10 things you need to know before starting a company

Launching a startup in the United States offers tremendous opportunity, but success doesn’t come from a good idea alone. New founders must also understand taxes, legal structures, employee classifications, compliance rules, and much more. Here are 10 essential things every US startup needs to know.

1. Choose the Right Business Structure

2. Get an EIN and Register Properly

Before doing business, you’ll need to obtain an Employer Identification Number (EIN) from the IRS. This number is required to open a business bank account, file taxes, and hire employees.
You’ll also need to register your business with the state where you operate, which may involve forming an LLC or corporation and filing for local business licenses or permits. Each state has different requirements, so check with your Secretary of State’s office or a local business authority.

3. Understand Your Tax Obligations

Startups are subject to federal, state, and sometimes local taxes—regardless of whether they’re profitable.

• • Federal Income Tax must be filed annually.

• • Self-Employment Tax applies if you’re running a pass-through entity like an LLC.

• • Payroll Taxes apply if you have employees.

• • Sales Tax may apply if you sell goods or taxable services—rules vary by state.

• • Some states charge an annual franchise tax just for doing business there (e.g., California’s minimum $800 fee).

Understanding these obligations from day one helps avoid costly penalties and late fees.

4. Set Up Good Accounting Practices from Day One

Many startups make the mistake of waiting too long to organize their finances, which can lead to confusion, errors, and missed opportunities down the road.

From the beginning, it’s important to use reliable accounting software, such as QuickBooks, Xero, or Wave, to track income, expenses, and cash flow. Be sure to open a separate business bank account and avoid mixing personal and business finances. This separation not only simplifies tax filing but also helps protect your liability status, especially if you’re operating as an LLC or corporation.

You should also keep detailed records of all business-related spending, including startup costs like incorporation fees, software subscriptions, or early marketing efforts. Many of these costs are deductible, and maintaining clean records can make tax season and future conversations with investors much smoother. Hiring a bookkeeper or accountant early can save time and help you avoid costly mistakes.

5. Know the Basics of Startup Tax Deductions

Startup founders can often deduct up to $5,000 of business startup costs in their first year of operation, with any remaining amount amortized over the next 15 years. Common deductible expenses include legal and accounting fees, market research, website development, licensing costs, and office equipment. These deductions can significantly lower your initial tax bill, so it’s important to track everything from day one.

Even before your company generates revenue, these expenses may be written off if they’re directly tied to getting your business up and running. As your company grows, it’s also worth exploring industry-specific tax credits such as the R&D credit if you’re developing new technology.

6. Funding and Investor Considerations

If you’re planning to raise capital for your startup, it’s important to understand what investors look for and how to prepare:

• • Choose the right structure: Most venture capitalists and angel investors prefer Delaware C Corporations because they support stock issuance, offer legal clarity, and are well-suited for fundraising.

• • Maintain a clean cap table: Track ownership accurately from the beginning. A simple, well-documented cap table helps avoid confusion and builds investor confidence.

• • Use standard legal documents: Instruments like SAFE notes and convertible notes are common in early-stage funding rounds. Using industry-standard templates makes the process smoother and more predictable.

• • Stay legally compliant: Ensure your entity is in good standing with the state, file annual reports, and keep up with any required filings—investors will check.

• • Prepare for due diligence: Investors will review your financials, legal documents, IP ownership, and employee agreements. Be ready to present organized, accurate records.

• • Work with startup-savvy professionals: An experienced startup attorney or accountant can help you avoid missteps and ensure you’re investment-ready from day one.

Getting these fundamentals right early on can make the fundraising process faster, smoother, and more successful.

7. Understand the 83(b) Election

If you’re issued equity that vests over time—such as founder shares—it’s crucial to understand the 83(b) election. This IRS filing allows you to pay taxes on the value of your shares at the time they are granted, rather than when they vest and potentially become much more valuable.

Since early-stage shares often have little to no value, making the 83(b) election can significantly reduce your future tax burden. The catch: it must be filed within 30 days of receiving your equity, and there are no extensions. Missing this window can result in a large and unexpected tax bill down the road.

Many first-time founders overlook this step, but it’s one of the most important early tax decisions you’ll make. Consulting a tax professional early on can help ensure you handle it correctly.

8. Classify Workers Correctly

Hiring your first team members is a big milestone, but it’s important to follow employment rules.

• • Employees require payroll tax withholding, unemployment insurance, and benefits depending on state laws.

• • Independent contractors are responsible for their own taxes, but must be classified properly—misclassification can result in audits, fines, and back taxes.

If you control when, where, and how a worker does their job, they’re likely an employee, not a contractor.

9. Protect Your Intellectual Property

Your brand, product designs, software code, and content are some of your most valuable assets—and protecting them early is key to building a secure and investable company. At a minimum, you should consider filing a trademark application for your business name and logo with the USPTO to prevent others from using your brand.

If your company is developing technology or inventions, you may also want to look into filing patents. Just as important is ensuring that any work created by employees, freelancers, or contractors is legally owned by your company. This is typically done through IP assignment agreements, which should be signed before work begins.

If intellectual property ownership isn’t clearly documented, it can lead to costly disputes or complications during fundraising or acquisition. Taking the time to secure your IP rights early on helps protect the long-term value of your business.

10. Stay Compliant with Ongoing Requirements

Running a startup involves more than just the initial setup—it requires consistent attention to ongoing legal and regulatory obligations. This means filing annual reports with your state, paying any required renewal fees, and maintaining your business’s good standing.

If your company is incorporated, you’ll also need to hold annual meetings and keep minutes to comply with corporate formalities. Additionally, don’t forget to renew any necessary local licenses or permits to continue operating legally.

Falling behind on these requirements can lead to penalties, loss of business status, or even involuntary dissolution, which could harm your reputation and ability to raise funds. Staying organized and on top of these tasks ensures your startup remains compliant and positioned for growth.

Starting a business in the US is an exciting and challenging journey but success often depends on laying the right groundwork from the beginning. By understanding these key areas—like choosing the right structure, keeping clean financial records, protecting your intellectual property, and staying compliant—you’ll be better prepared to grow your startup with fewer legal and financial surprises.

While there’s a lot to think about, you don’t have to do it all alone. Surrounding yourself with the right advisors, accountants, lawyers, and mentors can give you the clarity and support you need to build a strong, sustainable business from day one.