You can start a software company in the USA by making a business plan, choosing a business type, booking a name with the state authorities, and obtaining a registration certificate. Other steps you may need to take to make the software business functional is getting a tax ID, obtaining business licenses and permits, and protecting your business's intellectual property.

Determining the Legal Structure of Your Business

Determining the legal structure of a business is important. The ideal structure for a business depends on the goals of the business:

  • A sole proprietorship is the most basic type of business and requires minimum paperwork to start. This type of business is managed by a single person. However, a business set up as a sole proprietorship limits the ability of the business to get employees and funding.
  • A partnership is a business that is formed by the joining of hands between two or more people. The major advantage of a partnership over a sole proprietorship is that the burden of managing the business may be reduced since it falls on more than one person. Owners of a partnership have limited liability and can be sued as individuals as a result of the work they have done on behalf of the business.
  • A limited liability company is designed to enable small-scale business owners to function without worrying about personal liability. The business type is suitable for business owners who desire liability protection but have no immediate need to expand rapidly.
  • A corporation is the business type of choice for software companies that seek to grow rapidly. Filing your business as a corporation may help you to quickly get investors and lenders that can propel the business toward an initial public offering (IPO). Corporations are expensive to maintain because of strict governmental requirements and double taxation.

Consult a business lawyer and CPA to find out more about the relative tax, management, and legal advantages of each business type.

How to Make a Business Plan

Before starting a software business, it is important to make a business plan. A business plan is a document that states the purpose of your business. It gives details about your marketing efforts, product competition, financial needs, and goals of the business. The business plan can act as a guide to help you achieve your business goals. A business plan normally describes the following about your business:

  • The business concept
  • Market research
  • Marketing planning
  • Operations plan
  • Financial plan

Regardless of the business type you have chosen, you'll likely need to take steps to get your business off the ground:

  • You may need to report a name for your business with your state. You may also need to file another name, the Doing Business As (DBA) name that you will use in branding.
  • You may be required to file business registration documents to get a registration certificate in your state.
  • A federal tax ID is needed to facilitate tax payment. This ID can obtained online on the Internal Revenue Service (IRS) website.
  • Get the required business permits, licenses, and mandatory insurance policies. You can find out more about the exact license and permits a software company is required to have in your area through the U.S. Small Business Administration (SBA) guide.

How to Protect Your Software From Intellectual Property Theft

Although developing useful, commercially viable software is extremely difficult, it is easy for your ideas to be stolen and used at your expense. It is important for newly formed software companies to protect their inventions from such theft. This can be achieved by:

  • Making sure that employees and consultants who have access to privileged info about the business operations sign non-disclosure agreements (NDAs). A business lawyer can help you draft a good NDA.
  • Obtaining patents for each of your company's inventions. A patents lawyer can help you deal with the lengthy process of acquiring a patent.
  • Registering company product names and symbols with the U.S. Patents and Trademarks Office.
  • Registering your product copyright, so you can prove that you invented the product. Copyright protection has a longer period of validity compared to patenting.

If you need help with starting a software business in the U.S., you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.