Set Up a Company Online: The Basics

The United States is the most important market in Europe. The internet is a strategic channel for most businesses and a platform to connect and interact with customers, partners, and suppliers.

If you want to set up a company online, there are many things to consider:

  • registering the domain name
  • choosing an internet hosting service provider
  • getting an e-mail account
  • choosing a web design company and so on.

What is an e-commerce website?

An e-commerce website is a company’s online store that enables customers to purchase products or services.

Third-party sites such as [amazon, eBay are good examples of successful online stores.

How to Start an Online Business in 8 Steps

Choose your location and domain name for your business’ site. Decide on your hosting package. Obtain an EIN or employer identification number. Incorporate online.

Launch your website! Choose your design and development team to work with you on your site. Now, we will cover these steps in detail.

1. Assess the Viability of Your New Business Idea

You should first assess the viability of your new business idea. It would help if you asked yourself the following questions:

  1. Is there a demand for my product or service in the marketplace? What is its likely size?
  2. How much will it cost me to produce or provide my product or service? (Include all start-up and ongoing costs).
  3. How much will I charge for my product or service? (Include all fees to the customer)
  4. What are my competitors charging, and how competitive is this price with others?
  5. Am I prepared to offer discounts to attract customers? If so, what discounting strategy do I plan to adopt?
  6. How much will I invest in promoting my product or service once it is launched? At what point, if any, will I seek external funding for my business project?
  7. What banks and other financial institutions are likely to fund my new venture – and how do I go about approaching them?
  8. What benefits will my business project bring to society?
  9. How committed am I to this new venture? Will I have the stamina and determination required to see it through?
  10. Am I secure a good location for my business, or does it rely on an existing relationship with another company?

Once you have completed this self-assessment, you will be better positioned to decide whether your new venture is viable.

2. Develop a Business Plan

Once you have decided to proceed with your business idea, compile a business plan. A business plan is an essential tool for securing funding and planning the future growth of your new venture.

Before writing your business plan, make sure that you conduct thorough market research – if you are convinced there is a need for your product or service in the marketplace, then potential investors will find it much easier to believe in your project.

3. Choose a Business Name and Register Your Domain Name

Decide on a name for your business and register it as a domain name. If you plan to have an e-commerce site, make sure that you choose a memorable, relevant web address – [google is easy to remember!].

Check whether the domain name (i.e., the website address) you wish to register is available and, if necessary, register it. Choose a web hosting service provider that offers good security, reliability, uptime, and customer support (e.g. [http://www.hostgator.com/ ]).

4. Decide on Your Business Structure

It would help to consider whether your company will be an LLC (limited liability corporation), a C Corp, or an S corp.

I. LLC

A Limited Liability Company is the simplest business structure; it requires limited government reporting and no shareholder meetings. Business losses are not taxed against the owner’s personal income but instead “pass-through” the business to the owner.

LLCs are liable for self-employment tax on all profits – this amount is deducted from each member’s share of the profits at the end of each year.

II. C Corporations

A-C corporation is a separate legal entity from its business owner, and as such, incurs its own taxes, fees, and liabilities. This means that business losses incurred by the company will not be taxed against the personal income of the shareholders or directors.

III. S corporations

An S corporation is a hybrid with the tax advantages of a partnership or LLC but must file its own tax returns. Each shareholder receives an annual K-1 statement detailing their share of losses and profits for that year.

5. Take Care of All the Legal Tasks to set up a company online

The next step is to meet all the legal requirements for your business. You should check that you have met any city, state, or local regulations and registered your company with the relevant authorities.

Ensure that you have a proper business mailing address; this may be your home, but it has to look professional if anyone wishes to contact you. If possible, get a business line or mobile phone number – this way, you can be contacted at any time when your customers need to speak with you.

6. Build Your Website and Choose Your Sourcing and Fulfillment Methods

You should now register your website with a domain name registrar (e.g. [godaddy.com]) and choose the web host that will provide the services you need (e.g. [hostgator.com]).

