Want to jump straight to the answer? The best small business POS system for most people is Square or Shopify POS.
Small businesses need a fast and simple way to check out customers—regardless of the customer’s payment method or transaction environment. Things like tracking inventory, printing receipts, managing your cash drawer, and accurately tracking sales for bookkeeping purposes shouldn’t be a hassle for your employees or back office.
POS systems simplify payment acceptance and accounting while streamlining the checkout process for your customers. You can use this guide to find the perfect POS system for your small business.
The Top 5 Best POS Systems For Small Businesses
Square — Best Versatile POS Hardware For Simplicity
Shopify POS — Best For Retailers Selling In-Person and Online
Square has quickly become one of the most popular POS systems for small businesses in nearly every industry. That’s because they have such a wide range of hardware solutions to accommodate varying needs and checkout environments.
For small business retailers, quick-service restaurants, full-service dining, professional services, and so much more, there’s a good chance Square has an option that fits your needs.
Find an option that fits your needs with Square’s wide range of POS hardware.
For such a feature-packed POS solution, every piece of hardware from Square is surprisingly easy to use. Square accommodates contactless payments, online orders, phone orders, pickup and delivery, invoicing, and more.
You can choose from a wide range of POS hardware that works as a fixed register, mobile throughout your store, and even manage checkouts on the go.
Square Register — All-in-one cash register with a customer-facing display
Square Stand — iPad POS that lets you add printers and cash drawers
Square Terminal — Portable POS terminal with built-in payment processing and receipt printing
Square Reader — Turn any phone or tablet into a payment processing system and POS solution
Reader With Contactless Chip — To accept payments on the go
All of these solutions make it ultra-easy to set up and use, regardless of the checkout environment.
Stands and Terminals start at $149 and $299, respectively. If you want a complete Square Register, pricing starts at $799. Financing is available for all hardware, and you can even get a free card reader.
Shopify POS — Best For Retailers Selling In-Person and Online
Shopify is best known for its industry-leading ecommerce platform. But it’s also an excellent option for small businesses that sell both online and in-person.
That’s because you can manage all of your inventory, sales, and customer information from a single source of truth. It also has advanced inventory management features, including forecasting tools, so you can prepare your stock accordingly.
Sell online or in-person with Shopify’s versatile POS tools.
This is an excellent option for brick-and-mortar retailers that are expanding to online sales. It also works really well for ecommerce stores that want to establish a retail presence.
Keeping everything organized for your customers is another great perk. If someone buys a product online and wants to return it in person, Shopify POS can easily handle the transaction.
Customers can also buy online and pick up their purchases in your store. Let’s say an in-person shopper wants something, but you don’t have the right color or size on-site. You can use Shopify POS to process the transaction and ship the right product to their home—so you never miss a sale.
The setup and onboarding process is ultra simple. So you can get started right away and easily train your staff. If you have any questions, the Shopify support team is available 24/7 via phone, email, or live chat.
Best of all, Shopify POS is free with all Shopify plans. For those of you who want more advanced features, there’s a Pro version that starts at $89 per month.
Lightspeed offers industry-specific POS solutions for retailers, golf courses, and restaurants. But the restaurant systems are ideal for small businesses, as they accommodate such a wide range of needs within the food and beverage industry.
This POS system is versatile enough for bars, cafes, quick-service restaurants, full-service dining, hotels, and more. If you sell food and drinks, Lightspeed has you covered.
Lightspeed’s versatile POS system works for every type of restaurant.
Lightspeed has everything you need to scale your business and accommodate your customers. You can easily diversify your service offerings with online ordering and contactless delivery.
The POS system makes it easy to change your floor plan and adjust tables—ensuring your staff always knows where to go. This also helps you handle large group reservations without confusing your staff.
You can use Lightspeed to turn tables faster with tableside checkouts. The system also lets you set up QR codes for menus, ordering, and payments.
Menu modifications and custom orders? No problem. Splitting the check and accepting multiple payment forms from a single party has never been easier.
Lightspeed also syncs with third-party apps, like OpenTable, for reservations. It seamlessly integrates with popular food delivery services like UberEats and DoorDash.
Plans start at just $39 per month. You can try it free for 14 days with unlimited access to every POS feature.
Clover — Best POS System With Built-In Payment Processing
Most modern POS systems come with payment processing. But Clover is unique in the sense that it’s branded a payment acceptance solution first and a POS solution second.
But don’t think that Clover’s POS tools are an afterthought. It’s still a feature-packed solution with plenty of options for businesses in different industries.
Quickly process any type of payment with Clover’s POS solution.
You can use Clover to accept virtually any type of payment from your customers:
EMV chip cards
Contactless NFC payments
Checks
Cash
Swipe cards
Phone orders
Online orders
The list goes on and on. The software is fully encrypted and PCI compliant. You can also take payments without WiFi, and everything will sync when you connect to a network.
With Clover, most businesses get bank deposits the next day. You’ll also benefit from fraud protection of up to $100,000.
If you’re looking for a payments-first POS system that’s easy to use but highly sophisticated, look no further than Clover.
Pricing varies based on your business type and your hardware requirements. Plans start at $14.95 per month, and hardware ranges from $499 to $2,000+. Processing rates start at 2.3% + $0.10 per transaction.
As your small business grows, you need a POS system that will grow with you. Having to change your POS system as you’re opening new stores will only complicate things.
But Vend is specifically designed to accommodate small businesses with multiple locations. You can easily expand without any downtime and accommodate your customers no matter which location they’re visiting.
Vend will help you smoothly run your Multi-location business with ease.
Vend really shines with its advanced inventory management features. It seamlessly tracks all of your stock in real time. You can easily transfer merchandise from one store to another and use the mobile stock-taking features to count items and reconcile your inventory.
All of your customer information can be collected during the sale process. But this only needs to happen once, as that same customer profile can be accessed from any location.
This makes it much easier for you to track and manage customer loyalty programs across every storefront. You can also segment your customer database to further personalize the buying experience.
Vend even has built-in employee management tools. Permissions can be managed by role, and you can set up sales targets to motivate your staff and track their progress.
The solution works with nearly any payment processor, and you can accept all of your customer’s favorite payment methods from all of your locations.
Plans start at $69 per month if you use Vend’s parent company for payment processing. Otherwise, you can get Vend POS starting at $99 per month.
How to Find the Best Small Business POS Systems For You
Every POS system offers the same functions. There’s a way for you to add products or services to an order, accept a payment, and complete the checkout.
But the variations come in the details, which is where you need to look closely as you’re evaluating different POS solutions and comparing them side by side. Beyond pricing and feature lists, you need to consider the factors that relate to your specific small business and operations.
We used the key criteria below to narrow down our list of the best POS systems. You can use the same considerations as a buying guide to find the best option for your unique needs.
Hardware Types and Functionality
The first thing you need to consider is your checkout environment.
Do you want a POS system that’s fixed to a specific location on a countertop? Or do you want the flexibility to process orders from anywhere in your store?
From there, think about how the POS system should function for your business type. For example, a quick-serve coffee shop may want a POS solution with a customer-facing screen. But that likely won’t be necessary for a local dry cleaner or hair salon.
Some POS systems are simply a screen with software. But you’ll need to sync them with a separate register and payment processing system.
Others are all-in-one payment stations with built-in cash drawers and credit card machines. So you’ll need to think about which hardware solutions make the most sense for your checkout process.
Payment Acceptance
POS systems and payment processing go hand-in-hand.
If you’re already in business and happy with your payment processor, you shouldn’t get a POS system that forces you to change. So you should immediately see if the system is easily compatible with your processing system.
Others may want an all-in-one system for POS and payment processing from a single provider. While this option keeps things simple, it doesn’t always translate to the lowest possible rates. So that’s another factor you’ll need to consider.
You don’t want to turn away any paying customers. So look for a POS system that can accommodate any type of payment—including all major credit cards, cash, checks, Apple Pay, Google Pay, and other alternative payment methods.
Mobility
Mobile POS systems are critical for small businesses that operate on the go.
Let’s say you have a food truck or you’re a retailer that sells shirts at local farmer’s markets. Or maybe you have a restaurant and want your servers to take orders and process payments tableside.
You need something that’s not only small and easy to transport but also something that works from anywhere. You shouldn’t have to rely on a stable internet connection to check out customers or process payments. Look for a system that can still operate offline and then sync your records when you’re able to connect.
Conversely, small businesses that want a register fixed in a specific location in the storefront don’t have to worry about mobility.
Setup and Training
Since POS systems come in all different shapes and sizes, the setup process varies greatly as you’re comparing different solutions.
Some systems are ultra-simple and don’t require any specific hardware. You can just download software to a smartphone or tablet and turn any device into a mobile POS system.
Others do come with hardware components, but they’re ready to go out of the box.
Generally speaking, the more hardware you have, the longer the setup takes. Complete POS stations with built-in cash drawers and payment acceptance may require a bit more setup.
Beyond the initial setup, you need to think about the day-to-day use by your staff. Look for systems that are easy to use and don’t require specialized training. It should be an easy fix if someone on your team adds the wrong item to an order or needs to print a new receipt.
Otherwise, glitches and errors with your POS system could lead to long lines at your register—or worse, prevent you from accepting certain payments.
Security and Compliance
POS systems contain sensitive data. Many of you are collecting information about your customers, and some of you might even be storing credit card details when you’re processing payments.
You need to make sure your POS system is PCI compliant to avoid fines and potentially damage your company’s reputation. If there’s a data breach and information about your customers gets stolen, people might think twice before they visit your business again.
This is also important for small businesses that sell online in addition to in-person. Both digital and physical transaction environments must be secure—and you can find plenty of options that are safe with the POS systems reviewed in this guide.
The Top POS Systems For Small Businesses in Summary
Square and Shopify POS are the two best POS systems for small businesses on the market today. If you want a simple solution with lots of options for hardware, Square has you covered. Shopify POS is perfect for small businesses that want to sell online while syncing inventory with in-person sales.
Be sure to consider the hardware, payment acceptance capabilities, mobility, setup, security, and recommended use cases as you’re evaluating the top picks on our list.
Want to jump straight to the answer? The best start-up business loans with bad credit for most people are Upstart or Lendio.
Funding a start-up is a challenge. Most lenders want to look at your financial statements, annual turnover, business tax returns, collateral, and other financials that you’re yet to build up to par. The challenge is even more significant for startups with bad credit.
Fortunately, some alternative lenders specialize in funding startups with bad credit, regardless of how long you’ve been in business.
The Top 5 Best Start-Up Business Loans With Bad Credit
Many startups haven’t been in business long enough to build a credit history. In this case, traditional lenders like banks are out of the question. Fortunately, Upstart is one of the first lenders to offer loans to people with no credit history, a trend that continues to date.
Applying for a loan with upstart is an easy, three-step process.
While Upstart offers different types of loans, its unsecured personal loans have no credit history requirements. Plus, you can use the loan to fund your startup since Upstart doesn’t restrict how you can spend the personal loan.
So how does Upstart qualify borrowers?
The lender doesn’t check for financial information such as credit or payment history. Instead, Upstart uses alternative criteria, such as employment and educational experience. The loan is also unsecured, meaning you don’t have to put up any collateral.
The best part is Upstart doesn’t have a minimum education attainment requirement. So you can still qualify for a loan regardless of your education level.
Additionally, Upstart reports to major credit bureaus like Experian, Equifax, and TransUnion. Therefore, you can slowly build your credit history and creditworthiness as you make regular and timely payments.
Upstart offers personal loans between $1,000 and $50,000. In addition, the loan terms vary between three and five years. Finally, Upstart loans have a fixed interest rate between 5.6% and 35.99% with no prepayment penalty.
Furthermore, Upstart transfers funds in as little as one business day. However, you’ll need to accept the loan before 5 PM ET Monday through Friday to receive funds by the end of the following business day.
Upstart also has a simple application process. Simply check your rate, and choose the loan amount and preferred loan term. Neither of these processes affects your credit score. The lender offers other loans, including car refinance, debt consolidation, and small business loans.
Specifically, a small business loan may be a good alternative for a startup with a credit history. There’s a minimum credit score of 580 and at least one year in business. You don’t have to put collateral, but you may be required to sign a personal guarantee.
Upstart’s small business loans range from $5,000 to $200,000. Overall, this lender has something for everyone. So whether you have poor credit or are deemed unscorable by the CFPB, Upstart certainly has a loan option for you.
Lendio – Best Marketplace Lender for Comparing Business Loans
If you prefer to price shop before accepting a loan, Lendio offers a convenient marketplace to compare interest rates and loan terms. Lendio has more than 75 lending partners in its network. The platform is also free to use. You only pay after accepting the loan.
Lendio will match you with potential lenders so you can choose the best loan.
The best part about the marketplace is its painless application process. Rather than apply to different lenders, you only fill out one Lendio application. Then, the platform will match you with potential lenders so you can choose the best loan.
Lendio offers startup business loans ranging from $500 to $750,000, with loan terms of up to 25 years. The interest rate varies from 0-17%, and you can receive funding in two to four weeks. You’ll need a credit score of 680 or higher, at least three months in business, and at least $6,000 in average monthly revenue.
Most startups with poor credit may not qualify for the Startup Business Loan product from Lendio. But not to worry. The marketplace also has other types of loans, including:
Business Line of Credit – You can borrow between $100,000 and $500,000. The requirements include a minimum credit score of 560, at least $50,000 in annual revenue, and at least six months in business.
Short-term Loan – You can borrow between $25,000 and $700,000. The loan terms range from three to ten years, with interest rates between 8-36%.
Business Term Loan – Borrow between $5,000 and $20 000 with interest rates as low as 6%. The term loans vary between one and five years, with the possibility of next-day funding. You’ll need a credit score of at least 600, six months or more in business, and at least $8,000 in monthly revenue.
Equipment Financing – You can borrow between $5,000 and $5,000,000 with interest rates as low as 7.5%. The loan terms vary between one and five years, with the possibility of next-day funding. You’ll need a minimum credit score of 650 or higher, one year in business, and at least $50,000 in annual revenue.
SBA Loan – Lendio offers SBA-backed loans up to $5,000,000. These loans have terms ranging from 10 to 30 years. You’ll need a credit score of at least 600, two or more years in business, and at least $8,000 in monthly revenue.
Lendio also offers special loans for underserved small businesses, including veterans, women, and minorities.
Bluevine specializes in providing small businesses with lines of credit (LOCs). You can borrow up to $250,000 with interest rates as low as 6.2%. You’ll also receive a decision in as little as five minutes after submitting your application.
Bluevine lets you borrow up to $250,000 with interest rates starting at 4.8%.
Most banks require a credit score of 700 or higher to open a line of credit. Bluevine is more lenient, with a minimum credit score of 625. You can qualify for a LOC with as little as 24 months in business.
You’ll also need at least $40,000 in monthly revenue to qualify for a Bluevine LOC. This is a revolving line of credit. It means that your funds replenish as you repay your loan.
Notably, Bluevine doesn’t charge extra fees. For example, you don’t have to pay opening, maintenance, prepayment, or termination fees. This makes Bluevine an ideal lender for keeping your borrowing costs at a minimum.
Like most other lenders on our list, Bluevine has a quick and easy application process. First, you only need to connect to your business checking account. Then, Bluevine will assess your eligibility and communicate a decision in five minutes.
Bluevine also offers some of the quickest funding times of any lender. For example, you can pay $15 to use the bank wire option. Then, you’ll receive your funds just a few hours after the lender approves your loan. Alternatively, the free ACH transfer option takes one to three business days to receive funds.
Unlike other lenders that only offer daily and weekly payments, Bluevine offers weekly and monthly payments. Finally, the repayment period is typically between six and twelve months.
As a result,Bluevine is an excellent option for a startup that doesn’t want to be stretched thin with daily payments and short repayment terms.
Although OnDeck also offers lines of credit, the lender is a terrific option for startups looking for term loans. OnDeck offers short-term loans between $5,000 and $250,000 with repayment terms of up to 24 months. So you only need one year in business which is within the range of most startups.
OnDeck offers short-term loans between $5,000 and $250,000 with repayment terms of up to 24 months.
You need a credit score of at least 600 to qualify for a short-term loan. It’s higher than some alternative lenders but certainly lower than most banks. You also need at least $100,000 in annual revenue to qualify.
After paying off half of your initial loan, you can qualify for a second short-term loan. OnDeck also rewards return clients. You’ll get lower interest rates the next time you apply for a loan.
You can choose between daily and weekly payments. The short payment periods may not be an issue for a business with solid cash flow. However, some startups may prefer a different lender with extended repayment periods.
OnDeck is transparent about its cost of borrowing. Most short-term loans have an APR of 35%. Origination fees vary between 0%-5% of the borrowed amount. The maintenance fee ranges between 0.4% and 0.42% of the total loan amount.
The application process is straightforward. First, you’ll need to provide documentation such as EIN, month-to-date financial statements, and at least three months’ business bank statements. Then, you’ll receive a call from an OnDeck loan advisor to explore your options.
There’s also the possibility for same-day funding up to $100,000. For example, you may receive same-day financing if you choose ACH or wire payments. You only need to accept the loan and check out online by 10.30 AM ET the day of or 7 PM ET the day before.
OnDeck provides a SMART BOX tool to help you understand your loan product. For example, SMART BOX describes typical loan pricing metrics like factor rate, annual percentage rate, total interest percentage, and average monthly payment. So you know exactly what you’re paying.
Lastly, OnDeck is a terrific option for startups that want to build their credit score. The lender reports to the major credit bureaus, including Equifax, Experian, and PayNet. Making timely OnDeck payments will help you qualify for cheaper loans in the future.
A loan marketplace like Lendio is a terrific choice for comparing loan options. However, comparing different lenders can be tricky since each lender has different loan requirements and underwriting processes. If you prefer to deal with a single lender, Credibly offers multiple loan products for all types of businesses, including startups.
Credibly offers multiple loan products for all types of businesses, including startups.
First, Credibly has some of the lowest credit score requirements in the industry. This flexibility is excellent news for startups with bad credit. For example, you can qualify for a loan with a credit score of 500 and just six months in business.
The lender also has an extensive portfolio of financial products. Your options include:
Invoice factoring
Equipment financing
Long-term business loans
Merchant cash advances
Working capital loans
Business lines of credit
Credibly also has a seamless application process. First, you can prequalify online by providing a few details about your business. Then, you’ll receive approval in as little as four hours. The lender also offers same-day funding for some of its loans.
Depending on the loan type, you can borrow up to $400,000. However, there are minimum business revenue requirements. For example, you’ll need at least $15,000 in monthly revenue to qualify for working capital loans and merchant cash advances. Similarly, you’ll need at least $50,000 in annual income to qualify for a business line of credit.
The best part is that Credibly focuses more on the business’s financial health than its credit history. As a result, the review process makes it easier for startups with bad credit to qualify for a loan. In addition, Credibly offers multiple repayment options, including daily, weekly, and monthly payments.
Finally, Credibly offers competitive rates, especially for a lender with low credit score requirements. The lender has factor rates as low as 1.09.
How to Find The Best Startup Business Loans With Bad Credit For You
Finding a startup with bad credit shouldn’t be difficult if you know where to look. Here are some of the things to consider when choosing alternative lenders. We also used the same criteria when assessing the best startup loans featured in this review.
Qualification Criteria
Different lenders have different ideas of what constitutes bad credit. But, again, it depends on the lender’s credit scoring model. So check if the lender’s credit score requirements line up with yours.
For example, FICO considers anything below 580 to be a poor or bad credit score. The scoring model also rates credit scores between 580 and 699 as fair. Anything above 699 is considered good.
Some lenders apply the VantageScore credit scoring model, which has a higher threshold for good credit. For example, this model considers scores below 661 as bad credit scores. Fair credit ranges between 601 and 660, according to this model. Finally, credit scores above 660 are considered good.
The good news is that most alternative lenders have lenient credit score requirements. For example, Credibly offers loans for credit scores as low as 500. Also, don’t forget to check other qualification criteria.
Time in business is an essential requirement. You need less than three years in business to be considered a startup. But, again, alternative lenders like Credibly and Lendio require at least six months in business.
Finally, you’ll need to check the minimum monthly or annual revenue requirement. Again, this requirement varies depending on the lender. Lenders with lower credit score requirements typically have higher annual or monthly revenue requirements.
Most lenders will overlook lower credit scores if your business generates much revenue.
Interest Rate
Lending to startups with poor credit is risky. So, lenders offset some of the risks by charging higher interest rates. However, if you shop around, the loan doesn’t need to be expensive or excessive.
Unfortunately, most lenders don’t advertise their top interest rates. Instead, they’ll show the minimum interest rate, which most businesses don’t qualify for. So, prequalify for a loan before accepting the terms and price shop to get the best interest rate available for your credit score.
Most consumer advocates consider an APR of 36% or lower affordable. This figure is much higher than what most traditional banks offer. But, you can still use it as a guideline when shopping for affordable startup loans with bad credit.
Repayment Terms
Most startups have unpredictable cash flows. So you don’t want repayment terms that will put more financial stress on your business. Therefore, choose a lender who offers flexible repayment terms.
Most lenders have daily, weekly, and monthly repayment schedules. The monthly schedule is ideal, so make sure your lender offers this unless you have a stable cash flow. Some lenders also offer flexible terms, allowing you to change your repayment period at no extra cost.
