By Fernando Berrocal

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In September 2020, Wall Street Journal reported more than 3.2 million applications for Employment Identification Numbers (EIN). According to the U.S. Census Bureau, there were 440,165 business application submissions in March 2021, up 3.4% over the previous month.

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In 2022, these numbers are expected to rise.  What is behind this trend? According to the Peterson Institute for International Economics, the main cause of new businesses emerging rapidly is changing customer preferences; entrepreneurs have new opportunities as a result of the COVID-19 pandemic.  Another factor that may contribute is geographic location; being in a location where filing paperwork is convenient will encourage potential entrepreneurs to take the leap into actual business.

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Entrepreneurship as a need is a third hypothesis. This is true for people without a job who are looking for the next step in their careers.  Many out-of-work people used social media platforms during the pandemic, and discovered their true passion as a result. Young people in particular may reach a large audience through mediums such as TikTok and YouTube; the rise of e-commerce sites are helpful in bringing their creations to reality. 

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Despite these lowered barriers to business, early entrepreneurs can’t rely on everything they hear or see online to build successful startups.  Many are unaware of crucial measures every young entrepreneur must follow when getting started. When launching their vision, new startup owners should make sure they cover the following steps:

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1. Make a Business Plan: Although it may appear to be an outdated practice, having a documented business plan is a valuable asset. A startup's business strategy serves as its foundation.  This plan helps you create objectives and identify the deadlines or activities necessary to achieve these goals. An actual, documented business strategy serves as a continuous reference point; it keeps you organized and on track.

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Business plans come in two different types: traditional and lean. A traditional business plan is usually 30-40 pages long, and serves as an organization's road map. Lean business plans tend to be approximately one page long. Here, entrepreneurs may discuss their startup's value proposition and how it can address challenges for its target demographic(s).  The lean style may also include information on current business partners as well as ideas for providing a positive customer service experience for the organization's customers.

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2. Incorporate a Limited Liability Company (LLC): The more time devoted to developing your startup, the more necessary it becomes to incorporate. So what exactly does this mean? The process of forming a corporate business structure is known as incorporation.  It establishes a legal separation between the business and its owner, providing limited liability protection. The separation of personal and professional assets is created by having restricted liability protection. This guarantees that the owner's items are neither harmed nor utilized as collateral in the case of an unanticipated occurrence.

The best corporate structure for your business will be determined by its demands and services. An LLC, Corporation, S Corporation, or nonprofit corporation are among the options for incorporation. These are only a few examples of several types of business forms. 

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3. File for Trademark Protection: One common mistake a young entrepreneur may make when starting a business is failing to protect the organization's trademarks–one of the most crucial actions any new entrepreneur should take. The distinct names and logos involved in your startup help to differentiate your brand. The easiest approach to protect these marks?  Register them as trademarks.  One tip: conduct a name search before submitting for this registration. Use a trademark database, such as the U.S. Patent and Trademark Office’s Trademark Electronic Search System (TESS). You will be able to see if a trademark is already registered, or is in the process of being registered.  After establishing a trademark is available, you may begin the registration process–granting you exclusive rights to use the mark and protection against plagiarism.

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4. Obtain Tax IDs and Business Licenses:  What can a tax ID accomplish for your business? The IRS can uniquely identify tax accounts by requesting an EIN. You may also recruit workers, open a business bank account, establish pension, profit-sharing, and retirement plans.  Don’t forget applicable business licenses, as well.  Note: business licenses are subject to change based on your industry and region. If you're unsure what licenses or permissions your startup will need, contact your local Secretary of State for a complete list.

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5. Keep your Business in Compliance: Meeting internal and external corporate criteria is known as business compliance. Your startup’s state of incorporation determines what this criteria means. The following is a breakdown of the two sorts of requirements:

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• Internal Requirements: According to the Small Business Administration (SBA), incorporated businesses are required to retain records. Your startup’s structure will determine what documents you need to create and keep updated.

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• External Requirements: This is how state and federal filing requirements are met. From annual reports to franchise taxes to articles of amendment, small businesses have regular paperwork to submit and renew.

Startups that follow the Secretary of State's regulations are officially in good standing. They have completed their yearly filings and paid the required costs. Failure to do so might result in an organization's unfavorable status with the state–even involuntary dissolution. If you want more support, choose a third-party registered agent for your business. A registered agent serves as an intermediary between your business and the state, organizing papers from the government and delivering them to you in a secure manner. This enables business owners to fulfill all deadlines with the peace of mind that their startup is in good standing.

Ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.

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