How to Start a Business During COVID-19

The coronavirus pandemic has completely reshaped the American economy. Many have used the crisis to pursue entrepreneurship, both to help solve global challenges and to reestablish personal income streams. Starting a business in any environment can be tricky. In these unprecedented times, entrepreneurs should not only heed state-specific requirements for starting a compliant business, but also take into account the new factors facing startups.

Create a COVID-19 Business Plan

Any new business idea should have a plan behind it. The business plan outlines the first few months or years of your new venture, including the path to achieving initial revenue. Depending on your idea, the business plan may be highly detailed, especially if you have partners or outside investors. For ventures that are home-based or side projects, your plan might simply document a few high-level considerations.

COVID-19 has disrupted the way we do business. It has reshaped consumer demand for all sorts of products and services. Entrepreneurs and first-time business owners should incorporate this changing demand into their business plans. Maybe you’ve had a great idea for a while and the pandemic freed up your time to pursue the venture. Do some homework before jumping in. Ask whether there is still a need for your product. Also consider whether people will consume your product in the same way. Consumer safety is paramount. Can you keep up with the demand for contactless, delivered, and ultra-clean products? All of these considerations can make or break your new enterprise.

Understand Your State’s Compliance Requirements

In addition to a business plan, you will need to decide on a company name and entity structure. The name you pick must be unique. The structure you choose depends on your revenue, tax preferences, and plans for growth. In short, it is best to talk to an attorney or tax advisor to help you get it right.

When you want to make things official, you will file to create your business with the secretary state. This process is known as “formation” of a legal entity. By doing so, you create a company separate from yourself and gain what is known as “limited liability protection.” Most entrepreneurs are best suited forming their LLC or corporation in the state where they live and work. However, some entrepreneurs choose states like Delaware or New Mexico for business friendliness or taxation reasons.

In all cases, you will be required to appoint a registered agent when you form your company. The registered agent’s job is to receive service of process and other legal notices on behalf of your company. Because the registered agent must reside in the state where you form your business and be available during all business hours, it is important to choose a reliable registered agent. And, if you form your company in a state like New Mexico (or any other state you don’t live in), you will need to appoint a New Mexico registered agent as well as in any other states you plan to do business in.

As we adapt to the new normal of COVID-19, remember that state compliance requirements do not go away! Your new company will face various tax registration, licensing requirements, and annual filing obligations. Your specific requirements will vary depending on your product and location. Again, it is important to do your homework and understand what is needed to operate and stay in good standing.

Leverage Tools to Work Remotely

Entrepreneurs need a variety of tools to get their business off the ground. In an era of COVID-19, however, it is no longer enough to set up a basic bank account, website, email, and payment processor. From the outset, your business will need to interact remotely with customers, vendors and suppliers, and employees.

Business owners will need to invest in cloud-based storage, communications and virtual meeting applications, and depending on your product, digital project management tools. As your company grows and hires employees in other states, it may need to track its compliance requirements in a central location as well.

The upside is tremendous. New businesses that invest in these productivity tools are more efficient and reach profitability faster. At the same time, however, these tools increase the initial cost of doing business. Entrepreneurs should factor these expenses into their initial budget and business plan.

Be Prepared to Bootstrap It

The COVID-19 pandemic has enforced a sobering reality in the United States. With so many shuttered and adversely impacted businesses, one fact remains: only the strong will survive. Entrepreneurs should be prepared to invest both economic resources and their own time to make their new ventures successful. Those looking for external investors should be aware of the current trends in funding.

On the bright side, entrepreneurs that approach their new business idea with a solid game plan have a chance to make a difference. Those that understand the current market, their compliance requirements, and are comfortable making an investment in technology can quickly set up their company and start making a profit.

Disclaimer: 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.

James Gilmer is a Compliance Specialist at Harbor Compliance, a leading provider of compliance solutions for companies of all types and sizes. Founded by a team of government licensing specialists and technology trailblazers, Harbor Compliance has helped more than 25,000 organizations apply for, secure, and maintain licensing across all industries. James is passionate about helping nonprofit organizations leverage compliance to enhance their fundraising and program activities and educating the sector on compliance issues. James is also a Co-Founder of Berks Sinfonietta, Inc., a nonprofit chamber orchestra located in Reading, Pennsylvania.