Application Process & Time to Fund
Alternative loans are meant to be more accessible than traditional bank loans. However, some business owners with stellar credit still prefer alternative lenders for the quick application process and fast funding time.
Ideally, the lender should let you prequalify. You’ll need to enter a few details about your business and instantly determine if you qualify for the loan. It will save you time applying for loans that don’t fit your business.
Equally, you want a lender that pays out quickly. Some lenders approve loans the same day and send funds directly to your bank account as soon as the next day. These factors are critical if you need working capital urgently.
Loan Options
Some lenders specialize in one or two types of financing. Others, like Credibly, offer half a dozen or more loan options. Regardless, ensure that the lender’s financial products match your desire.
Some popular loan options include:
Invoice factoring
Long-term business loans
Equipment Financing
Merchant cash advances
Business lines of credits
Working capital loans
It’s also helpful if the lender provides a loan advisor. The expert can help guide you through the best loan products. Ideally, this service should be free and part of the application process.
The Top Business Loans With Bad Credit in Summary
Business loans aren’t just reserved for thriving businesses with stellar credit. Today, almost anyone can qualify for a loan from an alternative lender. In addition, a poor credit score is no longer a barrier to entry for startups, with some lenders accepting scores as low as 500.
Loans for bad credit typically come with high interest. Compare different loan options to ensure you’re getting the best deal. Besides, alternative lenders offer more perks, including a quick application process and fast funding times.
National Funding is a terrific lender for small businesses seeking quick, hassle-free financing. The private lender has been in business since 1999 and has disbursed more than $4.5 billion in capital to over 75,000 small businesses nationwide. National Funding offers multiple loan products, including working capital loans, small business loans, short-term business loans, and equipment financing.
The lender also serves numerous industries, including commercial trucking, agriculture, construction, and restaurants. Specifically, businesses with bad credit prefer National Funding for its relatively lenient qualification requirements.
However, how does National Funding fare compared to other similar lenders? We’ve created this review to help you determine if this lender can satisfy your funding needs.
National Funding Compared
National Funding wasn’t on our top list of best startup business loans. However, the lender fared much better when we tested the best merchant cash advance services. As a result, we ranked National Funding as the best merchant cash advance service for long-term funding.
National Funding specializes in working capital loans and equipment financing. However, small businesses looking for alternative funding options are still welcome. The lender also offers small business loans, short-term loans, and merchant cash advances.
National Funding also provides loans specific to underserved businesses. These include business loans for women, minorities, and veterans. The lender also has several partner programs, including the affiliate & referral program, strategic partner program, equipment vendor program, and broker services program.
National Funding Health and Stability
National Funding is one of the private lending pioneers with a decades-long track record of serving small businesses in most industries. The company was founded in 1999 and has since expanded from working capital loansto include bridge loans, credit loans, equipment leasing, merchant cash advances, unsecured loans, and credit card processing.
National Funding is also a corporate product sponsor of California sports teams, including the San Diego Padres and USC Trojans. Some of the lender’s investors include Wells Fargo Capital Finance and CapitalSource. The alternative lender has served over 75,000 businesses and isn’t expected to stop soon.
National Funding also recently made a strategic growth investment in Finova Capital, a merchant finance partner with decades of experience. Finova Capital is best known for its point of sale (POS) equipment financing solutions, merchant cash advances, term loans, and working capital loans. This partnership is expected to grow National Funding’s reach and financial services.
National Funding Pricing
National Funding doesn’t openly advertise how much its loans cost. You’ll need to apply for a loan and receive an offer to get the exact quote. However, you can always decline the loan offer if you’re unhappy with the terms.
The specific interest rate depends on your credit score and other financial data. The lender also charges interest based on the type of loan. This can be simple interest for equipment financing or a factor rate for small business loans.
National Funding Pricing Structure
The cost of a National Funding loan largely depends on the type of loan. The interest rate may vary depending on your credit score and other financial data. However, your repayment options are limited to daily or weekly payments.
National Funding charges a factor rate for its small business loans. Term lengths vary between 4 to 24 months. Frustratingly, the lender doesn’t advertise the specific factor rate. But, a little digging shows you can expect a factor rate between 1.10 and 1.17 for small business loans. But, again, the factor rate varies depending on the loan’s terms. The lender also charges an origination fee for its small business loans.
The lender also charges a fixed simple interest rate for equipment financing. The interest rates start at 4.99%, depending on the terms of your loan. However, the interest rate varies between 15% ad 30% for most loans. You can also expect an origination fee between 1 and 3% of the total loan amount. The loan terms vary between two and five years.
Finally, National Funding doesn’t charge interest on its merchant cash advances. Instead, you pay a set percentage of your credit card sales. There’s no deadline to repay the loan. The lender charges its fee until the loan is repaid.
National Funding Pricing Comparison
National Funding is far from the cheapest lender on the market. There are some great alternatives if you prefer to price shop before applying for a loan. Plus, most lenders are more transparent than National Funding, making it easier to find a fair deal.
For example, Upstart offers multiple loans, including credit card repayment, debt consolidation, and car refinancing loans. And you can calculate your interest rate before applying for the loan without affecting your credit score. Most Upstart loans have an APR of 25.05% with 60 monthly payments.
Similarly, Fundera is open about its interest rates and additional charges. The loan marketplace lets you compare rates from different lenders. You only need to fill out one application, and Fundera will connect you with multiple potential lenders to compare interest rates. Again, you’ll find out how much interest you will pay before applying for the loan.
National Funding Trials and Guarantees
National Funding doesn’t charge a prepayment penalty. Instead, the lender rewards you for paying early. For example, you can save 7% of your remaining short-term loan balance if you repay within the first 100 days of receiving the loan. Similarly, when you pay the loan early, you get a 6% discount on the remaining equipment loan balance.
You can also apply for a National Funding loan without impacting your credit score. There’s also no commitment required when you apply for the loan. You can reject the terms with no additional fee.
Finally, National Funding also provides a loan specialist to help you understand your loan options. Again, this service is free. The Funding Specialist will also help you customize your loan to get the best interest rate and repayment terms the lender can offer.
National Funding Startup Business Loans Review
Startups have a notoriously difficult time accessing funding. But, if you’re a startup with at least one year in business, you may qualify for a National Funding small businesses loan. In addition, startups with at least six months in business may be eligible for equipment loans from National Funding.
Although National Funding didn’t make it on our list of the best startup loans, it might still be an option worth exploring. Here’s what makes National Funding a good or bad lender for funding your startup.
What Makes National Funding Startup Loans Great
National Funding has some of the lowest qualification requirements for an alternative lender.
Easier to Qualify than Bank Loans: National Funding has some of the lowest qualification requirements for an alternative lender. Its qualification criteria are certainly more lenient than traditional banks. For example, you can qualify for a small business loan with a credit score as low as 500 and only one year in business.
Similarly, equipment financing loans have a minimum credit score requirement of 575. You can also qualify for the loan with just six months in business. Some startups easily meet the qualification criteria.
Customized Loan Options: National Funding understands that business funding isn’t a one-size-fits-all affair. Therefore, the lender offers customized loan options to fit your specific funding requirements. This way, you’re guaranteed the type of funding that solves your unique cash flow or investment problems.
The lender also puts you in touch with a Funding Specialist. There’s no guesswork since the advisor helps you during every step of the application process. The financial advisor will also help you find the best funding option for you.
Quick Funding Times: This lender has short funding times, a lifeline for businesses needing immediate cash injection. The application takes only a few minutes. Plus, you can receive funding in as little as 24 hours after approval.
You don’t have to wait long for approval, either. You’ll receive a call from the Funding Specialist within 24 hours of your application. This means you can receive funding in as little as two business days after submitting your application.
Potential Tax Benefits: You may be able to deduct the total price of qualifying equipment from your tax returns. This benefit is subject to the terms of Section 179 Tax Deduction. In addition, you may be able to deduct up to 100% of purchased or leased equipment up to $1,080,000.
You can contact a National Funding advisor or a tax professional to determine your qualifications.
Simple Application Process: The National Funding application process is quick and straightforward. To begin the underwriting process, you only need to complete a one-page online application. Then, the lender does a soft credit pull that doesn’t affect your personal credit score.
You’ll be asked to submit documentation such as bank statements if you qualify. Again, you’ll be in touch with a financial advisor to help you through the process. The underwriting process is fast and smooth if you have the necessary documentation in order.
Prepayment Incentives: National Funding offers prepayment incentives where most alternative lenders impose a prepayment penalty. You can save up to 7% of your remaining loan balance if you repay your loan in 100 calendar days.
Where National Funding Startup Loans Falls Short
The National Funding application process is quick and straightforward.
Opaque Pricing: The most frustrating aspect of National Funding is its opaque pricing. You have no idea how much interest, origination fees, or extra costs you’ll pay until you apply for the loan. That means you might waste time applying for a loan you cannot accept.
Short Repayment Schedule: National Funding only supports daily and weekly payments. There’s no option for monthly payments. Regular payments may be a problem for startups with irregular cash flow.
Therefore, National Funding may not be the best option for a startup. Most competitors offer at least weekly or monthly payment options.
High-Interest Rates: The fact that National Funding isn’t transparent about its interest rates and fees is telling. The lender charges higher interest than most competitors. You can also expect extra costs like origination fees. Although these fees are standard, it makes the loan more expensive, considering the higher interest rates.
National Funding Startup Business Loans Compared
National Funding wasn’t on our top list of best startup business loans, but it is still a strong loan option. To get more information about our top startup loans, check out these top-rated companies:
Credibly — Best for Working Capital Loans With Poor Credit
National Funding Merchant Cash Advance Review
National Funding fares much better when you consider its merchant cash advance services. The lender recently shifted its focus to short-term, working capital, and equipment financing loans. However, it offers some of the best merchant cash advance services, especially if you’re looking for long-term financing.
National Funding charges a small percentage of your credit card sales until you repay the loan. That means there are no checks or invoices. Instead, the payments are automatic and fixed for your loan term so you can manage your cash flow effectively.
The are also no restrictions on how you can spend the money and no prepayment penalties, collateral, or fixed payback deadline. Again, a Funding Specialist will help you create custom loan terms suitable for your specific business.
Finally, National Funding has lenient qualification criteria for its merchant cash advances. You need at least one year in business and at least $3,000 in monthly credit card transactions. Plus, you can receive funds directly to your bank account within 24 hours after approval.
This merchant cash advance product is most suitable for businesses looking for long-term financing. There’s no fixed deadline for repaying the loan. And you can work with the Funding Specialist to set a reasonable rate.
National Funding Merchant Cash Advance Compared
National Funding offers long-term cash advances for small businesses struggling with cash flow. It’s also a terrific choice for its lenient qualification requirements. However, there are other equally good options.
National Funding offers three primary business loans: small business loans, equipment financing, and merchant cash advance services. You’ll need to look elsewhere if you need additional financing options.
Most small businesses may find National Funding loan offering limited. For example, National Funding doesn’t offer SBA-backed loans. Similarly, the lender doesn’t service invoice factoring, business line of credit, and long-term loans.
Additionally, National Funding is opaque concerning the actual cost of its loans. You’ll have to go through the application process before you find out how much you’ll need to pay. Other lenders are more transparent.
Finally, National Funding business loans are more expensive than most competitors. You may want to price-shop before you decide this is the right lender for you. National Funding may still be a good option if you don’t qualify for traditional term loans or alternative funding.
National Funding Business Loans Compared
National Funding offers small business loans up to $500,000 with quick funding times. Similarly, you can get an equipment financing loan of up to $150,000 with no annual revenue requirements. However, these loan options are limited compared to other lenders.
Bluevine — Best for established businesses seeking lines of credit up to $250,000
Lendio — Best small business loan marketplace with 75+ lenders
OnDeck— Term loans and lines of credit for business owners with a 600+ FICO score
Fundbox — Best for new businesses in need of inventory or supplies from vendors
Funding Circle — Best small business lender with loan terms up to five years
Kabbage — Best for businesses with low monthly or annual revenue
Lending Club — Best P2P lending marketplace for business loans
Kiva — Microloans up to $10,000 at 0% interest for entrepreneurs
SmartBiz — Best for SBA loans up to $5 million with 25-year terms
Credibly Capital — Bank-backed loans for business owners with great credit
CAN Capital — Best merchant cash advance for small businesses
Final Verdict
National Funding is a terrific option for small businesses with less-than-stellar credit. You can qualify for a loan with credit scores as low as 500 and just six months in business. In addition, the lender has a quick funding time, perfect for companies that need working capital quickly.
However, there are pitfalls to be aware of. First, National Funding charges higher interest and additional fees than many alternative lenders. So, be sure to price shop for your loans before committing to financing from National Funding.
SmartBiz is an AI-powered financing platform that has funded more than 230,000 entrepreneurs. With fast and flexible financing options, SmartBiz matches you with the perfect lender to receive the loan you need.
More than 60% of SmartBiz loans go towards women, minority, and veteran-owned businesses, as it aims to help any small business find reliable access to SBA, bank term, and custom financing.
Want to read more about the top best startup business loans? We reviewed dozens of options and narrowed it down to the top six. If you want to scope out all of your options, see all of our top picks here.
Credibly – Best for Working Capital Loans With Poor Credit
About SmartBiz
SmartBiz is the number one facilitator in SBA 7(a) loans for less than $350,000, and with more than $9 billion delivered to businesses across 13 years, the company is trusted by many. The ultimate aim of SmartBiz is to ensure small businesses can apply for and secure low-cost funds from banks.
SmartBiz has evolved over the years—from one streamlined application to an AI-powered platform and reliable access to SBA, bank terms, and custom financing for any business type. SmartBiz works with a diverse team of technologists who work together to transform small business banking and keep the fees low.
SmartBiz Products and Services
SmartBiz offers three different loans, including SBA, specific-term, and custom loans. All SBA loans have lower rates and longer terms, while specific-term bank loans offer fixed rates and shorter repayment terms and are an overall faster way to access funds.
On the other hand, SmartBiz custom loans have both customizable repayment terms and interest rates. From lines of credit to invoice financing, SmartBiz can help you find the perfect loan for your needs.
SmartBiz was founded in 2009 by a team of financial service entrepreneurs and is a privately held company. The company has backing from leading venture capital firms, including Investor Growth Capital, Venrock, First Round Capital, Baseline Ventures, and SoftTech VC. SmartBiz has a total funding amount of $37 million as of 2022.
Today, SmartBiz employs 51-100 people across its Austin and San Fransisco offices. With a 4.2-star rating on Glassdoor, it seems that SmartBiz offers a healthy work environment and diverse culture.
And as the number one facilitator for SBA loans for small businesses, SmartBiz is a stable company that delivers every time.
SmartBiz Pricing
SmartBiz is a free loan service with no hidden fees. You can apply for an SBA loan, a term loan, or custom financing in under five minutes online. Whether you run a small business, need a personal loan, or find yourself in a unique situation without the funds—SmartBiz can handle it all for you, entirely free.
SmartBiz Pricing Structure
Because SmartBiz is a loan service, it doesn’t have a traditional pricing model. Instead, if SmartBiz accepts you for a loan, you will have to make repayments every month. The interest rate and repayment terms depend on how much money you borrow and what type of loan you choose.
SmartBiz Pricing Comparison
SmartBiz’s interest rates for its SBA loans vary depending on the amount you borrow and your credit score. Any working capital and debt refinance loans from $30,000 to $50,000 have a variable interest rate of 9.25%. And for loans between $50,001 to $350,000, the variable rate is 8.25%.
In comparison to other popular financing services, SmartBiz certainly offers higher interest rates. For example, Upstart’s interest rates start at 5.31%, and while Bluevine doesn’t offer SBA loans, its business lines of credit have a rate as low as 4.8%.
Lendio is one of the only other financing services with similar interest rates to SmartBiz, with its maximum rates set at 8.25%. However, its minimum rates start at 5.75%—and with any company, the rate is indicative of how much money you borrow.
SmartBiz Trials and Guarantees
SmartBiz is a free forever loan servicethat only requires you to make repayments on accepted loans. SmartBiz guarantees that the soft credit pulls it conducts will not affect your credit score.
SmartBiz Startup Business Loans Review
Compared to other financing services, SmartBiz stands out for its SBA loans for small businesses and startups. You could benefit from SmartBiz’s service if you are looking for custom financing, SBA loans, or specific-bank term loans.
SmartBiz is better for small businesses because of its custom financing options. Whether you need lines of credit or invoicing loans, SmartBiz can help kick your business off the ground. To see how SmartBiz stacks up against its competitors, check out ourtop picks for startup business loans.
What Makes SmartBiz Startup Business Loans Great
SmartBiz offers custom financing and flexible loans for small businesses.
SmartBiz helps you find flexible small business loans as quickly as possible.
Custom financing: Whether traditional loans aren’t suitable for you due to time constraints, low revenue, or credit profile issues, SmartBiz offers custom financing solutions for any situation to help you find the loan that works best for you. With interest rates as low as 6.99%, bank term loan amounts of $30,000 to $500,000, and repayment terms of 24-60 months, you can pay off your loan quicker than you applied. SmartBiz offers different options, from lines of credit to invoicing loans, you can find a flexible funding solution with ease.
Quick and easy application: SmartBiz’s online application process is incredibly easy to do in three easy steps. You can fill out one single, streamlined application to find out if you’re pre-qualified for the loan. SmartBiz will request a few common documents, including personal and business tax returns, personal financial statements, profit and loss statements, balance sheets, and collateral. SmartBiz will then refer you to a lender that will most likely fund your business, to which you can access your capital and grow your business.
Fair eligibility requirements: To be eligible for a SmartBiz loan, there are a few requirements you need to prove. Unlike most financing services, SmartBiz doesn’t ask for unfair requirements. All SmartBiz asks is that your business is not in the following industries: gambling, life insurance, religious teaching, political and lobbying activities, oil wildcatting, mining, mortgage servicing, real estate development, bail bond, and pawn or private clubs. To be eligible for all SBA 7(a) loans, your business must be above two years old, and your credit score must be above 650.
AI-powered solution for lenders: SmartBiz lending partners can benefit from its AI-powered technology solutions to create more approvals and optimized risk and resource management. This SmartBiz platform comes with application management, AI-powered automation, document capture, automated reviews, online file audit, and underwriting and closing features. You can efficiently manage all loan applications and create a customized lending experience.
Refinancing options: You can choose to purchase or refinance commercial real estate through a SmartBiz SBA loan. All it takes is five easy steps, from pre-qualifying and providing financial information to accepting your letter of intent and conducting a property valuation, SmartBiz ensures you get your funds as quickly as possible.
Where SmartBiz Falls Short
SmartBiz fees and interest rates vary depending on the size of the loan.
SmartBiz comes with different loan rates and fees, depending on how much money you borrow.
High fees: SmartBiz definitely has higher fees than most of its competitors. For an SBA loan, fees for working capital include the following: $350,001 to $700,000 — 2.77% of the guaranteed portion; $700,001 to $1,000,000 — 3.27% of the guaranteed portion; and $1,000,001 to $5,000,000 — 3.5% of the guaranteed portion + 3.75%. Not only that, but it also has excess fees for applications and bank closures. For example, on top of the working capital fees, you also have to pay a $3,000 one-time application fee and a $450 bank closing cost, and third-party report charges may apply.
Higher interest rates: The lowest interest rate that SmartBiz offers is around 6.99%, but that is for a custom financing option. If you are interested in an SBA loan, the minimum interest rate is between 8.25% and 9.25%, plus the prime rate of between 2.75% and 3.75%, which is high compared to other financial services that start between 4-5%.
Customer support: According to a few reviewers, SmartBiz’s customer support is lacking in many ways. A few reviewers claimed that its customer service was slow while others said the representatives were unfriendly and unhelpful. Some reviewers went as far as to say they couldn’t even get in touch with SmartBiz’s customer support in the first place, which is unfortunate.
SmartBiz Startup Business Loans Compared
While SmartBiz is a decent option for small businesses to take out an SBA loan or custom financing, the best financing service for most people is Upstart because of its quick funding time, and you can qualify without a credit history.
Credibly – Best for Working Capital Loans With Poor Credit
SmartBiz Business Loans Review
Business loans can be an easy way for small business owners to find the funds to kickstart their business ventures. Everything that we discussed above regarding startup business loans applies to most business loans of any kind. However, we did discuss more about SBA loans and custom financing options, which can have more fees associated with them.
Here is a quick look at how SmartBiz stacks up against some of the best financing services on the market today:
Bluevine — Best for established businesses seeking lines of credit up to $250,000
Lendio — Best small business loan marketplace with 75+ lenders
OnDeck — Term loans and lines of credit for business owners with a 600+ FICO score
Fundbox— Best for new businesses in need of inventory or supplies from vendors
Funding Circle — Best small business lender for loan terms up to five years
Kabbage — Best for businesses with low monthly or annual revenue
Lending Club — Best P2P lending marketplace for business loans
Kiva — Microloans up to $10,000 at 0% interest for entrepreneurs
SmartBiz — Best for SBA loans up to $5 million with 25-year terms
Credibility Capital — Bank-backed loans for business owners with great credit
CAN Capital — Best merchant cash advance for small businesses
SmartBiz Final Verdict
SmartBiz offers excellent custom financing options and SBA 7(a) loans for small businesses. If you need to find quick and easy funds, you can do so by utilizing SmartBiz’s AI-powered platform.
