I was watching a Chinese podcaster who is a JP Morgan analyst who has her own startup, she talked a lot about the ups and downs in her journey as an entrepreneur and one of the questions she got asked a lot by investors is "if Microsoft or Amazon wants to copy your idea, how do you know you can win against them?". She said she really doesn't know whether she could win against these big companies, but the good thing is if these big companies are looking at the same thing she is building, then that means at least this a product of good quality/promise, but otherwise, she didn't really add much to answering this question. I am just wondering what redditors about this in general? I mean every start up is different, and there really shouldn't be a "model answer" to this but just some food for thought
Starting a business is an exciting journey. For many entrepreneurs, starting a business is their chance to take their product to market, to become part of their local communities and to start making income from their own ventures.
Many entrepreneurs choose a limited liability company (LLC) as a preferred vehicle for that journey. An LLC is a type of entity structure known for its flexibility and ease of formation.
Regardless of the state in which you decide to form your LLC, you can expect to face a unique set of requirements. While this may be less enjoyable than actually working on your business idea, understanding the rules (and getting them right from the beginning) helps you set up your business faster and avoid issues down the road.
Entrepreneurs need step-by-step information for setting up a compliant LLC. Unlike many online articles, which are general in nature, this article is a how-to guide.
Below, we’ll take you through every step of forming an LLC, using the great state of Michigan as an example:
Establish a business plan
Your business plan documents what your business will make or sell, what customers you plan to serve, and how you plan to generate revenue. While having a business plan isn’t a requirement specific to Michigan, it’s essential to have one to guide the first few months (or years) of your new business.
Entrepreneurs who seek bank loans or investors, or who expect to scale quickly, will typically need a comprehensive business plan to demonstrate viability. If you’re simply forming an LLC to limit your personal liability and get your small business off the ground, it’s still a good idea to document your major considerations as a roadmap.
Confirm an LLC is right for you
You may be most familiar with the term “LLC” simply because of its popularity with entrepreneurs. But, it’s important to remember that other types of business entity structures exist.
The structure you choose establishes:
- Whether or not your personal liability is limited
- How your business is taxed
- Flexibility in ownership and management
- How effective you can be in delivering your product or service
As a result, your structure has a long-term impact. If you’re unsure of the right structure for you, check out this handy comparison chart, and speak to a legal or tax professional.
Pick a business name
Your business name conveys valuable information about your brand and your product or service. You will probably spend hours brainstorming the best name for your new enterprise. But there are a few things to consider.
In Michigan, your name cannot conflict with any other registered businesses in the state. Even names that are deemed too similar may not be approved. While these rules exist to protect existing businesses and consumers in Michigan, you can avoid frustrating rejections by conducting a name availability search through the Michigan Department of Licensing and Regulatory Affairs (LARA).
By typing in your desired name (and a few similar variations), you’ll readily see if any conflicts exist. Keep in mind that state document examiners review every business name filed with their office. Just because a name appears to be available online doesn’t guarantee you’ll secure it. On occasion, the database may be missing a record, or the examiner will simply decide the name is too similar. Of course, names that use vulgarity, seem deceptive or contain restricted terms may also be rejected.
If your company is fast-growth or you expect to register in multiple states, you’ll need to repeat the process of name availability searches each time. You may decide to search other states before even forming your company, or you can do that with each new state as you grow. That said, keep in mind that having a name available in Michigan doesn’t mean it’s free to use elsewhere, even in neighboring states.
Once you find a name available in Michigan, determine if you’ll need a trademark. The United States Patent and Trademark Office (USPTO) has a public trademark database, where you can search and explore the availability of your name.
Appoint a Michigan registered agent
All LLCs in Michigan are required to designate a registered agent with LARA when filing to create an LLC. The registered agent is the LLC’s designated point of contact to receive legal and government notices and forward them to the business. The registered agent must have a Michigan address and be available during all business hours.
In Michigan, individuals may serve as the registered agent, but there are downsides, including privacy and availability. Entrepreneurs may be better served choosing a Michigan registered agent company that ensures their LLC meets state requirements and reliably receives documents.
Prepare and file articles of organization
Articles of organization are the document that officially creates your Michigan LLC. In Michigan, the articles of organization are a short form that asks for your LLC’s name, purpose (which may be general in nature) and registered agent.
They also ask for your business’s duration, which is how long you want your LLC to exist (if not forever). The articles of organization must also be signed by the organizer, who is the person creating the LLC. The organizer may be a member (or owner) of the LLC but isn’t required to be.
In Michigan, the filing fee to form an LLC is $ 50, which is relatively low compared to other states. You can file Michigan articles of organization online, which typically results in a turnaround of just a few days. Alternately, you can mail in your articles, which typically takes several weeks for approval.
Once your articles of organization are approved, you officially have a business entity. And, your LLC name is yours to use in the state of Michigan.
Establish company records and operating agreement
Your filed articles of organization are the first document for your LLC’s permanent records. Over time, you’ll create many more, including agreements, minutes and any amendments. It’s essential to keep these documents both handy and secure, as you’ll use them a lot.
One of the most important documents you’ll create is your LLC’s operating agreement. While Michigan doesn’t specifically require that you create an operating agreement, it’s still a good idea.
The operating agreement documents how the LLC will be governed and run. If the LLC will have other members, the operating agreement details your respective ownership percentages and initial capital contributions. This written record is helpful for banks and lenders and may also resolve disputes down the road.
Hold the organizational meeting
Your LLC organizational meeting establishes the procedures for operating your business. If you have multiple members, this step is significant. If you’re the only owner, you can go through the steps on your own. Either way, document the meeting results in the form of minutes and store them in your company records.