Once your site is live, work on promoting it to gain as much traffic as possible – [if you don’t have many visitors, how can you sell anything to them?] You should also decide whether or not you will use a drop shipping company, and if so, which one.

Choosing an internet hosting service provider

You will also need to find a reputable provider for your e-commerce hosting. The host will be the company that actually delivers your website to all of your visitors, and as such, you should only choose a reliable one with an established reputation.

You can read reviews posted by other users online or ask friends and business associates for advice.

Getting an e-mail account

Once you have decided on a hosting service and business name, the next step is to register an email account for your company.

If you are using Google Apps or Microsoft Office 365 for your e-mail, then sign up using that personal email address; if not, this should be done separately.

Choosing a web design company

Finally, you will need to find a web design service. Websites give you an online presence and make users aware of your products or services; therefore, you should hire a skilled graphic designer who can create the perfect site for your small business.  

You can usually find such companies on sites like Elance, Guru, and Freelancer, but you should read reviews carefully to ensure that you hire the best provider.

Always get a written agreement outlining the work scope and overall cost before engaging them on any projects.

7. Develop and Implement Your Prelaunch Marketing Strategies

Having designed and launched your site, you should now promote the business and build up a customer base. This can be done in many ways:

Use social media sites such as Facebook to get more followers – having more people sharing news about your website will help it get seen by many more customers.

Email marketing is another method that can be used, but be careful not to spam your customers.

8. Launch Your New Business!

By this point, you will hopefully have a good number of customers ready to buy your products. The last stage is to find a supply chain to meet the demands of your customers and send the products.

It would help if you also did any necessary web development work to improve and expand your business – for example adding new products or services or upgrading payment options.

Pros and cons of online company formation:

Pros:

  • You can start a business online without finding premises or dealing with maintenance, utilities, etc.
  • The costs are relatively low as no real office is needed, and equipment can be shared with friends and family.

Cons:

  • Some business owners may not like that their company is connected to them personally – it’s harder to hide bad news or negative comments. 
  • Also, if customers cannot visit an online company, it can seem less trustworthy and may not sell.

What is the cost of setting up a company online?

The costs of setting up an online company vary from one business location to another. The expenses of incorporating a limited liability company (LLC) differ from state to state, but incorporation is usually the most costly process for any new business. In some states, such as Delaware, the LLCs are also called ‘Delaware LLCs.’

For example, it is estimated that an LLC business registration costs $45-350 in California. Annual fees are to be paid every year after the LLC incorporation has taken place and vary from state to state.

There are separate charges for different services online:

  1. Service Cost of Incorporation $45 – 350
  2. Incorporation Fee Annual Renewal $50 – $300

With all the paperwork there is to do, the cost of setting up an online company can be quite high.  Still, new business owners prefer online incorporation because it’s quick and easy.

What is more beneficial than cheap services is that many companies offer discounts on their prices – a new company should look for such opportunities.

The average cost of setting up a company online is approximately $400-600. This includes the cost of incorporating + annual fees + shipping costs but excludes equipment and product sourcing expenses.

Registrations & Filings

To form an online company, you will need to do the following:

  1. Register your business name
  2. Register with the IRS as a sole proprietor (if you’re going to operate under your personal name)
  3. Draft an operating agreement and corporate bylaws
  4. File for taxes
  5. Establish a business bank account or credit card
  6. Accept payment methods

Depending on your state of residence, registering a company name may take some time. Once you’ve chosen the business name, which should be registered in all caps, with no punctuation marks or special characters, visit your state government’s website to register it.

The application process is straightforward and will only take five minutes – you’ll have to provide your contact information as well as a description of your business activities.