With 13 years in the industry and $9 billion delivered to businesses across the U.S, SmartBiz is a reliable and stable company, and we would recommend SmartBiz to any small business that needs access to quick funds.
Many business owners may require an external source of financing at some point. Whether you’re launching a new business, bridging a cash flow deficit, or expanding a business, it’s essential to consider your financing options carefully. The two most popular options are taking a business loan or applying for a business line of credit.
A business loan is the best option for most people. It allows cash-strapped small businesses to finance a significant investment, a major acquisition, or expansion, usually with fewer limitations and lower interest rates. However, the comparison isn’t always this cut-and-dried.
Read on to find out which financing option suits your specific business needs.
Business Loan Pros and Cons
Pros
Extended repayment periods
Lower interest rates
Receive a lump sum upfront
Predictable payment plan
Cons
Slow to fund
Rigid repayment terms
Stricter credit score requirements
Business Line Of Credit Pros and Cons
Pros
Flexible repayment structure
Generally easier to qualify
Quick funding times
Ongoing access to capital
Cons
Lower borrowing amounts
Shorter term length
Higher interest rates
The 11 Best Business Loans for 2022
No matter your company size or capital needs, we’ve identified the top 11 best business loans available. Read our in-depth reviews on each to see which might be the best fit for your company and future plans.
Bluevine — Best for established businesses seeking lines of credit up to $250,000.
Lendio — Best small business loan marketplace with 75+ lenders.
OnDeck — Term loans and lines of credit for business owners with a 600+ FICO score.
Fundbox — Best for new businesses in need of inventory or supplies from vendors.
Funding Circle — Best small business lender for loan terms up to five years.
Kabbage — Best for businesses with low monthly or annual revenue.
Lending Club — Best P2P lending marketplace for business loans.
Kiva — Microloans up to $10,000 at 0% interest for entrepreneurs.
SmartBiz — Best for SBA loans up to $5 million with 25 year terms.
Credibility Capital — Bank-backed loans for business owners with great credit.
CAN Capital — Best merchant cash advance for small business.
Loan Type: Business Loan Wins
A business loan is a type of fixed-term financing typically offered by banking institutions. The bank or financial institution gives you a lump sum that you repay with interest. You’ll make regular payments until you repay the principal plus interest.
You can use a business loan for multiple things, including purchasing business assets, expansion, or paying off business debts. You will likely need to specify the purpose of the funds in your loan application–and may need to show proof you are using the funds for that purpose.
For example, you can request a loan to purchase equipment. Often you will then be unable to use the funds for any other purposes, such as repaying debts or paying employees during a lean month.
There are multiple types of business loans, including:
Traditional Term Loans – This is the most common type of business loan. The lender offers you a lump sum which you pay off regularly on a fixed repayment schedule. Most of these loans require collateral.
Small Business Administration Loans – The Small Business Administration (SBA) guarantees loans for small businesses. For example, the SBA may offer to repay 85% of your loan up to a certain amount.
Unsecured Business Loans – These loans work just like traditional term loans, except you are not required to put up collateral to obtain funding. These loans tend to have higher interest rates and stricter credit score requirements.
A line of credit is more like a credit card than a business loan. First, the lender designates a sum of money up to a certain amount. Then, you can access the funds as needed and repay them over time.
Additionally, you’ll only pay interest on the borrowed amount. You can replenish your line of credit as you repay part or all of the borrowed funds. Then, you’ll be able to access the full line of credit once more.
There are different types of LOCs. The first is a secured line, also called an asset-based line. You must provide collateral to qualify for the line of credit. Examples include real estate, personal assets, and business cash.
The second type of LOC is the unsecured line of credit. You don’t need to provide collateral. However, this option might be more expensive than a secured LOC. Lenders typically offer high-interest rates and fees to cover their risk.
Generally, a business loan offers more flexibility. For example, you can apply for an equipment loan and use the equipment as collateral. There’s also the possibility of the SBA guaranteeing part of the loan if you qualify for its programs.
Finally, though a business loan may be harder to qualify for, you’ll benefit from lower interest rates. This case is especially true compared to an unsecured line of credit.
Lender Type: Business Loan Wins
You can borrow a business loan from many different types of lenders, including traditional banks, the Small Business Administration (SBA), and online lenders.
Similarly, you open a line of credit with a bank, direct lender, or the SBA. However, more lenders offer business loans than lines of credit. You shouldn’t have difficulty finding a line of credit if you meet the requirements.
Still, business loans offer more diverse options and lenders. This diversity makes it easier to price shop. You’re also more likely to find a good deal. For example, some lenders are willing to beat the competition’s interest rates or loan terms.
Funding Needed: Business Loan Wins
Business loans typically offer larger borrowing amounts. You can borrow anywhere from $500 to $5,000,000. Additionally, you can get a short-term loan for smaller amounts and pay it off in six to 24 months. It’s a good option for short-term expenses like paying seasonal employees or purchasing inventory, or to cover an emergency or lean time when you know more income is a few months away.
Similarly, you can apply for a long-term loan with a three or five-year term to purchase equipment or construct a new warehouse. Some business loans have an extended period of up to 10-30 years.
A business line of credit typically offers lower amounts. For example, most lenders offer a maximum of $250,000. A LOC is designed to have a shorter term, hence the lower credit amount.
Interest Rates and Loan Terms: Business Loan Wins
Business loans typically have lower interest rates. This is especially true for secured loans.
Business loan terms are also clearly structured. For example, you know exactly how much interest you need to pay and when your payments are due. These payments are also scheduled so you can easily forecast your cash flow.
A line of credit is less rigid. For example, repayments are unscheduled, making it challenging to calculate interest. You can also draw from your line of credit anytime, complicating interest calculations.
Additionally, many LOC lenders charge a monthly or annual maintenance fee. So you’ll still pay fees even if you do not use the line of credit. You can also expect other commitment fees whether or not you use your credit line.
So, before signing the agreement, ensure you understand your LOC’s interest rate and loan terms. Ensure you read the fine print and check for potential hidden fees.
One benefit of a line of credit is the flexible payment schedule. You only start paying interest when you draw from your credit line. On the other hand, you’ll need to pay interest on a bank loan as soon as it is issued.
Qualification Requirements: Business Line of Credit Wins
Business loans generally have stricter approval criteria. Some of the things banks and online lenders consider include:
Bank statements
Financial statements
Business plan
Incorporation documents and contracts
Financial projections
Collateral such as real estate, inventory, machinery, or accounts receivable
Business loans typically have stricter credit score requirements, too. Most lenders will require your business and personal credit reports. Some lenders may have looser credit standards, but in exchange you’ll most likely need to provide collateral and pay higher interest rates.
A line of credit is generally easier to qualify for. Lenders primarily look at your personal or business credit score, years in business, and annual revenue. You have a good chance of qualifying for a secured line of credit, even with an average or poor credit score, if you have enough income. Lenders may also overlook your credit score in favor of collateral. Though again, you may still see higher interest rates if you have poor credit.
Finally, a line of credit is a good option for boosting your credit score. Most new businesses do not qualify for traditional business loans. So a LOC can help you build a creditworthiness history that could make you eligible for a business loan in the future.
Funding Time: Business Line of Credit Wins
Generally, a line of credit has a faster funding time. This is because there are fewer requirements and qualification criteria to process. Most banks and credit unions take several days to approve loans. It can also take additional time before the funds are available after approval.
Additionally, many lenders prefer not to underwrite one-time small loans. This is primarily the case for unsecured loans. Therefore, a LOC can be a good alternative for accessing funds quickly.
However, this scenario isn’t always true. For example, some online lenders approve loans the same day or the next day. But, since LOCs are generally easier to qualify for, a line of credit is often the best option in an emergency or cash flow crunch.
Fixed vs. Variable Interest Rates: Business Loan Wins
Many business owners prefer a fixed interest rate. This type of interest is constant for the term of the loan. However, variable interest rates change depending on the market conditions.
Business loans typically let you choose between a fixed or variable interest rate. This flexibility is vital for people who prefer predictable overheads. A fixed interest rate also makes financial planning and analysis easier.
Fixed rates are also easier to understand. You do not have to perform complex calculations to determine how much you’re expected to pay monthly. This simplicity makes it easier to price shop and compare lenders.
Interest rates of LOC change depending on the prime rate. This structure means you pay a different interest rate every time you draw from your credit line. The fluctuation can make it difficult to project your expenses and plan your finances accurately.
Additionally, a variable interest rate doesn’t protect you from sudden fluctuations in the rate. This unpredictability is concerning during times of high inflation and market fluctuations. As a result, you may end up paying much more than you initially anticipated.
However, a fixed interest rate isn’t always the best choice. You’ll pay the same interest if the interest rate increases. Regardless, it’s desirable to have both options and choose the most suitable one for your borrowing needs.
Type of Credit: Business Line of Credit Wins
LOC has the advantage of having a revolving credit. You draw from the fund any time you wish. You get access to the maximum amount of credit available whenever you need it. Plus, you have continuous access to the funds as long as you make regular payments.
Business loans are only available once. After that, you’ll have to re-apply for another loan if you need more money. Therefore, you don’t get peace of mind that there are funds available when you need them.
Of course, you’ll pay for the convenience of revolving credit with higher interest rates. But, on the other hand, you also qualify for lower borrowing amounts. However, these drawbacks are worth it for business owners who require consistent cash flow.
Prepayment Penalty: Business Line of Credit Wins
Many lenders charge an extra fee for repaying your loan early. It’s known as a prepayment penalty. The penalty is more common with business loans. Lenders attempt to recover some of the lost interest by charging a prepayment penalty.
A line of credit features flexible payments. Therefore, you can pay as much as you wish without extra charge. Or, you might opt only to pay the interest on the borrowed amount in a given month.
This flexibility comes in handy during lean months or if you have cash flow fluctuations. You also don’t have to worry about incurring extra fees on a good month. In addition, you can opt to repay your loan faster so you can access the maximum credit amount during lean months.
There are ways to avoid a prepayment penalty on your business loan. For example, many lenders allow you to repay up to a certain percentage of your loan in one payment. Similarly, some lenders reduce or scrap the prepayment penalty once you’ve paid off a certain amount.
You can read your loan terms to find ways to avoid the prepayment penalty. This should also be an essential consideration when vetting lenders in the first place.
Final Verdict
Business loans are generally the better option for small business owners. These loans are structured, ensuring predictability when planning finances. Business loans also have longer terms and lower interest rates, which are ideal for financing expansion or significant business purchases.
However, there are instances when it makes more sense to open a line of credit. For example, a LOC is a better option if you need emergency funds or you need to address a cash-flow deficit. A line of credit is also a terrific alternative to spending your emergency fund.
Securing external funding is part and parcel of operating a small business. The two main options are secured or unsecured small business loans. While unsecured loans have advantages, secured loans are the better option for most people.
Secured loans are more accessible, offer higher borrowing limits with lower interest rates, and can be paid back over an extended period. This post covers everything you need to know about secured vs. unsecured business loans to help you make an informed decision.
Secured Small Business Loans Pros and Cons
Pros
Lenient credit score requirements
Larger borrowing amounts
Lower interest rates
Longer repayment periods
Easier to access
Possible tax benefits
Cons
Slower to fund
Risk of losing business assets
Requires collateral
Unsecured Small Business Loans Pros and Cons
Pros
No physical collateral required
Quicker to fund
Simpler application process
Builds credit history
Cons
More difficult to access
Higher interest rates
Smaller borrowing amounts
Shorter repayment period
Potential personal guarantee or UCC lien requirements
The 11 Best Business Loans for 2022
The Quick Sprout team has done a lot of research into where to get the best business loans right now. The top 11 are below and you can read our in-depth reviews on each to see which might be the best fit for your business needs.
Bluevine — Best for established businesses seeking lines of credit up to $250,000.
Lendio — Best small business loan marketplace with 75+ lenders.
OnDeck — Term loans and lines of credit for business owners with a 600+ FICO score.
Fundbox — Best for new businesses in need of inventory or supplies from vendors.
Funding Circle — Best small business lender for loan terms up to five years.
Kabbage — Best for businesses with low monthly or annual revenue.
Lending Club — Best P2P lending marketplace for business loans.
Kiva — Microloans up to $10,000 at 0% interest for entrepreneurs.
SmartBiz — Best for SBA loans up to $5 million with 25 year terms.
Credibility Capital — Bank-backed loans for business owners with great credit.
CAN Capital — Best merchant cash advance for small business.
Loan Type: Tie
As the name suggests, a secured business loan requires the borrower to provide collateral to secure funding. The lender uses the collateral to offset the risk if the borrower defaults on the loan. The lender may seize the collateral to satisfy the debt and interest if you default on your payments.
There are many types of secured small business loans, including:
Traditional Term Loans – This is the most common secured small business loan type. The terms are straightforward. You receive a lump sum from the lender. Then, you repay a portion of the principal and interest every month.
Business Line of Credit (LOC) – This type of secured loan is also called revolving credit. It works like a credit card. The lender gives you access to a specific amount of money, known as a credit line. You can draw from your credit line as needed. Your credit line is replenished as you repay the debt.
SBA Loan – This type of loan works like a traditional term loan. However, the Small Business Administration (SBA) guarantees part of the loan, so you’re not liable to pay the total amount. For example, Standard 7(a) allows you to borrow up to $5 million. In addition, the SBA may guarantee 85% of the loan to $150,000 and 75% if you borrow more than $150,000.
Self-Securing Business Loan – This type of loan doesn’t require additional collateral. Instead, you can use your purchase as collateral. For example, you can put up a tractor that you want to purchase as collateral for the loan used to buy it. It’s a great option if you don’t want to compromise your personal or business assets.
On the other hand, unsecured loans don’t require you to put up collateral as security. Instead, the lender trusts that you will honor your commitment. However, some lenders may need a personal guarantee that you’ll repay the loan.
Similarly, there are several types of unsecured business loans, including:
Working Capital Loans – This short-term loan covers your day-to-day business expenses. For example, you can use the working capital loan to meet payroll or keep the machinery running.
Unsecured Term Loans – This loan type works like a traditional term loan. The only difference is the lender doesn’t require collateral to process your loan request.
Revolving Credit – This loan provides you with a line of credit (LOC) to draw from at any time. Again, the lender doesn’t require collateral to advance a LOC.
Overdraft – A lender provides a loan or credit limit up to a certain amount. You can use these funds in pre-agreed installments. The lender charges interest on the borrowed amount.
Other unsecured business loans include business credit cards, merchant cash advances, microloans, and government-backed unsecured loans. Secured and unsecured loans are equally diverse and tailored to your funding requirements.
Lender Type: Secured Loan Wins
Many lenders offer secured and unsecured loans. For example, most banks, credit unions, and financial institutions service secured and unsecured loans. You can go through the requirements for each loan type and decide the one you are most likely to qualify for.
Other potential lenders include online lenders, crowdfunding, and peer-to-peer lender. However, unsecured loans are inherently riskier for the lender. Therefore, most lenders require security such as collateral or a personal guarantee.
Although unsecured loans are widely available, you’ll have an easier time qualifying for a secured loan. In addition, people with a poor or non-existent credit history have a tough time accessing unsecured loans.
Funding Amounts: Secured Loan Wins
The amount of money you need to borrow is critical when choosing between secured and unsecured loans. Generally, secured loans offer more funding than their unsecured counterparts. This is especially true if you provide valuable collateral, such as real estate, inventory, or equipment.
On the other hand, unsecured loans are primarily used for short-term expenses like paying seasonal employees or purchasing inventory. Depending on the lender, most unsecured business loans range between $1,000 and $100,000. Conversely, secured loans are available for up to $50,000,000.
Interest Rates and Loan Terms: Secured Loan Wins
Unsecured loans typically attract higher interest rates due to the inherent risk the lender takes on. Depending on the lender, you can expect interest rates between 7% and 30%. Unsecured loans are also short-term. Most lenders provide a loan term of 3-18 months.
Secured loans offer lower interest rates, especially if backed with valuable collateral. The interest rates vary between 2.5% and 13%, depending on the lender. You can also expect a more extended repayment period, usually between five and 30 years.
A secured loan is more likely to offer favorable interest rates and terms than an unsecured loan. Therefore, it is critical to be realistic about how quickly you can afford to repay unsecured loans. Some lenders also require some guarantee that you’ll honor the loan terms.
For example, an unsecured loan may take a percentage of your credit card transactions or a personal guarantee. A secured loan may be a good alternative in this case since you’re putting up security either way. In addition, you’ll benefit from a lower interest rate and an extended repayment period if you opt for the secured loan.
Qualification Requirements: Secured Loan Wins
Secured and unsecured loans have different qualification requirements. These requirements reflect the risk involved with each type of loan. The typical considerations for a secured loan include:
The value of the collateral
Business plan
Cashflow history and projections
Credit history
Tax returns
A secured loan lender may consider other financials, including personal and business assets. As a result, secured loans have more stringent qualification criteria. There’s also more paperwork involved. In most cases, secured loan lenders consider collateral the most critical factor when assessing loan applications. Therefore, secured loans typically have more lenient credit score requirements and terms.
Unsecured loan requirements zero in on your creditworthiness. The typical qualification requirements include:
Loan amount and purpose
Annual turnover
Time in business
Credit history
Unsecured loans have fewer qualification requirements. You only need to prove that you can repay the loan. Otherwise, you may not need to file additional paperwork such as tax returns or a business plan. However, unsecured loans prioritize credit score, annual turnover, and time in business.
While secured loans have more qualification requirements, these requirements are less stringent. For example, a new business with a short credit history and low annual turnover may still qualify for a secured loan based on the strength of the business plan and collateral. However, such a business is less likely to qualify for an unsecured loan.
Funding Time: Unsecured Loan Wins
Secured loans have long application processes. The review and approval processes may be equally lengthy. It typically takes three to four weeks to receive funds. For instance, it may take time for the lender to assess the value of your collateral. Therefore, a secured loan might not be the first choice if you need funds immediately.
On the other hand, most of the information unsecured loan lenders require to assess your creditworthiness is available in your credit report. There are also fewer documents to process. As a result, you may receive funds in as little as 24 hours after successful application.
There are lenders who process secure loans quickly. However, a secured loan isn’t an option in an emergency in most cases.
Tax Benefits: Secured Loan Wins
You may be eligible for tax benefits if you take a secured business loan. For example, you may be able to write off the interest on the loan on your tax return. This is especially true if you use personal assets such as your home as collateral.
Unsecured business loans typically do not offer tax benefits. This downside may be enough to opt for a secured loan. However, there are conditions for qualifying for a tax break. For instance, you can only write off the interest if you use the funds for business-related expenses.
Fixed vs. Variable Rate: Secured Loan Wins
It’s equally important to consider whether a fixed or variable interest rate is more attractive. A fixed interest rate remains constant for the life of the loan. On the other hand, a variable interest rate fluctuates depending on the market.
Each option has its benefits. For example, a fixed interest rate is more predictable. You know exactly how much interest you must pay every month. This predictability is crucial for forecasting your finances accurately.
However, variable loans typically charge lower introductory rates. Variable interest rates are also typically lower than fixed rates. You’ll also pay lower interest if the overnight market rate goes down.
Either way, it’s ideal if you have the option of either fixed or variable interest rates. Most secured loans offer this option. However, most unsecured loans only offer fixed interest.
Some lenders may offer variable interest for unsecured loans. However, the repayment period is too short for the variable rate to offer tangible benefits.
Asset Takeover: Secured Loan Wins
The term unsecured may be misleading. You are still obligated to repay an unsecured loan, including the agreed-upon interest. The lender has recourse in case you default. It doesn’t matter if you didn’t provide collateral.
For example, the lender may sue you for your personal assets or wages if you default on your payments. The consequences may include losing personal property such as your home or car. The court may also impose wage garnishments until you repay the outstanding loan.
The asset take-over terms of a secured loan are straightforward. You know precisely what is at stake from the beginning. Defaulting on unsecured loans puts your business and personal assets at risk with no prior warning or consideration.
Besides, most lenders are willing to restructure or renegotiate loan terms if you cannot pay. So, providing collateral doesn’t always mean that you will lose your assets in case of unforeseen financial difficulties.
Prepayment Penalties: Secured Loan Wins
Some lenders charge a fee for paying off your loan early. This fee is called a prepayment penalty. Lenders use this penalty to recoup some of the lost interest lost when you pay before the loan term ends.
Many secured and unsecured lenders prefer not to charge a penalty for repaying your loan before it is due. However, many unsecured loans charge a prepayment penalty. This is because of the high interest the lender loses when you pay early.
Read the loan terms to ensure that there’s some wiggle room. For example, many secured loans allow you to repay extra up to a certain amount in one payment. The prepayment penalty may also decrease as you repay your loan.
Unsecured loans are short-term in nature. So the lender might be less willing to waive extra fees. Short-term lenders have a smaller window of earning interest.
Final Verdict
There are many reasons why secured small business loans are the better option for most people. These loans are more accessible to businesses with a poor credit history. Additionally, you can qualify for higher borrowing amounts that you repay over longer periods.