Obtain an EIN
Most business entities must obtain an employee identification number (EIN) from the IRS, regardless of whether they will have employees. The EIN is your business’s unique tax ID number. You’ll use it for nearly every B2B transaction, tax report and many government applications for the life of your LLC. With an EIN, you’ll be able to open a business bank account, which is vital for keeping company funds separate from your own.
Most businesses can obtain an EIN online directly from the IRS. At the end of the online application, you immediately receive your EIN (don’t forget to write it down!) with your official letter to follow via USPS mail.
Certain companies, especially those without a U.S. address or valid social security number or individual taxpayer identification number, may not be able to use the IRS website. Instead, they will have to mail or fax Form SS-4 to the IRS, which can take a few weeks to process. In all cases, the IRS does not charge a fee to issue an EIN.
File for S-Corp election, if desired
Depending on the LLC’s planned incomes and owners, electing S-Corp status may or may not be right for you. You also don’t have to immediately elect S-Corp status. Your business’s accountant or tax advisor can help determine whether this step is right for you.
Obtain Michigan Tax ID numbers
In Michigan, LLCs do not have a separate income tax (unless they’ve elected to be taxed as corporations). By default, profits and losses “pass through” to the owner’s individual income tax returns. However, the business may need to register for and pay other state taxes.
For example, if your Michigan LLC sells taxable products or services, you may be required to obtain a Sales Tax License from the Michigan Department of Treasury. There is no fee to register for a sales tax license in Michigan, and you can register online.
If you plan to hire employees, you may need to register for withholding tax and unemployment insurance tax (also through the Department of Treasury). Again, there is no fee to register, which takes place online.
There are other state tax types, so speak with a tax professional who can advise you on where registration needs to occur. Of course, you can expect to file tax returns and make regular payments for each tax type, for which your tax advisor can provide guidance and filing support.
Obtaining licenses, permits and DBAs
Companies across the United States often find business license compliance to be tricky. License and permit requirements vary significantly by location, industry and type of business.
Our how-to guide can’t reasonably cover every type of business. Michigan doesn’t have a general business license like some states. But from there, you can visit the SBA website, which provides a helpful guide to federal and state licenses. You can also contact your local municipal and county agencies and check what your business may need to operate.
If you wish to use a name separate from your LLC’s legal name, you may be required to register an assumed name (or DBA) with LARA. There is a $ 25 annual fee to register and renew your assumed name, which you can file using a paper form or online.
You’ll probably spend the most time researching and applying during this step. Don’t get discouraged, though. Getting it right is vital to your business’s success.
Ongoing compliance considerations
Michigan LLCs are required to file and pay state taxes. Additionally, Michigan LLCs are required to file annual reports with LARA. The annual report is a filing made to update the state with any changes to your LLC’s registered agent. LLCs must file this annual report to maintain good standing with the state.
While the report itself seems straightforward, remembering to file is trickier. Failure to file even a single report on time can result in penalties and worse consequences, like your business being revoked and losing rights to its name. Thankfully, it’s easy to file an LLC annual report in Michigan. The filing fee is just $ 25, and the due date is February 15 each year.
Keep in mind that as your business grows, it will need to follow a similar process of registering the legal entity, appointing a registered agent, opening tax accounts, and applying for licenses, permits and DBAs in other states. You can find state-specific information in this comprehensive Information Center.
When deciding to start a business, the time you spend planning has long-term impacts on how your business is taxed and its ability to grow. Do your research, take your time and seek professional assistance when needed. Forming your LLC correctly the first time saves costs and helps safeguard against issues down the road.
Harbor Compliance does not provide tax, financial or legal advice. Use of our services does not create an attorney-client relationship. Harbor Compliance is not acting as your attorney and does not review information you provide to us for legal accuracy or sufficiency.
Podimo, the Copenhagen-founded subscription service for short form audio stories and podcasts, has raised an additional €11.2 million in funding.
The round is led by Chr. Augustinus investment fund, and comes just 8 months after announcing its €6 million Series A. Existing investors, and the Spanish VC Aldea Opportunity Fund also participated.
Founded in 2019, Podimo is a podcast and short-form audio platform which offers personalized recommendations to listeners, while offering creators a share of revenue via premium subscriptions.
Premium members gain access to over 600 shows that are exclusive to Podimo and membership fees are shared directly with the podcast creators they listen to each month. The service is currently live in Germany, Denmark and carious Spanish speaking markets.
Co-founded by Morten Strunge, who has a track record in subscription media products via audio books service Mofibo (which he sold to Storytel), more broadly, Podimo is hoping to capitalise on the rise in consumption in podcasts. The startup’s other founders are Nikolaj Koppel, Andreas Sachse and Sverre Dueholm.
“Our dream is to address two challenges in the developing podcast industry,” explains Strunge. “The first is discoverability, where we intelligently match listeners to the content they love. And the second is monetization, where we provide a new stream of revenue for creators, allowing them to focus on creating and invest into great storytelling”.
By offering a freemium model, where a paid version provides unlimited listening and features, Strunge believes there is an opportunity to work closely with podcast creators to strengthen the podcast ecosystem and make it less reliant on advertising revenue.
“We want to become the preferred partner for creators, by both working closely with their content, curate and match it with each individual user, but also by offering a superior monetisation model,” he said when Podimo announced its Series A. The hope is that a more robust revenue stream will enable new content producers to enter the market and allow existing ones to earn more. In turn, that would provide the financial headroom to invest even more time and effort into high quality content.
“We have seen strong traction on our podcast and short form audio subscription service… and now more than 50% of our growth comes from our international markets,” Strunge tells me. “Our exclusive catalogue has grown to more than 600 exclusive productions, and our vision of building out revenue streams to creators of short form content really seems to be getting traction”.