Other Registration Requirements:

  • The tax ID number is also a mandatory process for setting up an online company. Your state should provide you with this information after registering your LLC or corporation. In most states, the tax number will serve as a virtual ID if you ever do business in person at any point – instead of showing your driver’s license, you’ll be able to provide the number. The tax ID will also make it easier to open a bank account and accept payment options online.
  • If you want your LLC or corporation to have legal standing, such as being considered a legitimate brand or company, then file it with the state’s secretary of state office. A fee must usually be paid for this service.
  • If you are setting up an online US company and want to operate it legally, then you must also draft a corporate bylaw, which is basically a document describing how the company will be run and what its structure will be. Incorporate a business attorney; they will help you organize your bylaws properly. Without drafting a bylaw, your online company won’t be recognized as an official business entity type.  The last step in setting up an online company is filing for taxes with the IRS. This involves providing tax forms W-8BEN to prove you are exempt from paying income and social insurance taxes.

Customer Service Promise

All companies should help their customers, whether through a phone line, email address, or live chat facility. The best way to guarantee customer service is to state the information clearly on your website. If prospective clients see no customer support for questions and concerns, they will go elsewhere.

You can also offer free shipping, free returns, and even a money-back satisfaction guarantee.  This is quite important because if you want to increase your customer satisfaction ratings, good customer service must be included in your company’s benefits list.

Providing top-notch customer service can be expensive; however, investing time and resources into this area will only pay off in the long run. With great customer service, you will be able to attract new customers and keep your current clients happy – they will be more willing to return to make additional purchases or recommend your company to their friends and family members.

Online Business FAQs

Q: Do online incorporation services include ongoing compliance assistance?

A: Many incorporation services offer to help you with your compliance documents.  The best way to find out if they do this is by visiting the company’s website or contacting them directly.

Q: Which is better for an online company – corporations or LLCs?

A: The choice between a corporation and an LLC really depends on how you intend to operate your business.  If you want your company to be completely separate from yourself, a corporation is the better option.

You will have more freedom in structuring and operating the company because it isn’t connected to any individual – it’s its own separate entity with its own set of tax benefits.

For example, if you form an LLC, you are personally liable for any debts accrued by the company. If an online business has a lot of money invested in it and you want to ensure there’s no chance of losing this investment if things go wrong, then incorporating will be more suitable.

Q: What is the best time frame for starting and running an online business?

A: The most common time frame for starting an online business is within the first few months of the year because it’s easier to attract traffic from visitors who are starting a new budget cycle.  

The best time frame for operating and maintaining a business, however, really depends on its industry – some businesses do better during holidays, while others need a steady flow of customers throughout the whole year.

Q: What are some online business ideas that I can operate?

A: Once you have decided whether to form an LLC or incorporate your company, you should consider what kind of services or products will be offered.  

If you want to make money by providing services rather than physical products, creating a membership site is the best way to do this.  With a membership site, you can have unlimited members and make money from recurring revenue.

Q: How do I choose an online business model?

A: The first thing to consider when choosing a business model is the amount of time and money you are willing to invest into starting your own company.  Next, decide whether you want to sell products or provide services.

Q: How can I ensure the success of my online business?

A: The most important thing to remember is that no business succeeds without good customer service.  The first step in providing stellar customer service is ensuring your customers get their orders as soon as possible and have a positive shopping experience when visiting your company’s website.

 It’s also a good idea to avoid using sales tactics that are too hard-selling – if customers feel pressured into buying something, they’ll be less likely to return.

Q. Do I need a registered agent service?

A. Yes, if you have a company that will be doing any business online.  Without a registered agent, who is a resident of the US, people can not find your records or reach you personally.  As an owner, you want to be protected from personal liability, and having a registered agent is easiest.

Conclusion

Today, there are all different online businesses in the USA, ranging from selling books to providing services.  That’s why you need to choose what type of business you want to operate before setting up your company.

 If you don’t know how to get traffic and customers for your web-based business, talk to a professional SEO expert in your area who can help you set up your company’s website and cost-effectively attract customers.

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