However, a secured loan isn’t always the best option. For example, an unsecured loan is a good choice if you need access to funds quickly. Regardless, weigh the pros and cons of each loan option carefully before making your final decision.
Let’s face it, running a restaurant isn’t easy. Mixing up customer orders, running out of ingredients, or taking too long to take payments are just some of the ways things can go wrong. Luckily, restaurant point-of-sale (POS) systems solve a chunk of these problems by helping you run your restaurant more efficiently. To reduce the time needed to research POS systems, we created a list of the best available.
Lightspeed’s Restaurant POS product is the best software for full-service restaurants. The software helps with ordering ahead, tableside orders, delivery orders, and contactless payments. While it’s the best for full-service restaurants, it also has features for quick-service restaurants, hotels, clubs, bars, and cafes.
Lightspeed streamlines orders and reduces wait times by making tasks more efficient. Restaurant customers can choose single-seat checkouts and split bills by guests, items, or courses. Employees can take orders from an iPad and easily send them to the kitchen. Its preset menu modifiers allow employees to quickly customize individual orders.
Full-service restaurants can customize floor plans and create multiple menus assigned to specific devices. Managers can give staff members different levels of access. Kitchen staff, waiters and waitresses, and bartenders can have varying restrictions or none at all. The software also comes with more than 57 integrations for greater personalization.
Lightspeed can be used to manage pickups, takeout orders, and deliveries. The platform integrates with food delivery apps like UberEats, DoorDash, and Foodora for receiving orders. All online orders can be taken from one screen. It can also be used for social media marketing, and it runs reports that reveal opportunities for improvement.
For growing businesses, Lightspeed has a system that’s easy to scale. It comes with built-in multi-location reports for those looking to expand. Users can add new locations, run their existing restaurants, and track revenue. This cloud-based platform can be managed anywhere. It even comes with an offline mode when not connected to Wi-Fi.
Lightspeed Restaurant POS comes with unlimited 24/7 customer support along with videos, demos, webinars, and onboarding support. Users must request a quote for pricing information, and the platform comes with a 14-day free trial. Users can also purchase additional hardware from Lightspeed if needed.
Food trucks need a POS system with specific capabilities, and TouchBistro’s Restaurant POS offers just that. It helps users quickly serve long lines, and it has features that help businesses that constantly move locations with limited space. This product also serves breweries, wineries, coffee shops, bakeries, cafes, family-style restaurants, fine dining, and more.
To keep lines moving quickly, TouchBistro offers integrated payments that allow customers to pay by tapping, inserting, or swiping credit and debit cards. It offers visual menus to reduce customer decision-making times, and it has efficient register buttons for finalizing transactions quickly.
The platform is easy to use and requires little training. Its mobile payment terminals are wireless, allowing employees to move them around the truck and store them quickly. Restaurant promotions and menus can be prescheduled. This helps reduce time wasted on manually switching from breakfast to lunch hour, for example.
Since on-the-go Wi-Fi can sometimes be unreliable, TouchBistro lets users process transactions without the need for an internet connection. To increase sales, the platform reminds employees to upsell with quick add-on options. Users can also run detailed sales reports, allowing them to track promotions and optimize their offerings.
In addition to sales insights, TouchBistro provides users with over 50 helpful reports. Payment reports show users the most common types of payments processed. Tax reports show users different state and local regulations depending on where the food truck is parked. Users can see revenue analytics categorized by tender type, sales category, menu item, and more.
TouchBistro offers 24/7 customer support via email, chat, and phone. The product’s pricing starts at $69 per month, and users must request a quote for additional details. Users have the option to try a free demo of the product before purchase. TouchBistro also offers add-on software and hardware products for greater personalization.
Revel’s POS System is the best platform for quick-service restaurants. It comes with solutions for both back-of-house and front-of-house, and it includes intelligent reporting, employee management, inventory management, menu building, Always On Mode, customer display systems, and more.
This system’s reports help users identify monthly progress, busiest hours, top menu items, and key performance indicators (KPIs). For managing employees, users can track hours worked, administer payroll, and create work schedules. Inventory management features let employees know when items need to be restocked and help maximize profitability.
When creating a menu, users can add combos, descriptions, and visuals to items. Users can also change menus at multiple locations at once. Always On Mode is useful when Wi-Fi is unavailable. It does this by taking offline payments and putting them in a queue. When the connection is reestablished, these payments will then be processed.
Its customer display systems come with signature collecting, CRM data processing, loyalty programs, on-screen tips, and order displays. Additional features include multiple payment options and Revel Concierge Services that manage the POS for its users. Revel also offers an in-house payment processing option called Revel Advantage for industry-leading rates.
Revel users have access to 24/7 customer support. New users can request a free demo and must contact Revel for a pricing quote. The software starts at $99 per month, and users can pay for onboarding starting at $674. Revel also sells hardware add-ons like barcode scanners, self-service kiosks, iPads, payment devices, networking, printers, and more.
If you need a system for your bar or nightclub, Toast’s POS Software is your best option. The tool aims to minimize the time bartenders spend entering information onto a screen, and more time pouring drinks and interacting with customers. Although not every bar or nightclub serves food, this platform helps with fast-casual, casual dining, and fine dining restaurants as well.
Toast offers flexible menus that let users add automatic happy hour prices, create daily specials, and app up to 86 menu items at once. If a particular liquor is running low, Toast can reflect it on your menu. Users can add an item name, its price, quantity available, online orderability, and inventory status.
For establishments with multiple bars in the same building, Toast lets customers open tabs with all of them simultaneously. For example, if someone opens a tab at the outdoor bar, he or she can walk inside and order another drink from the indoor bar on the same tab. It also gives customers suggested tip amounts, the ability to split checks, and paper, text, or email receipts.
This software also comes with credit card pre-authorization. This ensures that card information is securely stored when tabs are opened. As a result, stolen and fake card fraud is reduced. This also lowers the risk of customers leaving without paying their tabs. It ensures every card has an ample amount of funds, and employees can see taxes, tips, and subtotals on tabs.
Toast POS users receive 24/7 customer support. It has all-in-one POS options starting at $0 per month and ranging over $272 per month. Potential users should reach out to Toast for a quote and can request a free demo. The platform also features optional add-ons like payroll management and delivery services.
Epos Now’s POS Software is an excellent tool for cafes, bakeries, and coffee shops. It uses marketing tactics, promotions, and reward programs to increase customer loyalty. Users can manage and train employees, track inventory, and record sales from the app. It includes tools for increasing transaction amounts, and it fulfills and processes incoming orders.
The platform is cloud-based, so users can access it at any time from anywhere. From different devices, users can perform actions like clocking in and out, monitoring customer service, updating the menu, and assigning POS restrictions. Epos Now has reporting tools as well, letting users better understand data on employees, margins, sales, inventory, and customers.
The tool comes with a Kitchen Display Screen to ensure smooth communication between back-of-house and front-of-house employees. Images and recipes of menu items are stored so employees can quickly make coffees, smoothies, or other drinks. One-touch ordering speeds up the ordering process and makes sure lines are always moving.
Epos Now officially costs $999, but it offers sales over 50% throughout the year. Check its website for the most up-to-date pricing information.
Those looking for a POS system to fit their fast casual restaurant should consider Square’s Restaurant POS System. It has a Kitchen Display System to ensure the accuracy of tickets, it accepts tableside or in-line mobile payments, it offers pickup and delivery options through its free online website, and it keeps lines from becoming stagnant by stressing speedy usage.
Square’s Order Manager keeps online orders in one place, and it reduces errors by bypassing manual order entries. All payments are PCI compliant and have end-to-end encryption. There are identical rates across cards, next-day transfers, no chargeback fees, and no refund fees. Square also has gift cards meant to increase customer loyalty.
Users can track, send, and create social media marketing campaigns. Square provides helpful tools to create campaigns, target audiences, and run post-promotion reports to track results. Users can log specific customers to understand why they’re returning, to see which loyalty programs work best, and to send personalized messages.
Square has a free plan that allows unlimited devices and locations, and it includes customer support available during business hours. Its Plus plan includes a free trial and costs $60 per month per location. Its Premium plan has features like Square Payroll and Square Marketing, and you must request a quote for pricing details. Square Plus and Premium both offer 24/7 support.
How to Find The Best Restaurant POS Software For You
Choose a restaurant POS system with tools that will make running your restaurant significantly easier. Reporting, menu editing, pickup and delivery, flexible payments, and inventory management tools are specific features to look out for.
Reporting Capabilities
When deciding on a POS system, one with reporting capabilities can be very helpful. While this is not a must-have, most top POS systems include them. Users can gain a better understanding of employees, menu items, and customers by using a solid reporting system.
Reporting tools measure things like which marketing campaigns are the most successful, which menu items sell the most, and what time of day is the busiest. Understanding this gives users the ability to see what works and adjust what doesn’t.
Menu Customization
Menu customization options are strongly encouraged when searching for a restaurant POS system. It’s important to be able to remove unsuccessful items, adjust item prices, and add images and descriptions to your menu efficiently.
Other features to look out for are the ability to edit menus at different locations simultaneously, apply promotions and discounts, and automate menu switches based on the time of day.
Pickup and Delivery Options
If your restaurant currently offers pickup and delivery, you need a POS system that can handle these services. You want a system that’s capable of taking customer orders efficiently and ensuring you have orders ready for pickup or easy delivery.
Look for a system that integrates with third-party delivery services like DoorDash, Postmates, and UberEats. Allowing customers to place orders, enter payment, and add tips from their mobile devices is important, and a system with curbside pickup options is a bonus.
Flexible Payments
A restaurant POS system must be able to accept flexible payment options. These include options like credit and debit cards, cash, mobile payments, and gift cards. The more ways customers can pay, the better.
Failing to do this creates headaches for both your employees and customers. Other helpful features include a customer’s ability to open tabs, add tips, and split bills. Also, choosing one with pre-card authorization is helpful for security reasons.
Inventory Management
While inventory management isn’t mandatory, it can be extremely useful for restaurants that want to automate these tasks. Inventory management features help employees keep track of ingredients and recognize when something needs to be restocked.
Some inventory management tools automatically sync with the menu, informing customers if a certain item is low in stock or unavailable. These tools reduce time wasted on manually counting inventory, and they make the entire process more efficient.
Summary
If you think it’s time for a restaurant POS system, I hope this article helps you pinpoint the exact product you need. Lightspeed is the best for full-service restaurants, while Revel is suited for quick-service establishments. Food trucks should consider TouchBistro, and cafes should consider Epos Now. Toast is best for bars, while Square is suited for fast casual restaurants.
Before you make a final decision, you should also consider the five helpful POS tools we highlighted. These include reporting options, menu customization, pickup and delivery tools, flexible payment capabilities, and inventory management assistance.
Limited liability companies (LLCs) are a popular option for entrepreneurs nationwide. Unlike other types of business structures, LLCs can be formed in any state, regardless of your company’s physical presence.
Some states offer significant financial advantages compared to others. This guide will take a closer look at the best states to form an LLC and ultimately help you determine the best state of formation for your business.
Foreign LLCs vs. Domestic LLCs
If you form an LLC in your state of residence (your home state), it’s known as a domestic LLC.
When you form an LLC somewhere other than your home state, you’re required to register that business as a foreign LLC in your home state. To be clear, the term “foreign” has nothing to do with a business being owned by a non-US resident or outside the US. It just means that the company is doing business outside of its home state.
Why is this important?
Starting an LLC in another state might require you to form two LLCs—one in the state of formation and another in your home state.
For example, let’s say you live in Indiana but want to form an LLC in Wisconsin. You’d have to register that company as a foreign LLC in Indiana to do business in your home state.
With two LLCs, you’ll have double everything. That includes two state filing fees, registered agents in both states, two annual reporting fees, and more.
Maintaining two LLCs can quickly double your costs and double your headaches.
Are some states better to form an LLC than others? Absolutely.
But for the vast majority of people, registering an LLC in your home state will be the best option.
Most people hear or read something online that says, “Nevada has no corporate income taxes,” and assume it’s the right state to form a business. While the former may be true, the latter is not always the case—especially for anyone who lives outside of Nevada. (We’ll talk about Nevada in greater detail shortly).
Why? Remember, you’ll still be required to register a foreign LLC in your home state. So, you’ll still have to pay taxes in your home state, on top of the additional fees required for maintaining two LLCs.
The idea that you can form your LLC in a “no-tax” state, elect to be taxed as a corporation, and not pay income taxes in your home state is essentially misinformation. For most people, your home state will always be the best place to form your LLC. It’s unlikely you’ll be able to save money by registering an LLC elsewhere, and it will likely cost you more money in both the short-term and long-term.
Whether you choose to form an LLC in your home state or in one of the states on this list, we recommend using an LLC formation service to help you get started. You can read our full reviews of the best LLC services here.
5 Best States to Start an LLC
With all of that in mind, five states stand out amongst the rest as the best locations to form an LLC, so if you live in one of these states—great.
If you don’t live in one of these states, don’t automatically think it’s a good idea to form an LLC here (for the reasons discussed above). The type of business you’re starting will be a factor, as well. For example, an online-only consulting business with no physical facilities or storefronts could consider forming an LLC outside of their home state. But a retailer with a physical storefront in a shopping center probably wouldn’t have as much flexibility.
Below we’ll dive deep into the pros and cons of forming an LLC in the “best” states.
1. Delaware
Delaware has a longstanding reputation for being one of the most business-friendly states in the nation. According to the Delaware Division of Corporations, nearly 67% of Fortune 500 businesses are incorporated there.
While this doesn’t necessarily apply to LLCs, it definitely conveys a draw for organizations to form a business in Delaware. In 2021, 247,003 LLCs and 24,588 LPs/LLPs (limited liability partnership) formed in Delaware compared to 62,510 corporations.
Why?
For starters, the initial state filing fees and franchise taxes are lower than other states. Delaware doesn’t impose taxes on out-of-state income, either. The filing process is simple and allows LLCs to get up and running quickly. The state keeps it easy after that, too, with online filing of LLC taxes and reports.
Filing annual reports and taxes for your Delaware LLC can all be done online.
Another unique standout of Delaware is the Chancery Court. This is one of three constitutional courts in Delaware (alongside the Supreme Court and Superior Court).
The Chancery Court is only for business cases. This means that business-related cases are resolved much quicker than in courts that hear cases in all categories. Plus, the judges in the Chancey Court have much more experience in business hearings.
Delaware doesn’t require shareholders, directors, or officers to be residents of the state. Furthermore, one person can be named in all of these roles. It’s also one of the only states that allows you to exclude your personal identity from the formation documents.
Pros of Forming an LLC in Delaware:
Quick and simple formation process
Low filing fees and franchise taxes
No corporate income taxes (foreign LLCs that elect for corporation taxing)
More privacy for your business
Flexible business structure
Specialized business legal system (Chancery Court)
Cons of Forming an LLC in Delaware:
Dual-registration required for out-of-state LLCs
Two registered agents required (one for each state)
Multiple legal representatives (most lawyers are only licensed in one state)
No flat franchise taxes
If you live outside of Delaware and want to form an LLC there, it could ultimately be more expensive than starting an LLC in your home state. Aside from having to maintain two LLCs, your administrative costs may also be higher. An accountant in your home state may not be familiar with Delaware structures, so you’d likely have to retain two accountants.
Need help? Visit Incfile to form an LLC in Delaware today.
2. Nevada
Nevada is another state that draws a lot of attention from business owners who want to avoid paying high taxes. That’s because Nevada doesn’t impose taxes on personal income, corporate income, or franchise taxes.
With that said, Nevada does require business owners to pay annual license fees and annual filing fees.
In terms of privacy, Nevada is arguably second to none. They are one of the only states that allow for complete anonymity with public filings. In short, your LLC can remain anonymous in any public registration filing.
Furthermore, Nevada does not have an information-sharing agreement with the IRS. Since the state doesn’t have an income tax department, there’s no information to share.
Maintaining an LLC in Nevada is easy since they don’t require annual meetings or operating agreements.
NEvada’s llc registration checklist makes it easy to follow the required steps.
The registration process is simple and also requires fewer steps compared to other states nationwide.
Pros of Forming an LLC in Nevada:
No state personal income or corporate taxes
No franchise taxes
LLC owners can remain anonymous
No information-sharing agreement with IRS
No operating agreements or annual meetings required
Cons of Forming an LLC in Nevada:
Annual business license fees
Annual filing fees
List of officers and directors is public information
Gross earnings over $4 million may be subject to taxes
As you can see, forming an LLC in Nevada isn’t always ideal, especially if you’re in another state. You’ll still have to create a foreign LLC in your home state and maintain two registered agents for each LLC.
Need help? Visit Incfile to form an LLC in Nevada today.
3. Wyoming
Wyoming is another state with policies aiming to be as business-friendly as possible. For starters, they don’t impose strict reporting obligations for business owners.
Similar to other states on our list, Wyoming doesn’t tax personal income or corporate income. There aren’t any franchise taxes either.
Wyoming offers something really unique compared to other states—a lifetime proxy. With a lifetime proxy, you’re able to appoint another person to represent your shares or stock in a company on your behalf. This means that business owners in Wyoming can benefit from complete anonymity.
Aside from no individual or corporate taxes, the sales tax rates in Wyoming are very low.
Wyoming has some of the lowest state sales tax rates in the country.
As you can see from this graph, Wyoming ranks 44th in the country for local tax rates. Of the 46 states that impose sales tax (four states don’t have any sales tax), Hawaii and Alaska are the only two with lower averages.
Pros of Forming an LLC in Wyoming:
No franchise taxes
No corporate or personal income taxes
Low sales tax rates
Minimal reporting requirements for LLC owners
Lifetime proxy (for owner anonymity)
Cons of Forming an LLC in Wyoming:
LLC dissolution (if a member dies or files for bankruptcy)
High administrative costs
Asset protection is not guaranteed for lawsuits outside of Wyoming
Wyoming is definitely a great state to form an LLC for entrepreneurs who live in the state. But do the pros outweigh the cons if you’re living elsewhere? Your home state will still require a foreign LLC registration, so you can’t avoid taxation altogether.
Need help? Visit Incfile to form an LLC in Wyoming today.
4. Alaska
Alaska—the last frontier. While Alaska is best known for its cold weather and thousands of miles of uninhabitable terrain, it’s also a top location to form a business.
The largest state in the Union (and one of the last to join), it is an appealing place to start an LLC.
For starters, there is no state income tax or sales tax in Alaska. However, it’s worth noting that cities can collect local sales taxes (although these are generally low).
Wasilla is one Alaskan city that imposes a local sales tax on businesses. However, the rate is just 2.5%.
Depending on your new business’s industry, you might be entitled to certain tax credits as well. Examples include film production credits, frontier basin credits, new area development credits, qualified oil and gas service industry expenditure credits, minerals exploration incentives, and more. However, most of these require you to actually do business within the state.
Alaska also provides new business owners with great loan programs. In October 2022, the State of Alaska, alongside the University of Alaska and the Alaska Small Business Development Center, announced the launch of a new financing program with $59.9 million in funding. These funds will be available to Alaska small businesses over the next ten years.
But similar to the tax credits, they are intended for businesses operating with a physical presence in Alaska.
Registering an LLC in alaska is affordable compared to other states.
Pros of Forming an LLC in Alaska:
No state income taxes
No state sales taxes
Low local tax rates
Low LLC filing fees
A lot of tax credits and loan opportunities
Cons of Forming an LLC in Alaska:
Most credits are for businesses actually operating within Alaska
Local jurisdictions can collect sales tax
Physically distant from other states
If you live in Alaska and your business operates in Alaska, it’s definitely a great place to form an LLC. But it’s not always a practical solution for out-of-state LLC owners.
Need help? Visit Incfile to form an LLC in Alaska today.
5. South Dakota
Like other states on our list, South Dakota does not have any state income taxes (a common theme on our list).
Another advantage of starting a business in South Dakota is its 0% corporate tax rate. So, this is a great option for creating an LLC that gets taxed as a corporation. South Dakota has several other tax advantages as well, including no personal property taxes, no inheritance tax, and no business inventory tax.
The filing process is easy, affordable, and can be completed online without strict requirements.
You can file your LLC in south dakota directly from the secretary of state website.
Pros of Forming an LLC in South Dakota:
No state income taxes
0% corporate tax rates (for LLCs taxed as corporations)
No business inventory tax
Other tax advantages (for people living in South Dakota)
Cons of Forming an LLC in South Dakota:
Limited life
Local registered agent required
Most of the advantages associated with forming an LLC in South Dakota are for state residents and companies operating within the state. Anyone else would still have to maintain a foreign LLC in their home state.
Need help? Visit Incfile to form an LLC in South Dakota today.
What to Expect When You File For an LLC
Regardless of your state of formation, there are certain expectations for LLC filing that remain constant across the board.
First, expect to pay some type of filing fee to the state. These typically range anywhere from $50 to $500, and payments are due upon filing your Articles of Organization.
Many states also require you to file an Operating Agreement. This is a legal document that explains how your LLC will be run and managed. Even if your state doesn’t require you to file an Operating Agreement during the formation process, it’s still in your best interest to do so, as it will help prevent internal conflicts amongst LLC members.
Be prepared to appoint a registered agent during the filing process as well. You could technically name yourself as the registered agent, but it will make your life much easier if you use a professional registered agent service.
