Starting a business in the United States (US) can be both daunting and difficult, especially as a foreigner. That’s why we’re here to help! Considering opening a business in the USA? Things can get confusing, so this guide will help those who plan to do business in the land of the free and the steps that you should take.
According to the World Bank’s Doing Business rankings, the US ranks sixth among countries, based on the ease of doing business. Positive prospects aside, there is a lot before you begin your entrepreneur journey. It’s important to consider exploring the market, choosing a business structure type, calculating costs, planning your business and registering a company.
1. Conduct market research
It’s important to look at the American market and consider what would be a beneficial industry to invest in. Some of the most popular industries in the US include cosmetics, insurance, supermarkets, pharmaceutical manufacturing and sales, retail and healthcare. With such a large range of industries to invest in, it’s important to thoroughly analyse your chosen market for a full picture. This includes your target audience, consumer habits and financial capability characteristics.
You should also gather information about your potential competitors, roadblocks to entering the industry and other important factors. If you can, reach out to other business owners in the US and ask them important questions about starting a business in the US and the concerns that you have.
Another essential calculation should be how much you’re willing to spend. People often underestimate how much it costs to run your business before it takes off. The average cost of launching a business in the US is $3,000 to start and it only goes up from there. It’s important to have a realistic expectation of how much money your business will need to flourish. Remember, you’ll also need to pay employees salaries and rent for an office building if you need one.
2. Have a business plan
A business plan is a roadmap that guides the shape and path of your business. Usually, in the form of a written document, your business plan will outline the path of your business as well as predict the state of your business in a few years. This also means it will be important in spotting potential obstacles down the road and how you can overcome these roadblocks.
Your business plan is a key management tool that helps you define your objective, strategy, tactics and marketing techniques. This includes key milestones, deadlines, budgeting and cash flow. With this, you can analyse the direction of your business to make strategic decisions.
Starting your business from the ground up? This business plan will be essential in shaping your business and also guide you at the same time. The contents of your business plan should include what market you’re interested in, your business structure, target demographic, products or services and your expected profits. You’ll also be able to foresee any flaws in your strategy before you actually begin executing it.
Once you’ve established your business plan along with your market research, then you can start taking tangible steps to start your business by getting the necessary licenses.
Find more about business plans and some template examples here.
3. Choose a business structure
It’s important to do your market research before choosing a business structure since each structure has different sets of paperwork, taxes, fees and requirements that must be followed. You also have to choose your business structure before registering your business with the state. Each country has different types of business structures as well. In the US, there are different kinds of business structures such as sole proprietorship, partnerships, limited liability partnerships, and various kinds of corporate businesses.
Sole proprietorship
A sole proprietorship business means that you are self-employed and run your business alone. This means that you keep all your business’s profits but are also responsible for any losses or debts. Your business assets are considered your personal assets.
It’s fairly easy to form and gives you complete control of your own business in the US. This may be a viable option for low-risk businesses and people who want to test the waters before investing in a formal business. However, it may be hard to raise money as you are unable to sell stock and banks may not lend to sole proprietors. Sole proprietorship businesses need not register their businesses with the state.
Partnerships and Limited Liability Partnerships (LLP)
Partnerships are where you and your business will share the responsibility for the business. This means, unlike sole proprietorships, the business belongs to two or more people. This also means that your partners will also share in any business profits or losses, and also pay their own share of taxes.
Limited liability partnerships mean that usually, one partner in the company has unlimited liability, while everyone else has limited liabilities. This also means that limited liability members have limited control over the company, and this is usually agreed upon through a document. The structure of an LLP protects partners from debts against the partnerships, and also so they won’t be held responsible for the actions of other partners.
For bigger companies with multiple business partners, partnerships are usually a good choice of business structure.
4. Choose a location
Where is your business going to be? There are fifty states in the US and you can select any for your base of operations. Once you’ve found a good location, this is where your business begins. You can either lease an existing space for your office or even build your own place from scratch.
Some factors to consider include the price and visibility of the physical store, especially if you’re selling products at your business. Is it easily accessible by public transport or have plenty of parking spaces? Or maybe there might be competitors nearby that might steal the spotlight? Think about your layout and design of the store. An aesthetically pleasing place always attracts wandering eyes!
If you want your business to be online, then you need to look into building your own website. This might require time to spend on web design, and you may need to hire professional help if you have no experience with website building. Online business owners usually create a home office or rent a co-working space for several employees.
5. Register your business
Lastly, it’s time to register your business! Most businesses don’t have to register with the federal government, depending on the business structure chosen. Sole proprietors usually do not have to register with the federal government and can instead file to get a federal tax ID. A company’s employer identification number (EIN) is a unique state number necessary to operate. Without the EIN, business activities such as paying taxes, opening bank accounts, or hiring employees are not feasible. When you register your business, you should apply for the EIN right away.
However, If your business is a limited liability company (LLC), corporation, partnership, or nonprofit corporation, you’ll probably need to register with any state where you conduct business activities. State websites should be consulted for specific information about local conditions. Additionally, If you want to trademark your business, brand or product name, file with the United States Patent and Trademark Office once you’ve formed your business.
All in all, these are some of the big steps you have to make for your business. If you’re looking to start a business in the US, it requires determination, effort and a lot of patience as well. Planning and having foresight for your business is important, alongside passion and devotion.
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