You should pick a company name if you don’t have one yet. Even if you are not ready to actually incorporate, picking a name helps you and your partners/ mentors to focus on the new venture. A company name has two parts: the name, and a by-line describing what the company does. If you have a name, you will appear more committed to starting your venture. For example:
- MSN LLC
Multimodal Silica Nanoparticles
If you don’t have a web site, you may also want to pick that and reserve it for a few dollars a year. You can do this at www.godaddy.com . Its very inexpensive to put up one page with your company name, by-line, and a short description of what the company plans to do. Lends credibility if potential investors check you out. The web site name should be similar to but does not need to be identical to the company name and/or by-line. For the above company, to be unique on the web, the web name might be: www.MSNano.com.
At some point, before incorporating and printing business cards, your must make sure the name is not already taken in the state of Iowa (to form the company) or on the web (as a competitor). This is only a problem if the existing company is doing business in the same or a closely related market to you. You can check the Iowa state web site to see if the name is already in use at Business Entities Search.
Once you know the name is free to use in the state, search it on the web also. You can modify the name a bit if needed.
Forming the company:
You can form the company with Articles of Incorporation with the state of Iowa at Business Entity Filing. This is inexpensive but can be confusing the first time through. You can incorporate using a web service such as www.llc.com These sites will do the state paperwork, act as an agent for legal notices (for a yearly fee typically $99), and you have the option to have them create your company's by-laws. This costs more but is less hassle. The third choice is to use a lawyer. If you are seeking major outside investments, having general corporate counsel who will become familiar with the company is something to consider.
Company Form (LLC, S-Corp, C-Corp)
Choose a corporate form that is acceptable to your potential investors!
An S-Corp passes all profit/loss directly to the investors on their personal taxes. If you are seeking outside investment, this is usually a negative. A C-corp retains its earnings, separating individual investors (shareholders financial reporting) from the company. Angels and VCs like this. C-corp reporting rules can be onerous. Missing a board meeting can void the C-corp's legal standing.
State to Form the Company:
Choose a state of incorporation that is acceptable to your potential investors!
Many people form their companies in Delaware because they have fewer reporting rules (board meetings, etc.) This is true for a C-corp but not so much for the other forms. If you will be seeking local or state funding, being incorporated in your home state can be helpful or even required.
There is no such thing as an LLC (to the IRS). Most new ventures choose the LLC form because the reporting requirements are more relaxed. However, when completing the IRS forms you must choose from: partnership, S-corp, or C-corp for taxing purposes. So, your are an "LLC operating as a C-corp (or partnership)." Most investors do not understand this and request that you convert from an LLC to a "real" C-corp when they invest. This means filing a one-page document with the state to change the company Form (and changing your operating and shareholders agreements).
- LLCs have members with % equity, corporations have shareholders with stock.
- LLC members can all be "equal." Or, in a management LLC form, one or more members can be managing members. The rest are silent members (like silent partners). I.e. you can retain management control of your company.
All companies must apply for an Federal Employers Identification Number (EIN). This only takes a few minutes (really).
LLCs are popular because they have little required reporting of company activities. Three documents are necessary for any company:
- Articles of Incorporation - one page filed with the state stating company name and contact person.
- Operating Agreement - how the company will be structured (often just modified boiler plate)
- Shareholders or Members Agreement - this is the most critical to the investors in the company. Use a lawyer on this one for sure to avoid future disagreements and hard feelings!
- You can operate the company and manage investors any way you want, as long as its in these agreements AND you follow the agreements. However, money talks. Major investors will make their own rules, especially if you are desperate.
Logo and business cards:
There are $39 - $499 web based logo web sites where you can create a logo. For example: www.logomaker.com. Finding a site with business logos requires some searching.
Business cards can be printed at www.vistaprint.com for as little as $9.95/250. They also create logos. Or you can upload your new logo design for the card.