Once everything has been filed, it’s just a matter of waiting until the state officially recognizes your LLC as a legal entity. The exact time varies by state, but the typical range is anywhere from three to ten business days. Most states let you expedite your filing for an additional fee, which can also be facilitated through your business formation service.
Best States to Form an LLC: Your Top Questions Answered
What is the best state in the US to set up an LLC?
Delaware, Nevada, Wyoming, Alaska, and South Dakota are the best states in the US to set up an LLC. All of these states have business-friendly laws for LLCs, low fees, low taxes, and don’t have strict requirements on who can form an LLC in the state.
With that said, the best state in the US to set up an LLC will likely be your home state. Forming an LLC in a state where you’re a non-resident may sound appealing, but it can often be more complicated and costly.
Which state has the lowest taxes for LLCs?
South Dakota has the lowest taxes for LLCs that elect to get taxed as a corporation. They have a 0% corporate tax rate, and South Dakota has 0% taxation on business inventory, personal property, and inheritances. Alternatively, Alaska has no corporate income taxes or state sales taxes. Wyoming has no corporate taxes or personal income taxes, and it has one of the lowest sales tax rates in the country.
What are the best states to register an LLC as a non-resident?
Delaware is the best state to register an LLC as a non-resident. Shareholders, directors, and officers of a business are not required to be state residents, and you have the option to omit your personal identity on your LLC formation documents.
Just be aware that you may need to maintain two LLCs, including one in your personal state, if you want to form an LLC in a state as a non-resident. Consult with an attorney or tax professional before you register your LLC in a state where you don’t have residency.
Do all states require LLCs to have a registered agent?
All 50 states require LLCs to appoint a registered agent. Registered agents are required to receive service of process on behalf of a business, as well as any official documents from the state’s government office.
However, the rules for who can be a registered agent for an LLC vary slightly from state to state. For example, not every state lets you be your own registered agent. For more information, refer to our guide on registered agent requirements by state.
Conclusion
LLC formation is not universal from state to state. As you can see from this guide, some states have advantages compared to others for LLC owners.
With that said, it doesn’t mean that you should automatically form an LLC in one of these states.
So, while you may get tax breaks in one state, you’ll still have to pay them in your home state. Plus, maintaining two LLCs comes with its fair share of headaches, like extra fees, multiple accountants, multiple lawyers, and multiple registered agents.
In most cases, the pros won’t outweigh the cons when it comes to forming an LLC in a state other than your own. As always, consult with your accountant and attorney before deciding where to form an LLC.
Incorporate.com has more than a century of experience in the business formation space. It’s a branch of Corporation Service Company (CSC) that was founded back in 1899.
Naturally, the business has changed quite a bit over the last 122 years. Today, Incorporate.com serves as a fast and easy way to form businesses online. As a pioneer and industry leader in this space, more than 750,000 LLCs and corporations across the country have been started with Incorporate.com.
They offer a wide range of services to start a business, maintain a business, and everything in between. From obtaining an EIN to S-corp election and business licenses, Incorporate.com has it all.
Is Incorporate.com right for you and your business? Use this guide to find out.
As previously stated, Incorporate.com offers a plethora of services. But its business formation plans are definitely the most popular, so that’s what the bulk of this review will focus on. Those formation services can be segmented into three main categories—LLC services, incorporation services, and registered agent services.
Continue below to learn more about the packages, pricing, benefits, and discover what real customers have to say about Incorporate.com for business formation.
Incorporate.com LLC Services
You can use Incorporate.com to form an LLC (limited liability company) in all 50 states. Once you select your location and entity type, filling out the rest of the application is a breeze.
Incorporate.com asks a handful of simple questions about you and your business. From there, the formation experts handle the rest. This includes all of the paperwork preparation and legal filings for your LLC.
Essentially, your job is over after you complete the online application. It’s just a matter of waiting until the LLC is officially formed with your state.
Incorporate.com offers three different LLC formation packages for you to choose from:
The Starter — $99 + state fees
The Essentials — $249 + state fees
The Works — $349 + state fees
All plans come with access to the CSCNavigator, an online business compliance tool designed to keep your LLC in good standing. It comes with benefits like filing alerts, unlimited document storage, a to-do list, and order status tracking.
Incorporate.com prepares and files all of your LLC formation documents with your secretary of state, regardless of the plan you choose. All packages come with a $75,000 corporate compliance guarantee and instant online access to all of your LLC’s filed paperwork.
For those who want a bit more than the basics, the Essentials package comes with an EIN (tax ID) and corporate kit.
The Works package comes with all Essentials services, plus an LLC operating agreement and a business license research package.
It’s worth noting that some of these services are only available to customers who use Incorporate.com as their registered agent. We’ll discuss this in greater detail shortly.
Once you select a plan, you’ll automatically be directed to the online LLC application. This form can be completed in roughly ten minutes or less.
Between the low cost and outstanding service, Incorporate.com should be a top consideration for anyone who wants to form an LLC.
Incorporate.com Incorporation Services
Incorporate.com offers corporation formation services for C-corps, S-corps, and nonprofits. The process is similar to the LLC services described above. But the application questions will be a bit different based on the entity type you choose.
For those of you who aren’t sure which corporate entity structure is right for your business, Incorporate.com has some great resources on their website to help you decide. You can even consult with one of their customer support representatives for more information and guidance.
Here’s a quick overview comparing C-corps and S-corps:
Most of you will be choosing between one of these two options. But as previously stated, you can also form a nonprofit through Incorporate.com.
The price remains the same no matter which corporate entity type you select. The packages are identical to the LLC services offering three plans—The Starter ($99), The Essentials ($249), and The Works ($349). You’ll still have to pay state filing fees in addition to these base rates.
All packages include the completion and filing of your corporate formation documents. You’ll get a $75,000 corporate compliance guarantee, access to a robust online dashboard, and online access to your incorporation documents.
The Essentials package comes with an EIN and corporate kit. This package also includes annual report preparation and filing with your state.
As the name implies, The Works has it all. In addition to all of the Essentials features, it includes corporate bylaws and a business license research package.
At the end of the day, Incorporate.com is a solid choice for any business that wants to incorporate. If you’re still on the fence and unsure which entity structure is right for you, check out the resources on their website. They explain the different options in greater detail and even have a guide that compares corporations to LLCs.
Incorporate.com Registered Agent Services
Regardless of the entity type you’re forming, your business must have a registered agent. Getting this service from the same provider you’re using to start your business makes the most sense.
Incorporate.com’s registered agents will help your business maintain compliance.
They will become the state’s official way of communicating with your LLC or corporation. Any service of process, legal documents, or tax documents will be accepted by Incorporate.com on behalf of your business. This includes things like notifications from the Secretary of State, lawsuits, government notices, and more.
One of the most significant benefits of using Incorporate.com as your registered agent is the CSCNavigator. This online tool comes with perks like:
Filing alerts
Calendar of important filing dates
Order status tracking
Current status of your business standing with your state
Document storage and access
Overall, the tool is really helpful. You can be alerted in real-time if your registered agent receives an urgent notice on your behalf and access everything online.
The registered agent services from Incorporate.com cost $235 per year.
If you’re using Incorporate.com to form an LLC or corporation, getting the registered agent service is a no-brainer.
Overall Pricing and Value
We’ve mentioned the pricing a few times throughout this guide, but let’s take a more in-depth look at Incorporate.com’s packages and rates. This will make it easier for us to determine their value.
The packages for all business formation services are the same, regardless of the entity type you select (LLC, C corporation, S corporation, or nonprofit).
The Starter — $99 + state fees
Completion and filing of formation documents
CSCNavigator (online tool)
$75,000 corporate compliance guarantee
Online document access
The Essentials — $249 + state fees
All Starter services
Annual report preparation and filing
Corporate kit
EIN (employer identification number)
The Works — $349 + state fees
All Essentials services
Business license research package
LLC operating agreement
Corporate bylaws
The registered agent services cost $235 per year.
Interestingly enough, some of the services “included” with these packages are only available to customers who use Incorporate.com’s registered agent service. The CSCNavigator tool and the annual report preparation and filing service are both on that list. So, if you’re not using Incorporate.com as your registered agent, there isn’t as great a value with these packages.
With that said, it makes sense to use their registered agent services if you’re getting a formation package from Incorporate.com. It’s just easier, and there really aren’t many reasons to get these from separate providers.
At $235 per year, the registered agent plan is a bit high compared to others on the market today. But as we’ve seen from reviews, customers are happy with the service.
User Experience
Navigating the Incorporate.com website and getting started with the formation process is simple. Everything is straightforward and effortless to follow.
Incorporate.com does a great job explaining your options. Just pick your state, choose your entity type, and select a package.
From there, the application shouldn’t take more than ten minutes. You’ll be offered a few upsells, like expedited EIN processing and expedited shipping via FedEx, but it’s just a couple of extra clicks to bypass those.
Here’s an example of some questions on the application:
Incorporate.com will ultimately take your responses and use them to complete your formation paperwork.
Once you’re up and running, you’ll have access to the CSCNavigator (assuming you’re using the registered agent service).
This online tool is both robust and intuitive. It’s an easy way to see crucial business information related to your new entity. If you have a filing deadline coming up, you’ll be alerted to ensure compliance.
Customer Support
If you browse through online reviews, you’ll find nothing but great things about Incorporate.com’s customer support team.
Remember, this organization is a branch of Corporation Service Company (which has been in business for over 120 years). There’s a certain level of professionalism that comes with so much experience.
Phone support is the best way to get in touch with Incorporate.com. Their team is available from 8 a.m. to 8 p.m. Eastern, Monday through Friday.
They are also available by email and typically respond to emails within one business day.
The business formation packages are perfect for anyone who wants to start an LLC, C-corp, S-corp, or nonprofit. Just fill out a simple application online, and they’ll handle the document preparation and filing on your behalf.
Incorporate.com also has registered agent services to keep you compliant once your business is officially formed. This is something your company needs, so it makes sense to get it directly from Incorporate.com.
Between the low costs, friendly service, and ease of use, Incorporate.com is an industry leader in the online business formation space.
MyCorporation has been around for over 20 years. Since 1998, they’ve helped form and grow more than one million businesses across all 50 states.
Its popularity makes it one of the most trusted online filing companies in existence.
This industry leader makes it easy for people to form an LLC or corporation without having to hire an attorney or pay costly fees. In addition to the online filing services for business formation, MyCorporation also provides services related to trademark applications, DBA registration, copyright registration, registered agent services, and so much more.
MyCorporation knows what it takes to help small businesses succeed. So if you’re looking for a quick and cost-effective way to launch your startup, this will definitely be a great option to consider.
Is MyCorporation right for you? This in-depth guide will cover their services, plans, pricing, benefits, and real customer reviews to help you decide.
After reading this guide, it will be much easier for you to make an informed decision as it pertains to forming your LLC or corporation.
As previously stated, MyCorporation offers a broad scope of services for small businesses. But the online filing services for business formation are by far the most popular.
These services can be broken down into three major categories—LLC services, incorporation services, and registered agent services. We’ll cover each one in greater detail below.
MyCorporation LLC Services
The LLC services from MyCorporation are arguably their most popular offering. Small businesses in all 50 states have used this online filing service to start an LLC from scratch.
By using MyCorporation to start your limited liability company, you’ll benefit from added protection and credibility for your business.
The process is very straightforward. Just head over to the MyCorporation website and complete the simple online questionnaire. They’ll just ask for more information about the business you want to form, like its name, location, and more.
After you complete the questionnaire, there’s nothing left for you to worry about. You can just sit back and relax while the experts at MyCorporation accurately handle the paperwork and filing with your state.
Once everything is finished, they’ll send your completed filings along with any necessary documentation related to your LLC.
Every LLC package from MyCorporation includes the following:
Articles of Organization — Legal document establishing your LLC’s existence
Operating Agreement — Outlines the ownership and membership duties of the LLC
Support — Filing experts to assist you through each step
Business Name Check — To verify your name’s availability with the state
When you use MyCorporation’s LLC services, you can rest assured knowing that your documentation is filed quickly and accurately.
Here’s a quick overview of the packages and prices for you to choose from:
Basic — $99 + state fees
Standard — $124 + state fees
Deluxe — $224 + state fees
Premium — $324 + state fees
The Basic plan comes with everything that we’ve already mentioned. The Standard package includes service for annual reporting to your state. If you choose the Deluxe package, you’ll also benefit from MyCorporation’s registered agent services (more on this shortly). It’s something you’ll need, so I recommend getting it directly from your business formation service.
For those of you looking for the highest service level offered, go with the Premium plan. This package includes a corporate maintenance package with up to four filings per year and annual auto renewing.
There are a lot of options you add onto the packages, some of which are really useful while others aren’t really worth it:
EIN — $79
Rush filing — $100
Custom operating agreement — $59
Elite corporate kit — $100
Business license compliance — $149
State unemployment insurance, income tax withholding, and sales & use tax — $200 each
Company seal + embosser — $40
DIY logo maker — $39.95
I only really recommend getting that EIN, though it’s a bit pricey. But you’ll need it and thus adding it on is a worthwhile convenience. Everything else isn’t essential, but some options may be more useful in some cases than others.
If you want to start an LLC, MyCorporation is a solid choice.
MyCorporation Incorporation Services
You can also use MyCorporation to incorporate your business. They offer incorporation services for C-Corps, S-Corps, B-Corps, and nonprofits. MyCorporation also provides entity incorporation for physicians, lawyers, and other licensed professionals.
The incorporation services are actually quite extensive compared to some of the other formation services on the market today. Most companies just offer incorporation services for C-Corps and S-Corps. Some will offer nonprofit incorporation as well. But it’s really nice to see such variety in MyCorporation’s services.
The incorporation services are fairly similar to the LLC services that we discussed earlier. All plans come with:
Articles of incorporation
Business documents
MyCorp Vault digital document storage
Unlimited customer support
Corporation name check
The packages and pricing are identical to the LLC rates as well.
Annual reports come with the Standard plan, and registered agent services are included starting at the Deluxe level. If you want the corporate maintenance package with four annual filings beyond the initial setup, you’ll need to upgrade to the Premium package.
MyCorporation also has a corporate kit that includes a steel hand-held embosser, a gold-embossed binder, corporate minutes, waivers, sample bylaws, and 20 corporate stock certificates. You can purchase the Elite Corporate Kit for $100.
You can also file for your EIN at the same time for $79 and opt for rush filing for an additional $100. There are plenty of other upsells and add-ons—few to none of which will be necessary for most of you.
If you’re ready to incorporate as a C-Corp, S-Corp, B-Corp, or nonprofit, look no further; MyCorporation has you covered.
MyCorporation Registered Agent Services
Every LLC and corporation must have a registered agent. You could technically name yourself as the registered agent for your business, but that’s not advisable. If you’re using MyCorporation to form your business, it makes sense to use them for registered agent services, too. Getting all of these services from one place will make your life much easier.
Your registered agent from MyCorporation will be the state’s way to officially communicate with your organization. From accepting legal documents on your behalf to maintaining regular business hours, these services are available in all 50 states.
In addition to performing the duties of a registered agent, MyCorporation will also handle all of the paperwork required to name them as your registered agent. All you need to do is sign up, and they take care of the rest.
By using MyCorporation to act as your registered agent, they’ll help you maintain privacy and separation from the public. Most importantly, your personal information will stay protected.
They’ll accept legal documents outside of your business and receive service of process for your LLC or corporation during any legal proceedings.
The registered agent services start at $120 per year. You can add these services to any of the business formation packages for the same price. Alternatively, you can get these services included in your plan at no additional cost when you sign up for the Deluxe or Premium packages. These start at $224 and $324, respectively.
If you’re using MyCorporation to form your LLC or corporation, make sure you add on the registered agent services. Otherwise, choose a plan (Deluxe or Premium) that includes these services with the package—it’s something you need to have.
Overall Pricing and Value
We’ve mentioned some pricing a handful of times throughout this guide. But let’s take a closer look at the exact packages offered by MyCorporation. Regardless of the entity type you’re forming, these will be your options:
Basic — $99 + state fees
Articles of incorporation
Business name check
MyCorp Vault document storage
Standard — $124 + state fees
All Basic plan services
Annual report
Deluxe — $224 + state fees
All Standard plan services
Registered agent services
Premium — $324 + state fees
All Deluxe plan services
MaintainMyBiz four business filings per year
The registered agent service on its own starts at $120 per year.
In terms of value, MyCorporation isn’t the cheapest or most expensive business formation service on the market today. The entry-level plan starts slightly higher compared to popular alternatives.
I’d recommend the Deluxe package, at a minimum. You need to have a registered agent, so getting this bundled in your formation plan makes the most sense.
User Experience
Using MyCorporation is easy. Even if you’ve never gone through this process before, you won’t have trouble figuring it out.
The way everything is displayed on the website is extremely easy to navigate and comprehend. It’s as simple as picking a state, choosing your entity type, and selecting a plan.
From there, you’ll just need to fill out some basic form fields related to you and your business. Here’s a sample of what you can expect:
They ask a few more questions than some of the other business formation services that we’ve looked into. But the whole thing can be completed in roughly ten minutes or so.
If you’re unsure about what the form fields mean, just click on the question mark icons for an explanation. This should clarify things for you as you complete the forms.
Once you’re done, there’s nothing for you to do except wait. MyCorporation handles the document preparation and filing. All of your documents are available online when the process is complete and you’re officially incorporated.
Customer Support
Customer service representatives from MyCorporation are available by phone or email from Monday to Friday, 7:30 a.m. to 4:30 p.m. Pacific.
They’re really helpful if you need help or have questions during the sign-up process. But even after your business is formed, you’ll be able to get unlimited customer support from MyCorporation. This level of service comes standard with all of the formation packages.
Customer service is always something that needs to be evaluated as you’re shopping around and reviewing different business formation services.
It may not be today, but the day might come when you have a question or need assistance. For something as important as your business, it’s critical that you’re able to get an answer as fast as possible with minimal headaches.
There’s a reason why more than one million businesses have formed with this platform. They’ve been an industry leader in this space for decades, and appear to continue this success in the foreseeable future.
MyCorporation offers LLC services, incorporation services, and registered agent services, business license services, DBA names, and more.
If you want a fast and simple way to form your business online, MyCorporation should definitely be on your shortlist.
It’s our mission to find top-tier services and products for our readers, which is why our research team spent four weeks analyzing over 1,100 reviews and numerous features, data points, and pros and cons of 13 LLC formation services.
Our deep dive led us to the final 11 best LLC services that we’ve reviewed for this guide. Here, we deliver all the details you need to know about each, along with scenario matches and crucial points to consider when choosing the right LLC service.
In the first evaluation round, we assessed 13 top LLC services.
The companies we considered were BizFilings, Harbor Compliance, Inc Authority, IncFile, Incorporate.com, LegalNature, LegalZoom, MyCompanyWorks, MyCorporation, Northwest Registered Agent, Rocket Lawyer, Swyft Filings, ZenBusiness.
As a company that’s had its fair share of LLCs and other business formations, we know what goes into an incredible LLC service. Based on that knowledge and what other business owners need in an LLC service, we evaluated each company based on the following criteria:
Add-on services: Optional upgrades obviously aren’t necessary, but they can add a lot of value to a service. Plus, having add-ons available through your service can make it easier to keep all LLC-related features on one platform.
Compliance: If your state requires specific documents and annual reporting, you should look for a company with compliant-focused services to ensure you meet legal requirements.
Customer support: The ability to contact an LLC service when needed is priceless. Consider companies with multiple support methods, such as live chat, phone, and email.
Ease of use: Guided setups, knowledge bases, and free online resources allow you to navigate your LLC formation and related processes easily. Some services include interactive tools to get you set up as easily as possible.
Filing time: You shouldn’t have to wait weeks to form an LLC. Some services offer same-day or next-day business filing for free, while others charge extra to speed up the process.
Pricing: We dropped companies with a lot to offer but higher fees and pricing than their competitors. Your LLC filing should be as affordable as it is helpful.
Registered agent services: Registered agent services can file documents on your business’s behalf and keep your personal information confidential. Some companies give members registered agent services for one year.
Comparing each company to this set of criteria, we found that each of the 13 services exhibited the necessary qualities to stay on the list.
How We Narrowed the List of Qualified LLC Services
Because we want to offer only the best of the best, hyper-specific options for you to choose from, our research team identified two companies that offered similar features as others on the list but without similar value. These are the companies that qualified but are not recommended:
Incorporate.com: Incorporate.com is a popular option with plenty to offer. However, its fees are higher than comparable companies, reducing its value.
MyCorporation: Similarly, MyCorporation has unnecessarily higher fees than other top contenders without providing stand-out features.
The Top LLC Services Left Standing
After eliminating the two companies above, we were left with the following 11 LLC services, each of which we believe is ideal for various business needs.
Match Your Scenario to the Right LLC Service Solution
LLC business owners commonly fall into one or more of the following categories. To help guide your research and narrow your options, we’ve identified the top two LLC services for each scenario:
ZenBusiness potentially has the easiest setup process for LLC owners. The guided setup wizard walks new business owners through the required documentation and steps to set up an LLC without needing to know all the details.
ZenBusiness’s guided setup is ideal for brand-new business owners who haven’t had experience with business formation.
