation. Our goal was to get funded by external sources like venture capitalists. Therefore C corporations provide a little more flexibility when starting a business if you plan to grow, expand the ownership or sell your corporation.
When I first started working in the business banking division, I noticed a large amount of clients were filing their business documents in the state of Delaware. I found that a little strange considering we lived in Los Angeles, California. After doing a little research, I found out the reason behind this was that Delaware had the most flexible business laws in the country. It was also very beneficial in the tax department, specifically for corporations. More information on the benefits can be found at bizfilings.com. Since I had chosen to file a C corporation, filing it in Delaware made perfect sense.
After you know what type of business you are going to file, you’ll usually need to get a business tax ID number or Employer Identification Number (EIN). This is like a social security number but for your business. You can easily apply for one at irs.gov. It’s free of charge and really easy. They ask you a few questions and then will email you a copy of your EIN right then and there. The State of Delaware also requires that every business entity have and maintain a Registered Agent in the State, who is authorized to do business there. After a quick Google search, you’ll find several that you can use online. We chose A Registered Agent Inc. (I know, the name is really original) because they were well known and inexpensive. They charge an annual fee of $49.00.
Once you have the EIN and picked the registered agent, you’ll have to reserve your business name. This will cost another $75.00. You may want to check the state websites before you start anything to see if the name is available (something I talked about in previous blog posts). After this is done, you’ll have to fill out the formation forms. For a corporation, this form is called the Certificate of Incorporation. Once this form is filled out, it will need to be either mailed or faxed to the Delaware Department of State with the filing fee. This fee can range from $50.00 to $300.00 depending on the type of business. Once the business is filed, the State of Delaware will mail you back a filed version of the document you sent them. If you need it quickly, you can pay extra to get it back in a day or two. If you’re in no rush, you can just pay the costs listed above to get the document filed and they will send you back the filed copy in about two to three weeks.
Opening The Bank Account
To open a bank account, you’ll need the filed document, your EIN and also some sort of document that states the ownership of the company. This document is different for all the different business types. For example, an LLC would have an operating agreement that states the rules and ownership. A corporation would usually have corporate bylaws or corporate minutes/resolution. None of these document have to be filed and are usually drawn up by an attorney. These are probably the most important documents of all because they outline the legally binding rules of the company along with all the ownership structure. Once these documents are obtained, all authorized signers would have to go to the bank with proper identification (usually two forms of ID) to get the account open.
With the business registered and a bank account in hand, our focus shifted to creating and launching a simple one page website in order to recruit signups for our beta platform.
Sign up for our beta at www.myclyq.com.