Customer support is also top-notch with this company. Get your questions answered quickly via email, phone, or live chat, with agents even available during weekend hours.
IncFile offers free LLC business filing and free one-year registered agent services, making it super affordable for entrepreneurs. Its simple navigation and guided setup are also extremely helpful for new business owners.
When you’re new to the business scene, consider:
Ease of use: Slimmed-down dashboards, guided walk-throughs, and responsive customer service can improve the overall LLC formation experience for entrepreneurs.
Customer support: Is a company available to answer questions when you need help before, during, or after filing?
Resources: Some companies provide numerous resources and tools for self-help, many of which are free for customers.
Pricing: Affordability is key for entrepreneurs, especially those bootstrapping their businesses. Look for free registered agent and filing services to cut down on costs.
When amending or changing your LLC filing is necessary, ZenBusiness can help. It sticks with you throughout the life of your business, allowing easy access to document updates, converting to other business types, or dissolving a business.
LegalZoom also supports multiple types of business filing and changes, including applying for business licenses and filing annual reports.
If you don’t want to be left without support after forming your LLC, think about:
Add-on services: Some of the best companies feature optional add-ons you can choose as you need them, like tax preparation services, business license applications, and compliance checks.
Northwest Registered Agent’s main service is registered agent services. The cost of the service lowers as you file with more states, making it an ideal option for businesses operating in multiple locations.
IncFile’s registered agent service is free for your first year when you file your LLC. Business owners can try it during this time to make sure it’s a good fit without committing financially.
If your state requires your business to have a registered agent, you should look for:
Registered agent services: Registered agents are a must for most LLCs. Even if your company doesn’t need one, you might want one anyway for privacy and document management.
When you file with Northwest Registered Agent, you’ll automatically get same-day business filing without additional charges. You’ll also get immediate access to an online account where you can view your documents and track the progress of your filing.
File your LLC with MyCompanyWorks before 3 pm EST, and you’ll get same-day business filing. If you go past the cutoff, you can still get a quick filing the next business day with no extra fee.
When you don’t have a lot of time to spare, think about:
Filing time: Every state has varying time periods for processing LLC filings, but your LLC service can also affect the total amount of time it takes. Same-day or next-day filing services can cut down the wait.
Legal assistance can help business owners ensure that their company is compliant and meets all state requirements. Rocket Lawyer’s built-in legal team provides legal advice that you can purchase on an as-needed basis or use more regularly with a subscription.
The company also has legal forms and templates for convenient use on its website.
LegalZoom’s Business Advisory Plan lets LLC owners access legal consultations and a library of legal forms on an ongoing basis. You can subscribe to the plan annually for $459.
When you want extra help from experienced attorneys, consider:
Access to a legal team: Ask questions, get advice, or express your concerns to a legal team that knows the ins and outs of business formation and operation.
Legal forms and templates: Forms and templates that have already been reviewed by a legal time can give you peace of mind knowing they contain all required information for your state.
Although compliance isn’t LegalNature’s primary service, the company’s Compliance Guard option is one of the best of its kind. Compliance Guard provides you with just about everything you need to keep your company in the green zone, including meeting minutes, annual filings, and company resolutions.
Access compliant documents, like meeting minutes, when you need them with LegalNature’s Compliance Guard plan.
For just $125 a year, it’s an affordable solution to ensure compliance.
Harbor Compliance’s software, ComplianceAdviser, is a suite of tools customized to your business’s compliance needs. This service may cost more than others, but it could be the right solution for LLCs with more intricate compliance needs.
Avoid potential legal issues when forming or operating your business by prioritizing:
Compliance: LLC services that emphasize compliance usually provide legal forms and risk management services to help your business meet your state’s requirements.
LLC Service Reviews
The final 11 LLC services we chose best fit the common scenarios business owners use them for and have the features they typically look for in the right service.
There’s no one-size-fits-all solution for every business, though. That’s why we researched each company in depth to give you the details you need to know for an informed decision. Below, find our reviews of each company along with the situations they tend to work best with.
Entrepreneurs and startup businesses likely want to get straight to the point when forming their LLCs. ZenBusiness provides one of the most straightforward setups to create an LLC in a matter of minutes.
You start with its interactive chatbot that asks the important questions necessary to give you the right documentation for your state. The guide walks you through every step, leaving no opportunities for guesswork along the way.
New or solo business owners can also appreciate ZenBusiness Academy, which includes tons of online resources free for members. This suite of tools is basically training for small businesses to learn the nuances of tax filing, accounting, creating a business plan, and more.
What Makes ZenBusiness Great
ZenBusiness carries its simplicity beyond its initial setup with an easy-to-use platform for managing your account, finding documentation, and accessing learning tools.
The company can also serve as your ongoing registered agent to manage and store important documents related to your business. This service helps you stay compliant, monitor legal notices, and learn of legal matters you may need to respond to.
ZenBusiness can serve as your registered agent to meet your state’s requirements.
If you’re new to the entrepreneurial scene, you may need additional help as you navigate your business. ZenBusiness’s reliable and prompt customer service has proven experience assisting customers with various business needs and questions. Its broad hours of operation even include some Sunday support hours.
If you’re in the market for a no-frills LLC setup that gets straight to the point, you probably won’t find anything simpler than IncFile. Business owners can set up their LLCs within a couple of minutes by answering a few questions, and IncFile takes care of the rest.
It even does it for free if you choose the Silver package, which includes the necessities, like unlimited business name searches and prepared legal documents. All you pay is your state’s filing fees.
For LLCs wanting more, like registered agent services, an EIN, or an operating agreement, the free plan won’t cut it. Still, IncFile has the option of upgrading to other plans with just as simple setups.
What Makes IncFile Great
Although IncFile’s setup is highly self-explanatory and intuitive, helpful customer support is available by phone during typical business hours, Monday through Friday, to have as a backup.
To maintain its ease-of-use factor across the life of your business, IncFile also provides several optional services to add as needed. For example, you can purchase a domain name and business email through IncFile or add accounting and bookkeeping services to manage your financials all year.
IncFile’s accounting and bookkeeping services are just one of its many optional add-ons to help business owners.
Privacy is something that many companies take into consideration by giving you options for how they handle your personal information. However, Northwest Registered Agent makes privacy protection the standard in everything it does for your business.
As soon as you sign up, the company protects your information by default, leaving your business address off communications and keeping your data in its hands rather than selling it to others. As your registered agent service, the company prioritizes the privacy of you and your business.
Because Northwest Registered Agent focuses on registered agent services, it doesn’t offer some of the services that other LLC formation companies do, like domain registration and business banking, which is important to keep in mind if you want an all-in-one solution.
What Makes Northwest Registered Agent Great
Registered agent services from Northwest Registered Agent are available in all states. The more states you file with, the lower the cost for services per state.
The company scans every document you receive rather than just legal communication, including state and federal mail. You’ll also get compliance alerts to keep you informed of important legal requirements, all while protecting your privacy.
Northwest Registered Agent also offers a business phone number with an easy-to-use dashboard for quick customer access. You can use the number specifically for business communications to keep your personal number private.
An optional business phone service helps you communicate efficiently with customers while protecting your personal number.
Northwest Registered Agent charges $100 plus your state’s filing fees for LLC formation, but its registered agent services cost an additional $125 per year. This service isn’t optional, so you will want to look elsewhere if you don’t need a registered agent.
Rocket Lawyer provides LLC formation services with an overarching theme of quality legal support, allowing you to be only an arm’s length from credentialed lawyers when your business needs it.
Unlike other services with basic legal support attached to extra fees, Rocket Lawyer includes its support in an affordable subscription plan. The monthly cost gives you access to legal documents, free legal questions, and 30-minute consultations for each new legal issue.
Perhaps one caveat for some business owners to consider is that Rocket Lawyer’s customer support hours are limited to weekdays only, so you may not have access to the legal help you need outside of those hours.
What Makes Rocket Lawyer Great
Rocket Lawyer includes a Document Defense service, which helps protect your business in the case of an issue arising with contracts or documents made through the company. You can simply request a review to have a lawyer look over the issue and respond on your behalf to assist enforcement.
The service is also incredibly easy to use, whether you’re setting up your LLC or creating a new document. The guided walk-through asks all the right questions to customize your document. Each document has gone through an extensive legal review to protect you.
Use Rocket Lawyer to create personalized, lawyer-reviewed documents in minutes.
Rocket Lawyer’s membership is $39.99 per month, including on-call attorney services and incorporation filing discounts. Get a 7-day free trial to test it for yourself.
LegalNature – Best for Ongoing Access to Business Documents
LegalNature provides LLC formation services with done-for-you paperwork, filing, and EIN attainment so that you can begin operating as soon as possible. A guided setup with just a few questions is all you need to get started.
After forming your LLC, you can take advantage of LegalNature’s various business documents that are simple enough to customize on your own. With the help of the guided wizard, you can create operating agreements, a business plan, amendments, purchase agreements, and more, whenever you need them.
LegalNature emphasizes simplicity and speed so that each legal document can be ready in minutes.
What Makes LegalNature Great
After forming your LLC and creating documents with LegalNature, you can view everything you’ve created in your online business portal. This easy-to-use dashboard lets you access documents at any time, create new forms, and organize everything from your computer or mobile device.
LegalNature’s business command center organizes and stores all your business’s documents.
LegalNature truly provides a DIY-friendly experience, but it also offers a registered agent service for $125 per year to manage and store legal correspondence for your business. You’ll receive an email every time LegalNature receives a document on your behalf, allowing quick reviews.
LegalNature offers formation-only pricing for $49 plus state filing fees. However, to create business documents, you’ll need a subscription for $119 per year or $39 per month. Get a free 7-day trial of LegalNature before committing.
LegalZoom goes above and beyond for business owners far after their initial LLC filing with a broad mix of services ranging from operating a business to managing a thriving brand.
With LegalZoom, you’ll start with a straightforward LLC setup with guided help along the way. With select packages, experienced attorneys can help you ensure that everything gets done the way you need it to.
Once set up, you can move on to LegalZoom’s comprehensive business services, like trademarking, contract writing, and provisional patenting. LegalZoom also provides registered agent services, tax help, and a virtual mailbox.
With over 3.5 million businesses launched, LegalZoom’s track record speaks to their commitment to customer satisfaction, as demonstrated by their 100% satisfaction guarantee.
It’s notable that LegalZoom could land on the pricier side based on the services you need, as the company charges using more of a per-service format rather than offering packages. You may want to speak with customer support to get a quote for your precise needs.
What Makes LegalZoom Great
LegalZoom’s pick-and-choose-what-you-need model could be an excellent option for scaling LLCs. You’re free to add on services as needed and drop what you no longer need rather than buying a package that may include services you won’t use.
For instance, the Total Compliance service files annual reports on your behalf and alerts you with critical dates for your business’s compliance. Its Compliance Calendar has a low annual fee and keeps important filing dates frontloaded to help you avoid penalties.
Stay compliant with LegalZoom’s comprehensive and ongoing business services, like Compliance Calendar.
LegalZoom provides a range of LLC filing options, including a free plan that covers basic registration. For $249 plus state filing fees, the Pro plan offers business consultations, an operations guide, and operating agreement creation. The Premium plan, which costs $299, offers even more benefits, such as hands-on guidance from an experienced attorney.
Forming an LLC can be the first step toward building a larger business. It can be helpful starting with a company like BizFilings, which has numerous available services to add on as your business grows.
BizFilings starts with a simple setup process that includes a business name search, quality and compliance checks, and done-for-you filing. When selecting your package, you can choose additional services to scale your business, like payroll tax management and registered agent services.
Business owners setting up their LLC through BizFilings can also access its BizComply tool, which sends you alerts and necessary forms to keep your business compliant, even as it scales.
What Makes BizFilings Great
An LLC filing with BizFilings includes three free months of its registered agent services to manage your documents and assist you with compliance needs. You can continue to use this service to handle tasks if you decide to incorporate in the future.
Use BizFilings registered agent services to assist with your state’s legal and compliance requirements.
LLC owners can add operating agreements, annual report filing, business license research services, amendment filings, and numerous other options to their LLC formation package. Payroll services through ADP are also available should you need help managing employee payments for a growing team.
Package pricing starts at $99 plus state filing fees, while add-ons range from $20-$199. Get BizComply free for three months when you sign up.
Compliance is in its name, and Harbor Compliance lives up to its focus of providing businesses with helpful tools to manage their legal requirements.
Technically, Harbor Compliance is an online tool that helps you DIY much of your business’s compliance needs. Use the software to review and file new documents, renew licenses and registrations, and receive business communications from your registered agent.
Harbor Compliance’s specialists stand behind you to review documentation and alert you when something needs your attention.
If you one a comprehensive solution with additional services like trademarking and business domain registration, there are better options than Harbor Compliance. But for companies prioritizing compliance after filing their LLCs, this company is worth considering.
What Makes Harbor Compliance Great
A stand-out offering of Harbor Compliance is its ComplianceAdviser tool. This complete package includes registered agent services, compliance audits, DBA renewals, and other must-have features for year-round compliance.
The license management tool within Harbor Compliance’s software also lets business owners search a state’s requirements through its database. Then, track the renewal status of each license right from your dashboard.
Harbor Compliance makes license management easy with its online software.
Inc Authority – Best for Free LLC Filing and Bonuses
Although there are a few services that let you form an LLC for free, Inc Authority offers more than just a free filing. Business owners also get a business name check, a funding consultation, and other extras that blend affordability with value.
Despite it being a free service, you won’t feel as though you’re not getting the quality filing your business deserves. Inc Authority includes a similar guided setup as other services to ensure that your business is formed correctly and provides premium access to experts if you need help.
Your free filing even includes a tax consultation, registered agent services for your first year, and digital document storage and management without any additional fees.
What Makes Inc Authority Great
Inc Authority has exceptional value in its free services, but it also has plenty of affordable options for businesses to create a custom plan as their needs change.
One way to get several services for one cost is to opt for a premium service bundle with annual compliance notifications, business name searches, and a website domain. You can also add a la carte services to your free plan, including a legal documents package for $99 or an operating agreement for $89.
Inc Authority’s free LLC service has a lot of value compared to similar free services.
The company’s registered agent services are just $99 per year after your free first year, which gives you adequate time to test it out and ensure that it’s right for you. Premium packages start at $399 plus state filing fees.
MyCompanyWorks processes any of its submitted business filings the same day if they’re in the system and paid for before 3 pm EST. This is a unique feature for LLC services, many of which process filings within a few business days, only offering same-day service for an additional—and often hefty—fee.
If you do happen to get your filing complete after the 3 pm cutoff, you’ll still be eligible for next-day filing, so long as it’s a regular business day. Again, there’s no extra cost for this service.
The company’s setup is easy to use, too, so you don’t have to worry about getting hung up on the filing process if you’re close to meeting the deadline for same-day processing.
What Makes MyCompanyWorks Great
MyCompanyWorks simplifies single and multi-state filing with its interactive setup wizard that keeps track of your progress, so you’ll always know how much you have left to finish. You’ll also get email notifications to stay on top of any additional documentation or reminders about your filing.
MyCompanyWorks’ speedy filing and processing lets you start your business as soon as possible.
Once you file, you’ll also see the status of your order in your online dashboard. Track it from processing to acceptance with 24/7 access and monitoring.
MyCompanyWorks has three pricing options starting at $59 plus state filing fees. LLC owners might want to consider the Entrepreneur package for $199 plus state filing fees, which includes registered agent services and lifetime access to the company’s suite of business and legal forms.
Forming an LLC is usually a relatively straightforward process, but you may still need help along the way. It’s always a good idea to have available support when you need it, and Swyft Filings provides that for its customers.
Every person who uses Swyft Filings to form their LLC gets a dedicated Business Specialist on their side. You’ll get your specialist’s phone number and email, giving you direct access to them during their usual working hours. Your specialist becomes your go-to resource when you have questions about your business filing.
Registered agent services are also available per quarter, giving you additional help with managing your company’s paperwork and correspondence.
What Makes Swyft Filings Great
Not only is your business specialist available to answer your questions after filing for your LLC, but they’ll also personally review your filing to check for common errors before turning it over to your state.
If you can’t get a hold of your specialist—for instance, if it’s outside of their usual working hours—you can still contact customer support quickly via phone or live chat, Monday through Friday.
Automated features give you extra support, too. For instance, ComplianceGuard keeps you abreast of important due dates and renewals, while the online documents feature stores and organizes your documents for your convenience.
Swyft Filings offers some of the best direct support for LLC business owners.
A Swyft Filings plan starts at $49 plus state filing fees. Each plan includes a business name verification, lifetime customer support, ComplianceGuard alerts, and a one-hour business tax consultation. An easy payment plan is available to help you get started affordably.
We recommend ZenBusiness or IncFile as the two best websites to form an LLC. Both sites simplify the LLC formation process by filing all of the appropriate documents with your state on your behalf. Simply answer some questions about your business, and ZenBusiness or IncFile will handle the rest.
These online LLC services also help maintain your LLC post-launch. They offer registered agent services, annual report filings, and other things you need to ensure your LLC remains in good standing with the state.
How much does it cost to start an LLC?
Each state has its own filing fee to start an LLC—which typically falls in the $50 to $500 range. Some states also offer expedited LLC filing for an additional fee. If you’re using an LLC service to assist with the startup, you’ll also need to pay for the plan you’ve selected. Some LLC services, like ZenBusiness, will file your LLC formation paperwork for free. You just need to pay your state’s filing fee.
Is it better to have an LLC or DBA?
If you want to have a separate legal entity and benefit from liability protections, it’s better to have an LLC than a DBA. Forming an LLC helps protect your personal assets from lawsuits and debts, whereas a DBA or fictitious name does not. LLCs also have more tax flexibility than DBAs.
It’s possible to have an LLC and a DBA. You can form an LLC and also apply for DBA to operate your business under a different name for branding and banking purposes.
Can you turn your LLC into a corporation?
Yes, it’s possible in many states to turn an LLC into a corporation. Going through this process changes the ownership structure of your business and how your company gets taxed.
However, if you want to change your LLC into a corporation strictly for tax purposes, you can elect to be taxed as an S-Corp and still remain an LLC. This is a much simpler process that can be completed by filing a form with the IRS and the state tax office where your LLC operates.
Quick Sprout LLC Services Related Content
The following resources provide additional guidance that may come in handy as you find the right LLC service for your business. We’ve broken down the resources into reviews, comparisons, top lists, and guides so you can quickly locate the information you need.
There are approximately 100 billion decisions you have to make when starting a business.
Okay, maybe that’s a small exaggeration—but you know how many critical choices demand your attention as a business owner.
One of the earliest and most important decisions you’ll make is what type of business you want to create. I’m not talking about favoring online versus physical stores or selling products versus services; this is about the type of legal form your business should take.
This determines how you’re taxed, your personal liability, how you raise money, and what happens to your business should something happen to you, to list a few considerations.
That’s why we wanted to do a deep dive on business formations today. We want to take a look at how businesses are structured in the United States and what exactly that might mean for you as you get your business off the ground.
Let’s jump in.
Disclaimer: This study is based on U.S. business formations. Apologies to our international readers out there! But we think you’ll find the information here helpful especially if you conduct business with a U.S.-based client, partner, or vendor.
The 5 most common types of business structures in the US
There are many different types of business structures out there. However, we want to take a look at the five most common types, and what that might mean for you.
We’ll give you the pros and cons of the structure. We’ll also let you know who that specific structure might be good for.
Sole Proprietorships
Sole proprietorships are businesses that are owned and run by a single person. In a sole proprietorship, there is no legal difference between the business itself and its owner.
This is the most common way of organizing and forming a business, because it’s incredibly easy to establish and it doesn’t have to cost any money to do so. Freelancers, contractors, and “solopreneurs” often structure their business this way.
For tax purposes, all of the income, losses, and expenses you make from your business are a part of your personal income tax return. You need to report all of that to the IRS on Schedule C submitted via Form 1040.
The IRS taxes all of the profits made from business. Of course, you’re allowed to write off many expenses, including necessary purchases (e.g. office supplies), training (e.g. workshops, courses), and travel costs (e.g. flights, hotels, and conventions).
You won’t have to file a lot of documents. Depending on what service you’ll conduct, you might need to get a state or city license. And if you want to work under a fictitious name, you’ll need to register that with your state, county, or city you’re conducting business in (requirements vary depending on where you are). Other than that, though, you’ll be in the clear.
It’s also worth noting that sole proprietorships doesn’t limit your company to having just one employee. But it may require you to only use independent contractors and freelancers.
Pros
Easy to create. With other business formations, there will be more paperwork, fees, and headaches. With a sole proprietorship, though, you won’t have to file any documents with the government.
Taxes are simpler. Business formation types such as C corporations require you to file two separate forms of taxes: One for your business and another for your personal income tax. Sole proprietorships only require that the business owner file their personal income tax returns. Less work for you and your accountant—which is always a nice thing.
Cheap. This is easily the most inexpensive business formation on the list, since you’re not required to file any documents unless you’re working under a fictitious name. In that case you’ll need to register a Doing Business As (DBA) with your local government. This is considered your “trade name.”
Cons
Liability. As a sole proprietor, you’ll be personally liable for your entire business. This encompasses a number of potentially negative things such as debts or legal issues you run into while conducting your business. If you’re sued and you lose, you alone are responsible for the damages. If we had to point to the biggest downside of being a sole proprietor, this would be it.
Continuity of business. Since you’ll be your own business as a sole proprietor, this also means that your business ends if something should happen to you (e.g. death, injury, incapacitation).
No outside investors. Sole proprietors are not allowed to accept capital and funding from outside investors. That’s less money you could use to hire employees, create products and services, and generally grow your business.
Can’t issue equity. Some businesses are able to issue stock options to stakeholders and employees. Sole proprietorships cannot.
Who is this good for?
Sole proprietorships are great for freelancers, consultants, and other one-person operations. It allows you to get started with your business quickly and with little cost.
If you’re looking to seek funding, however, this would not be a good choice.
Limited Liability Company (LLC)
LLCs are a very common type of business in the United States,and for good reason. Unlike a sole proprietorship, LLCs are separate legal entities from business owners. This means individual owners won’t be liable for any debts and legal issues that might arise as they run their business.
For example, if your business gets sued for millions of dollars and you lose, you won’t have to worry about your personal assets like your house, car, and savings account being seized.
It also means that the company can have several owners (also called “members”). The IRS has rules about the type of business you’re allowed to run since businesses like banks and insurance companies are not allowed to be LLCs.
There is no maximum number of owners an LLC can have either. However, many states offer something called a “single-member LLC” (SMLLC) for an LLC with just one member. So it offers you more liability protection than a sole proprietorship, but you still just have one owner.
The way LLCs are taxed depends on whether or not the owners want to enter into a proprietorship, partnership, or a corporation. Partnerships need to file a partnership tax return and corporations need to file as C or S corporations (we’ll get into that later on).
Pros
Limited liability. You get limited protection from legal issues or debt that your business might incur. Note: That’s limited protection. It doesn’t cover everything (as we go over in the cons).
Tax flexibility. As an LLC, you’ll be able to choose whether you’re taxed as a proprietorship, partnership, or corporation. All have their benefits and drawbacks, but the flexibility is very helpful when making your decision.
Unlimited shareholders. You can offer stock options as an LLC to employees, investors, or stakeholders.
Cons
Limited liability is … limited. If you don’t completely separate your personal and business expenses, you stand the chance of running into legal issues. For example, a judge can rule that your LLC doesn’t fully protect certain assets if you don’t make sure to clearly separate the two worlds. Failure to do so could cost you … well, everything.
Fees, fees, and more fees. With a sole proprietorship, there are few fees if any. However, with an LLC, initial filing fees can vary anywhere from $45 to $500 depending on your state. Plus there are annual filing fees. One catch here though is that you can create an LLC in a state where you don’t live (e.g. a state with lower fees).
Taxes. Proprietors and partnerships are required to pay self-employment taxes up to 7.5% on their share of the profits. S and C corporations don’t have to do this, but they do have to pay taxes up to 7.5% on their salaries.
Who is this good for?
LLCs are good for small businesses that anticipate having some degree of liability and multiple owners and/or employees. It’s a fairly easy process to set up your LLC. Plus, the benefits you have when it comes to tax flexibility and stock options make it very lucrative.
Ultimately, this is an excellent choice for anyone burgeoning small-business owner who wants to establish a company that will remain relatively contained—but offers serious growth potential.
General Partnerships
Partnerships (or general partnerships) are business entities with at least two individuals.who are owners of the business. Like a sole proprietorship, it’s very easy to set up—however, it comes with even more liability since there are more owners.
The members share all profits, debt, and liabilities incurred by the business. This can be a double-edged sword. A rising tide raises all ships—so if your partner performs well, you and your business will benefit from it. However, if your partner doesn’t, then your business will suffer.
Also there’s more liability. Everyone in a general partnership has unlimited liability on the business’s debts and legal issues. If one partner is sued by a disgruntled client and loses, then all the other partner’s personal assets like their home and savings are at risk of being forfeited. Because of this, trust is absolutely paramount when it comes to creating a partnership. If you succeed, your partner succeeds and vice versa. However, if you or your partner fails, then you both will fail.
It should be noted that a subcategory of general partnerships are limited partnerships. These are typically composed of investors and other stakeholders who don’t have nearly as much liability as general partners.
There are also LImited Liability Partnerships, which protect the partners from each other’s potential misconduct. These are great for companies that have multiple professionals acting as a single entity (e.g. law firms).
Pros
No double taxation. General partnerships offer a very lucrative deal in terms of taxes. After all, you don’t have to pay taxes on the business’s profits. Individual partners do have to pay taxes for their personal income from the business. But the general partnership itself isn’t taxed.
Easy to start. General partnerships are incredibly easy to form. In fact, you can form one using just an oral agreement between partners. However, we highly recommend you draft a written contract for legal purposes. Contact an attorney to set up a partnership agreement to do so.
Less fees and paperwork. There are few to no fees incurred when creating a general partnership. There’s also less paperwork when it comes to this formation. As we mentioned, it can literally be formed through a handshake agreement (though we recommend you get it on paper).
Cons
More liability. In a general partnership, you’re not only liable to legal issues that arise with you but your partners’ as well. Depending on how many partners you have, the chances of you running into trouble only goes up. That can put your personal assets at risk.
No continuance. If one of the partners dies or is incapacitated then the partnership is dissolved—and with it, the business itself. This is also the case if one of the partners decides to withdraw from their partnership. If that happens, the entire partnership is dissolved.
Sharing debt. If one of the partners secures credit for the business, the rest of the partners share in that debt. This can create for some very sticky situations, especially if one of your partners gets credit without your knowledge.
Who is this good for?
This is an option for small businesses with few to no employees, but has two or more people who want to start a small business. Honestly, it’s not the best organizational structure out there and we’d recommend going with another option like forming a corporation, an LLP, or an LLC if you can.
C Corporations
C corporations or “C corps” are separate legal entities from the business owner. The C refers to how the entity is taxed, under subchapter C in U.S. internal revenue code.
This subchapter helps ensure that C corps have double taxation. That means that the corporation itself will be taxed on profits and then the shareholders will be taxed on their dividends.
The benefit, though, is that they offer a high degree of liability protection for their owners. After all, they’re a separate legal entity. That means if a disgruntled client sues your C corp, your personal assets are unlikely to be seized.
We mentioned before too that shareholders are taxed on dividends. This is because C corps can issue stocks (and therefore stock options) to shareholders.
All these benefits come with some catches though. For one, C corps are required to have a board of directors. These are designated officers who manage the business. The board of directors are also required to have an annual meeting where they elect their officers. If you’re the founder of a C corp, you must cede control and decision-making power to the board. If that’s an important element for you, definitely take it into consideration.
Pros
Little liability. The biggest boon of a C corporation is the fact that you’ll be protected from personal liability since it’s a separate legal entity. In fact, shareholders are typically only liable for any debt that might be incurred over the course of the business.
Attaining capital. If you’re looking to raise funding from outside investors, C corporations are the way to do it. In fact, venture capitalists typically only fund C corporations. Why is that? Honestly, it’s because your business will have “corporation” as a part of its name. Seriously. VCs are weird.
Continuance. If something terrible should happen to you or a founder of your business, the C corporation lives on and the work will continue. That means everyone who relies on the income brought in by the business can continue to rely on it.
Cons
Double taxation. C corps are taxed twice. Once on the profits, and once again on the shareholder dividends.
Fees, fees, and more fees. You’re going to have to pay filing fees each year in order to keep your corporation registered. You’ll also have to pony up a one-time registration fee.
A lot of formalities. C corporations are required to perform a bunch of little (and, frankly, annoying) formalities such as forming a board of directors, holding annual meetings, adopting bylaws, and more. This can distract from the tasks you want to devote most of your time and energy to.
Who is this good for?
If you’re planning on going public, a C corp is a great way to structure your business formally. It also helps that you have a lot more liability protection since your business will be a separate legal entity from you.
It’s also a good option if you’re seeking funding from venture capitalists. They tend to favor corporations more than other entities because of how legitimate it sounds (I’m being completely serious; VCs are weird folks).
S corporations
S corporations are another type of corporation (and also water is wet!). Just like the previous category, the S refers to subchapter S in the IRS tax code.
S corporations are considered “pass-through entities.” That means they aren’t subject to double taxation, because shareholders report all of the corporate income, losses, and debt on their individual personal tax returns.
S corps are also notable because there are no “owners” of the businesses. Instead, there are those who own shares of stock in the business. You can have more influence over the company if you hold more stocks. However, shareholders aren’t typically the ones who run the company. Rather that’s up to the board of directors (remember them from C corporations?).
Like C corps, S corps are also required to have a board of directors elected by an annual shareholders meeting. The ones elected to the board will be the ones running the day-to-day operations.
The directors in the board also elect the officers (president, VP, treasurer, and secretary usually).
Pros
Pass-through entity. As an S corp, you’ll be able to establish your business as a pass-through entity, which means you won’t experience double taxation. All profits and losses flow through the company and to the shareholders. This is especially lucrative if the company founders invested money into the business, since the losses can be written off in their tax returns.
Less liability. This is another aspect S corps share with their C corp siblings. Since the business is its own legal entity, shareholders are protected from personal liability. As such, there’s a barrier to their assets being seized in the chance there’s a bad court case.
Continuance. The transfer of ownership for an S corp is fairly simple. So you don’t have to worry about the business being dissolved or disorganized in the event or withdrawal.
Cons
Stricter rules. There are a lot of rules that come with creating an S corp. For one, you’re limited in the amount of shareholders—you’re allowed no more than 100. You also need to be a U.S. citizen/resident or be an estate or be a specific eligible trust to be a shareholder in an S corp.
A lot of formalities. Like C corps, you’re expected to have a bunch of formalities, such as the annual meeting of the shareholders and board of directors, as well as the adoption of bylaws.
One class of stock. As an S corp, you’ll only be allowed to have one class of stock. You aren’t allowed to have both common and preferred stock. If you do so, you could have your S corp status revoked.
Fees, fees, and more fees. Like C corps, you’ll be expected to pay a stiff filing fee from $300 to $900 as well as various legal and accounting fees. That doesn’t even get into the annual upkeep fee you’ll have to pay.
Who is this good for?
Bigger businesses that want to be protected against personal liability and double taxation. Also, this is a fit for businesses who are or are expecting a steady amount of income. Those filing and legal fees aren’t going to pay for themselves.
How are businesses in the US Structured? Stats and Facts to know
Those are the five most common types of business formations and structures you’ll see in the United States.
Let’s now dive a little deeper under the surface to see what the numbers behind them look like. Below are a few stats and facts you should know when considering the type of business structure you want to form:
Fact #1: The most popular place to establish a corporation is…
Pop quiz: What state is the home to companies such as Citigroup, JPMorgan Chase, Morgan Stanley, and Goldman Sachs?
No it’s not Wall Street. It’s not even in New York City. They’re all actually based in Delaware—at least on paper.
In fact, they actually all share a single address: 1209 North Orange Street. That’s the home of the Corporation Trust Center in Wilmington, Delaware. Here’s what it looks like.
No, seriously. It’s true. That building that looks like a dentist’s office is actually the legal home of some of the wealthiest corporations in the world. Some 300,000 businesses are registered at the location. Other businesses “housed” there include Apple, General Motors, Google, and American Airlines.
The entire state of Delaware is home to more than 1.5 million business entities. That’s more than one business to every single resident who lives in the first state (pop. 950,000). In 2019 alone, more than 226,000 businesses were formed there. The most popular of those business structures were LLCs:
The reason that Delaware is so popular is because of a set of tax systems and laws that have made it incredibly business friendly (in a legal way!) since the late 18th century. For example, the Delaware Court of Chancery has literal centuries of legal precedent in settling corporate legal suits. They also allow businesses to settle legal disputes with just a judge instead of a jury.
There’s also the “Delaware Loophole,” which allows businesses to declare their revenue in Delaware rather than the state where they actually conduct business. This means they avoid their state’s taxes. It should also be mentioned that Delaware doesn’t tax on a number of different things, like corporate income.
Overall, if you really want to maximize your tax advantages and join a club made up of some of the most powerful corporations in the world, Delaware is your place.
Fact #2: Sole proprietorships are the most popular type of business formation (by a large margin)
Even though LLCs are the most popular type of business formations in the most popular state for Big Business, sole proprietors are the real majority in the United States.
As of 2016, there’s close to 26 million sole proprietors in the country alone, according to the IRS. As a comparison, in 2010 there were only 23 million sole proprietors. And the number increased a TON over the years prior to then (see chart below).
Does this mean you should start a sole proprietorship? Not necessarily. But it does indicate that there are some clear advantages to having a sole proprietorship over an S corp, C corp, or partnership. For example, it’s incredibly easy to start up. There are also likely going to be more in the future with the rise of the gig economy (e.g. Lyft, Uber, Postmates)
Fact #3: C corps are less and less popular each year
You can also see in the chart above that S Corps and partnerships come in second while C corporations fall in third. In fact, the number of C corps seems to be dwindling by about 60,000 C corps each year.
It doesn’t take an economist to figure out why, either. Pass-through entities. S corporations, partnerships, and sole proprietorships aren’t double taxed. Therefore, they’re seen as much more lucrative opportunities for business owners to maximize their profits.
It’s also an indicator of the wider range of economic issues business owners have faced in recent years. After all, since 2009 we’ve seen two different economic recessions and disasters that have absolutely hamstrung entrepreneurs’ ability to make money. It only makes sense, then, that they’ll pursue more lucrative options.
Fact #4: 2020 is a BOOM year for business applications
Did you think that a global pandemic ravaging the world would stop people from applying for businesses?
Well…yeah, I guess I did too. But apparently that’s not the case! In fact, more businesses are being applied for than ever in the United States. 2020 has been an absolute boom year for business applications, with nearly 160,000 businesses applied for since the year began.
Now the increase could be attributed to a few factors. For one, the stimulus bills passed by the U.S. government might have encouraged and incentivized a lot of people who otherwise wouldn’t have started businesses to do so.
Think about it. After you’ve been let go from your job due to the consequences of the pandemic, and the government hands you a $1,200 check, you might feel the urge to use your new time and money to start a business to get some income. Whatever the reasons, the surge of new businesses means that a post-pandemic economic boom is lying in wait.
Conclusion
There are many ways to start a business. However, the most popular way is easily sole proprietorships. Not only is it easy for you to start one but you don’t face the headaches that come with starting a corporation—such as legal and filing fees—as well as the tax disadvantages.
Whatever you ultimately choose, be sure to check back on Quick Sprout for more guidance and information on how to start your business.
Choosing the right business structure for your new venture is a crucial decision. Many business owners lean toward two of the most popular options—LLCs and sole proprietorships.
Each one has its fair share of benefits and drawbacks.
The right one for you and your business will depend on several factors. You’ll need to consider things like the tax implications, startup costs, regulations, liability protection, and more.
If you’re torn between the two, you’ve come to the right place. This guide will provide you with an in-depth explanation of LLCs and sole proprietorships. You’ll learn more about each one’s advantages, potential downsides, and the differences between the two.
What is an LLC?
LLC stands for “limited liability company.”
These are legal entities formed at the state level. When you start an LLC, you’ll have to decide where you want to register it. For most of you, that answer is simple—your home state will almost always be the best option.
LLCs are popular because they combine some of the positive aspects of corporations and partnerships while eliminating some drawbacks of each. Like a corporation, LLC owners and shareholders benefit from limited liability protection (hence the name). LLCs also provide pass-through taxation, like a partnership.
Types of LLCs
There are several different categories within LLCs. Generally speaking, you’ll need to choose one option from each of the following four categories:
Single-Member LLC vs. Multi-Member LLC — As the name implies, a single-member LLC (SLLC) has one owner. The IRS treats SLLCs like a sole proprietorship, in the sense that the owner doesn’t have to file separate taxes (note that this is not always the case at the state level). Partnerships would fall into the multi-member LLC category. Multi-member LLCs must file separate tax returns and have contingencies in place for events like death, split-ups, and irreconcilable disagreements.
Member-Managed LLC vs. Manager-Managed LLC — Most LLCs are member-managed, meaning that the owner (or owners) run the business. Managers (not owners) named in the LLC operating agreement run a manager-managed LLC. This structure allows owners to distance themselves from the company’s operational tasks. Investors who are family members or silent partners may want to form a member-managed LLC.
Regular LLC vs. Professional LLC — Some states don’t allow certain professions to form an LLC. Doctors, lawyers, CPAs, chiropractors, and similar businesses may be required to form a PLLC (professional LLC). Only licensed professionals can be listed as members of a PPLC.
Domestic LLC vs. Foreign LLC — Domestic LLC refers to the state where the LLC is formed. For example, if an LLC is registered in Colorado and does business in Colorado, it’s a domestic LLC. But if that same business is registered in Nevada (to do business in Colorado), it’s operating as a foreign LLC. Many owners look to form LLCs in “tax-friendly” states. But this usually requires the formation of two LLCs—one in the state of registration and another in the business owner’s home state (a foreign LLC).
All LLCs will have one of the designations from each bullet listed above. For example, you could have a domestic, single-member PLLC that is member-managed.
What is a Sole Proprietorship?
Sole proprietorships are a bit more straightforward than an LLC.
A sole proprietorship is owned and run by a single person. This business structure is unincorporated, meaning that the company is not considered a separate legal entity. At both the federal and state levels, business owners and sole proprietors are viewed (and taxed) as one and the same.
According to a recent study, there are more than 23 million sole proprietorships in the United States. This number represents 73% of all business structures in the country—making it the most popular organizational structure.
Many sole proprietors are also independent contractors (freelancers), although the two terms are not synonymous. Independent contractors work for another business, but not as an employee.
By default, the legal name of a sole proprietor’s business is their own name. Many owners choose to register a DBA (doing business as) name to add professionalism to a sole proprietorship.
For example, let’s say you’re a sole proprietor named Joseph Johnson that provides marketing consulting services. You could register a DBA called “JJ Marketing Associates” to avoid using your name for business purposes, marketing purposes, or as the public-facing name of the company.
Even with a DBA, the state and federal government doesn’t recognize your sole proprietorship as a separate entity.
Similarities Between LLCs and Sole Proprietorships
When comparing LLCs and sole proprietorships side-by-side, it’s important to recognize that these two business structures share some commonalities.
Here’s a quick list of the similarities between LLCs and sole proprietorships:
Income and expenses must be reported in Schedule C Form 1040.
Net income is taxable, regardless of whether or not cash is withdrawn from the business.
They have similar rules for tax deductions (like home office expenses and health insurance premiums).
An EIN (employer identification number, also known as a tax ID number) must be obtained if employees are hired.
Any industry-specific business licenses and permits at the state and federal levels are still required.
LLCs and sole proprietors both have the option to register a DBA (doing business as) name.
As you can see, from taxation to paperwork filing, LLCs and sole proprietorships do have a handful of things in common.
Differences Between LLCs and Sole Proprietorships
Now it’s time to compare the differences between LLCs and sole proprietorships. There are more differences between these business structures than similarities. Rather than just listing bullet points, we’ll take a closer look at various categories you should evaluate. This will make it much easier for you to decide which one is right for your business.
Liability Protection
As the name implies, an LLC limits the liability of owners. LLC owners won’t be held personally liable for business debts or liabilities. If your company goes bankrupt, creditors can’t go after your personal assets (only business assets), and they are also protected in the event of a lawsuit against your company.
Since sole proprietorships are not separate entities, the owners are personally liable for any debt or legal action against the business. You could even be held responsible for any liabilities caused by an employee.
Management Structure
One or more people can own an LLC. These are known as either single-member LLCs or multi-member LLCs. In most cases, the owners will also manage the company (member-managed LLCs). However, managers can be appointed to handle the day-to-day operations (manager-managed LLCs).
The management structure of an LLC will be described in an official operating agreement, which is a legal document created during the formation process.
Sole proprietorships are simpler. The owner is the boss and in charge of everything. Sole proprietors don’t have to deal with any partners, managers, or other members.
Business Funds and Personal Funds
LLCs must have separate bank accounts for business activity and personal use. This includes separate credit cards, debit cards, checking accounts, and savings accounts. Mixing personal and business finances can result in serious penalties.
Sole proprietors do not have to maintain separate accounts for business and personal use. In the eyes of the law, sole proprietors and their businesses are one and the same. With that said, most accountants frown upon this practice and recommend using a separate account for your business. In the event of an IRS audit, this separation will make your life significantly easier. While this isn’t a fact per se, it’s assumed by many that auditors are more likely to scrutinize your records if you mix personal and business finances.
Business Name Registration
Depending on the state, the acronym “LLC” or other variations must be included in your business’s official name. Other examples include L.L.C., Limited Liability Co., Ltd Liability Co., and more. These are known as “entity designators.”
You’ll be asked to select an entity designator when you’re registering a company name. Here’s what this looks like if you’re going through that process on Swyft Filings:
Sole proprietors are not subject to these name requirements. By default, the name of a sole proprietorship will be the business owner’s actual name. However, they have the option to register a DBA (doing business as) name in their state.
LLCs can register a DBA as well.
Tax Implications
By default, LLCs are subject to pass-through taxation. The owner of an LLC has the tax liability “passed through” to their personal tax return. In short, earnings are only taxed once. However, LLCs can choose to be taxed in many different ways. This flexibility gives them the option to be taxed as a corporation, partnership, or sole proprietorship.
Similar to an LLC, sole proprietors will also benefit from pass-through taxation. Business income will be reported on the sole proprietor’s personal tax returns. Sole proprietorships are only required to pay taxes on profits (as opposed to the full income of the business). As a sole proprietor, you won’t have the option to be taxed as a corporation or partnership.
Startup Process
The requirements to register an LLC will vary slightly from state to state. But generally speaking, you’re required to file articles of organization and pay a filing fee. LLCs are required to maintain a registered agent and file annual reports with the state.
It can take weeks to form an LLC. Most people hire a lawyer or use an online business formation service to handle the paperwork and filing on their behalf.
There is no formal process required to form a sole proprietorship. However, depending on your business, you might be required to obtain a license or permit (rules vary by state). Make sure to check your state’s individual requirements, typically listed on your state government’s website.
Funding
Many businesses require capital to get up and running. Most lenders won’t approve loans for business applications if you don’t have a separate business checking account. So, LLCs might have more access to certain types of loans. However, it can be challenging to obtain a startup loan if your company has no credit. Sole proprietors with good credit could take out a personal loan or line of credit.
LLCs have an easier time taking on investors. In contrast, most investors won’t invest in a single person unless a separate legal entity is formed.
LLC Pros and Cons
Now that we’ve had a chance to compare the similarities and differences between LLCs and sole proprietorships, it’s time to take a closer look at the pros and cons of each.
LLC Advantages:
Liability protection against business debt, lawsuits, and personal assets
Higher level of credibility
Flexible tax options
Easier for multiple members and investors
Flexible management structures
Easier access to loans, financing, leases, and more
Sole proprietorships have their fair share of perks. But do those pros outweigh the cons? Let’s take a closer look:
Sole Proprietorship Advantages:
Easy to start
No formal registration requirements with the state
Owner has complete control of the business
No directors, members, or complicated management structures
Owner gets all business profits
Inexpensive to form
Business is not taxed separately from the owner
Sole Proprietorship Drawbacks:
No liability protection
Limited financing options
No taxation flexibility
Difficult to hire employees
Owner is responsible for company losses
Business licenses and permits are still required (depending on state and industry)
LLC vs. Sole Proprietorship: Which is Right For Your Business?
With all of this in mind, it begs the final verdict—which one is better, an LLC or a sole proprietorship?
That question can only be answered on a case-by-case basis. As previously mentioned, sole proprietorships are the most common business structure in the United States. That’s because they are easy and inexpensive to start. However, sole proprietors don’t have any liability protection. Since the business is not viewed as a separate entity, your personal assets are not safe from lawsuits or business debt.
LLCs require more work to start and are also subject to costs that don’t apply to sole proprietorships.
However, many business owners feel that the benefits of an LLC outweigh the cons. Personal liability protection is the number one advantage of starting an LLC. You can also leverage flexible tax options, different management structures, and more.
If your business has any risk for debts or lawsuits, you’ll want to protect yourself with an LLC. But if you’re running a low-risk company like a small personal blog, you can probably get away with staying a sole proprietor.
Always consult with an accountant and an attorney before determining the best business structure for your unique situation.
But this guide should be used as a reference to help keep you informed and steer you in the right direction.
Rocket Lawyer is one of the most popular and reputable online legal services in the U.S.
The platform is best known for its extensive library of legal documents, forms, and contract templates. It’s a quick, easy, and affordable way for anyone to get legal advice from qualified attorneys.
Rocket Lawyer also provides business formation services for LLCs, C-corps, S-corps, and nonprofits in all 50 states.
Since launching in 2008, more than 20 million people have used Rocket Lawyer’s legal services. Is Rocket Lawyer right for you and your business? Continue reading to find out.
Rocket Lawyer offers a wide range of services for individuals and businesses alike. From estate planning to lease agreements and divorce settlements, they have legal documents and attorney services for basically any category you can think of.
For the purposes of this guide, we’re going to focus on the business formation services offered by Rocket Lawyer. These formation services can be segmented into three main categories—LLC services, incorporation services, and registered agent services.
We’ll take a closer look at each one to help you determine if Rocket Lawyer is right for you.
Rocket Lawyer LLC Services
If you’re starting an LLC and want to avoid the hefty costs associated with hiring a traditional lawyer, Rocket Lawyer is a cost-effective alternative.
Getting started is easy. Just answer a handful of simple questions about your business, and Rocket Lawyer will handle all of the paperwork for you. They’ll also take care of the LLC filing on your behalf.
Once the process is complete, you’ll be able to access the LLC documents from your Rocket Lawyer account. Hard copies will be sent to you as well.
Another benefit of using Rocket Lawyer to form your LLC is the expertise included with your service. Rocket Laywer’s LLC specialists have worked with thousands of businesses, so they’ve seen it all. If you have questions or need some extra assistance during the process, those experts are just a phone call away.
Answering the questions and completing your order online takes just a few minutes.
Choose your state of formation, pick a company name, provide basic contact information, and fill in a few other simple form fields. During this process, you’ll have the opportunity to rush your order if you need to form the LLC ASAP. Rush filing fees and processing times vary from state to state.
You can also use Rocket Lawyer to get your tax ID number (EIN). You’ll need to have one, so it makes sense just to get it now. The EIN add-on costs $59.99.
Rocket Lawyer hits you with a few upsells during the order process for your LLC. You can skip most of these. They also offer registered agent services for $149.99 per year ($111.99 with the membership discount). We’ll cover these services in greater detail shortly, but this is definitely something you’ll want to add.
The LLC formation service costs $99.99 + state fees. But you can get it for free when you sign up for a Rocket Lawyer’s premium membership.
Take a look at this sample checkout page for an LLC in Washington:
As you can see, the membership discounts will automatically be applied to your order when you sign up. The $99.99 is deducted, and the registered agent service is discounted as well.
Most people go with the membership option. It comes with other perks and legal services your business will need after the LLC is officially formed. For example, you can ask lawyers free legal questions and get free 30 minute consultations on new legal matters. These services usually start at $49.99 per question and $59.99 per consultation, so the membership offers a tremendous value to business owners.
Rocket Lawyer should be a top consideration for anyone who wants a fast and affordable way to form an LLC online at the end of the day.
Rocket Lawyer Incorporation Services
In addition to LLCs, you can also use Rocket Lawyer to form an S corporation, C corporation, or nonprofit corporation.
The incorporation services are nearly identical to the LLC services. You’ll answer a few simple questions about your business to get started. The questions will look slightly different for corporations, but it’s still the same general information.
You’ll also have access to the incorporation experts at Rocket Lawyer if you have questions or need some extra help during the signup process. It’s normal to need guidance, especially if you’ve never done this before. Don’t be afraid to take advantage of their expertise.
Rocket Lawyer will help you get organized with the financial aspect of your new corporation as well. You can provide the initial number of stocks you want to issue and those stocks’ initial values. You’ll then add information about your corporation’s shareholders, including their equity percentage and personal details. Rocket Lawyer will use that information accordingly on your incorporation documents.
You can include information about additional directors of the corporation during the order process, too.
Rocket Lawyer can also handle your S-corp election form while filing your documents. This extra incorporation service costs $69. The fee is definitely worth the convenience if you want to be taxed as an S corporation.
If you want your incorporation documents filed immediately, you have to pay extra to expedite the process. The exact fee and processing times will vary depending on your state of formation.
For example, California’s standard processing time is 5-7 business days ($120). But you can expedite the order for 1-2 business days and pay $560. Is it really worth more than 4.5x the standard fee? That’s for you to decide.
You can add an EIN (tax ID) to your order for $59.99. Getting this on your own directly from the IRS is free, but it is easier to just have Rocket Lawyer do it for you and get everything in one place.
Rocket Lawyer also offers a customized “corporate kit” for new corporations. For $99, you’ll get:
Stock certificates
Custom embossed binder with corporation name and matching clip case
Custom corporate seal
Sample business forms
This is a “nice-to-have” item but not a requirement to incorporate.
The final step of the process is deciding whether to use Rocket Lawyer as your registered agent. This additional service costs $149.99 per year ($111.99 for members).
Again, you can avoid the $99 incorporation service fee by signing up for a Rocket Lawyer premium membership.
Between the quick setup, low cost, and ongoing benefits, Rocket Lawyer’s incorporation services should definitely be considered if you’re ready to incorporate.
Rocket Lawyer Registered Agent Services
Rocket Lawyer provides registered agent services in all 50 states. If you’re using them to form an LLC or corporation, adding this service is a no-brainer.
Your business needs a registered agent, and this is definitely something you don’t want to do on your own.
Here’s a brief explanation of what is included as part of these services:
Keep your personal information private (the RA will be used for public records)
Official point of contact for legal and tax notifications
Online access to legal notices
Fast email notifications
Acceptance and notice for any service of process
Compliance ensured
The service costs $149.99 per year. You can get it for the discounted rate of $111.99 with a Rocket Lawyer premium membership.
If you’re using Rocket Lawyer to form your business, I strongly recommend using the Registered Agent service as well.
Overall Pricing and Value
Rocket Lawyer’s pricing structure is a bit unique compared to other similar services on the market today. In addition to the standalone services, they offer a premium membership, where members have access to discounts and freebies.
Let’s take a closer look at what premier members get for $39.99 per month:
Free business formation (for new members, 25% off thereafter)
25% off registered agent services (normally $149.99)
Free legal documents (normally $39.99 per document)
Free document defense (normally $9.99 per document)
Free legal questions (normally $49.99 per question)
Free 30 minute legal consultations (normally $59.99 per consultation)
Up to 40% off Rocket Lawyer on-call attorneys
The membership is also free to try for seven days.
In short, you can get the business formation cost waived (excluding state fees) when you sign up for Rocket Lawyer Premium. If you’re planning on using any additional services after your initial business formation, the membership cost pays for itself pretty quickly, especially for legal documents and consultations.
But if you just want to use Rocket Lawyer for the business formation package and never plan on using the other services, you probably don’t need the membership.
User Experience
Using Rocket Lawyer to form your business is incredibly straightforward. I went through the process several times for different entity types, states, and scenarios. It never took more than five minutes to answer the questions.
Once you complete the signup forms, just sit back and relax while Rocket Lawyer handles the rest.
All of your LLC or incorporation documents will be available online for you to access and download. Rocket Lawyer will also send you a hard copy of those documents in the mail.
Creating legal documents using the templates provided by Rocket Lawyer is a breeze, too. They have contracts and documents for everything, which is extremely useful for any business owner.
They also recently came out with a new feature, RocketSign, that offers electronic signatures on documents from anywhere.
The electronic signature capabilities won’t make or break your decision to use Rocket Lawyer for business formation, but these extra perks definitely add value if you’re on the fence.
Customer Support
Rocket Lawyer’s support team is exceptional. I love the fact that you can call them if you need help during the signup process or at any other point.
It’s common for new business owners to have questions as they are forming an LLC or incorporating. The experts at Rocket Lawyer can put your mind at ease.
Representatives are available via phone or live chat from 6 am to 6 pm, Monday through Friday.
With a Rocket Lawyer membership, you’ll also get free 30-minute legal attorney consultations for every new legal matter. If you just have a quick legal question, you can ask a Rocket Lawyer attorney for free as well.
It’s an excellent option for anyone that wants to form an LLC or corporation. They also provide registered agent services, legal documents, attorney consultations, electronic signature capabilities, and tons of other useful online legal services.
Rocket Lawyer’s reputation and reliability speak for itself with 12+ years of experience, and more than 20 million clients served.
You can quickly and easily become a Rocket Lawyer premium member to form your business for free and benefit from great discounts on other services.
Most businesses need an EIN to operate. If you’re starting a new business, getting an EIN should be at the top of your to-do list.
Think of an EIN like a social security number—but for your business.
You need a social security number to rent or buy a house, get a job, and open a personal bank account. EINs are just like that. You won’t be able to hire employees, form certain entities, or open a business checking account without an EIN.
Fortunately, getting an EIN is relatively simple. There are several different ways to do it, and you can even get an EIN for free.
Not sure if you need an EIN? Don’t know how to get one? You’ve come to the right place. This guide will walk you through everything you need to know about getting an EIN for your business.
What is an EIN?
The acronym stands for “employer identification number” and is a type of taxpayer identification number (TIN). EINs get issued by the IRS to business entities like LLCs and corporations.
The primary purpose of these unique nine-digit numbers is for tax reporting. But most banks, credit card companies, and vendors will require your business to have an EIN before allowing you to open an account or working with you.
People often confuse EINs and social security numbers (SSNs) with each other, as they are both nine-digit government-issued identification numbers. But the formatting for an EIN is different from an SSN. EINs start with two digits, followed by a hyphen and then seven more (12-3456789). SSNs follow a three-two-four digit sequence, separated by two hyphens (123-45-6789).
EINs are often referred to by many different names. Here are some common synonyms for EIN that you’ll see in different contexts:
EIN
Tax ID number
Federal tax number
Federal tax ID
Federal employer identification number
Employer ID number
If you see any of these terms on a form, just know that they all refer to an EIN.
Does Your Business Need an EIN?
According to the IRS, this is the general criteria used to determine if a business needs to have an EIN:
Does the business have employees?
Does the business operate as a partnership or corporation?
Does the business file tax returns for employment, excise, or alcohol/tobacco/firearms?
Does the business withhold taxes (other than wages) paid to non-resident aliens?
Does the business have a Keogh plan?
Is the business involved with certain trusts, IRAs, Exempt Organization Business Income Tax Returns, estates, real estate mortgage investment conduits, nonprofit organizations, farmers’ cooperatives, or plan administrators?
If you answer “yes” to any of these questions, the IRS says you need to have an EIN. However, it is important to note that a business of any size, even a single-member LLC, can get an EIN.
Let’s take this one step further and look at the EIN requirements for different entity types. Keep in mind, just because you’re not required to get an EIN doesn’t mean you shouldn’t.
Sole Proprietorships
Sole proprietorships without employees are not required to obtain an EIN if they answer “no” to all of the other criteria listed above. Any sole proprietor with employees is required to get an EIN.
In many cases, sole proprietors will still need an EIN to open a bank account or do other business-related tasks (even though the IRS doesn’t require it). Without an EIN, sole proprietors are forced to use their personal SSN on 1099 forms and other business documentation, which ultimately exposes your risk to identity theft.
Single-Member LLCs
Single-member LLCs without employees are not required to get an EIN. Again, this is under the assumption that the LLC does not meet any other IRS criteria (such as excise tax, Keogh plans, etc.). Any single-member LLC with employees is required to obtain an EIN.
Similar to sole proprietorships, it’s still recommended that you get an EIN for your single-member LLC, even though the IRS does not technically mandate it.
Partnerships and Multi-Member LLCs
If your business is structured as a partnership or multi-member LLC, you are required to obtain an EIN.
You’ll have to file a partnership return and provide K-1 tax forms to all members of the LLC. You must have an EIN for this type of reporting and entity structure.
Corporations
The term “corporation” can refer to several different entity types. The most common entity types are S corporations, C corporations, and nonprofits, all of which are required by the IRS to have an EIN for tax purposes.
In short, if you are incorporating your business, you need an EIN.
Trusts and Estates
In some instances, EINs are used for certain types of trusts and estates. But for the purposes of this guide, we’ll stick to diving into EINs for businesses only.
Reasons to Get an EIN For Your Business
Aside from the government mandates, there are other reasons why you should get an EIN. So, for those of you who fall into the “not required” categories, here are some other scenarios where an EIN might be necessary:
Opening a business banking account (most banks will require an EIN)
Building business credit to qualify for loans
Protecting you from identity theft (instead of using your SSN for business purposes)
Applying for a business credit card
Applying for a business line of credit
Applying for certain business licenses
1099 forms (instead of SSN)
Establishing credibility as a freelancer or independent contractor
Establishing trust with new vendors
Avoiding tax penalties
Having more options for retirement plans
As you can see, EINs go far beyond tax requirements. Remember when we said that a single-member LLC is not always required to have an EIN? Take a look at this business checking application from US Bank:
In this case, you wouldn’t be able to open a business bank account without an EIN. This means you can’t separate your personal expenses from business expenses, which may lead to a completely new set of problems down the road.
Getting an EIN from the beginning (even if you don’t actually need one) can also help your business grow in the future.
For example, let’s say you’re currently a sole proprietor and handle all business operations on your own. But you start to get more work and need to hire an employee. You won’t be able to legally hire anyone until you obtain an EIN. Rather than waiting and potentially encountering delays in the process, it’s better to be proactive and get an EIN while you’re setting up your business entity. This way, you’ll be able to hire people when you’re ready without having to take extra steps.
EIN Eligibility and Requirements
Now that you understand who needs an EIN, what they’re for, and why you need one, there’s one more thing to know before you apply. Just because you need an EIN doesn’t necessarily mean that you’re eligible to get one (but most people are).
According to the IRS, these are the eligibility requirements for obtaining an EIN:
Your business is located in the US or within a US territory
The applicant must have a valid taxpayer identification number (usually their social security number)
Each responsible party is limited to one EIN per day
A “responsible party” is defined as the person who owns or controls the entity (a natural person, not an entity).
How to Get a Free EIN (Employer Identification Number)
Applying for an EIN is easy. You can apply directly with the IRS to get a free EIN, using one of the following methods:
The IRS requires that you complete the application in one sitting. So, you can’t start, save your progress, and then finish at a later time. Your session automatically expires after 15 minutes of inactivity. If this happens, you’ll need to start over.
I like the online application because it’s so straightforward. You just have to provide some basic details about your business, including:
State or territory where the business is physically located
Reason for applying (to hire employees, banking purposes, new business, etc.)
Information about the “responsible party” (you, in most cases)
You can apply online during business hours from 7 a.m. – 10 p.m. EST, Monday through Friday.
You’ll receive your EIN immediately after the application has been verified, and can use it to open a bank account or apply for a business license right away. However, it takes up to two weeks for the EIN to become an official part of the IRS’s records. You won’t be able to file an electronic tax return or make an electronic tax payment until it is in their official records.
Apply by Fax
For those of you who can’t or don’t want to apply online, you have the option to send your application via fax. You’ll need to print and complete IRS Form SS-4.
This form is available online and there are no time constraints for when you can send the fax (unlike the online form).
Make sure you read the form carefully. If you answer something incorrectly or make a typo or error, it can cause significant delays in the process. Error-free forms generally take about four business days to process.
If you’re located in one of the 50 states or Washington DC, send the fax to 855-641-6935. For those of you without a legal residence, principal office, or principal agency within the US states, fax Form SS-4 to 855-215-1627 (within the US) or 304-707-9471 (outside the US).
Apply by Mail
A mailed application will take the longest to process. But if you’re not in a rush, you can print and complete Form SS-4 and send it to the following address:
Internal Revenue Service Attn: EIN Operation Cincinnati, OH 45999
The mailing address remains the same regardless of your physical location. However, if you don’t have a legal residence or a principal address in the US, change the attention line to “Attn: EIN International Operation” instead.
Apply by Phone
If you’re applying for an EIN and your business is located outside of the US, you cannot apply online. You must call the IRS directly to obtain an EIN as an international applicant.
This option is ONLY available to international applicants. The IRS does not take phone applications for businesses physically residing in the US anymore.
To apply for an EIN by phone, call 267-941-1099 between 6 a.m. and 11 p.m., Monday through Friday (the number is not toll-free).
Alternative Ways to Get an EIN
For those of you launching a new business, you have another option for obtaining an EIN.
In order to officially start your business, you need to file the appropriate documents with your state, name a registered agent, and go through some additional formalities. Many people choose to use a business formation service for this. These online services will handle all of the appropriate filings on your behalf, regardless of your entity type.
While signing up for a business formation service, you can easily add an EIN filing option to your plan. The provider will obtain one from the IRS on your behalf using the same information you’re providing to form your LLC or corporation.
There’s usually an added, one-time fee for this service, but you’re paying for convenience. It’s as simple as checking a box and letting a third-party handle the rest for you.
Here’s an example from Inc Authority (a popular business formation service):
Adding an EIN to your order will look a little different, depending on the formation service you use. But everyone offers one, and it’s easy to select when you’re signing up. Some business formation service plans will even include an EIN in your package.
How Much Does an EIN Cost?
Applying for an EIN is 100% free—as long as you apply directly through the IRS. The four methods discussed earlier in this guide (online, fax, mail, phone) are all free for anyone.
If you use a third-party service, there’s usually a charge on top of the business formation base cost. Here’s a list of EIN prices from the best business formation services on the market today:
These are the current base rates for obtaining an EIN from those providers. In some cases, EINs will come included in certain formation plans or premium packages.
Conclusion
Employer identification numbers (EINs) are required for many businesses to operate. Even if your particular business isn’t required by law to obtain an EIN, it’s still in your best interest to get one.
How do you get an EIN? It’s easy—just follow the instructions in this guide.
Getting an EIN from the IRS is free and easy. But if you don’t want to deal with the IRS, you can always use a business formation service and let them handle the application on your behalf.
Incfile is one of the most popular business formation services on the web. It’s a fast and easy way for anyone to start a business without the hassle and costs associated with hiring an attorney.
Over half a million businesses have launched with Incfile since 2004.
As a pioneer in the business formation industry, Incfile uses modern technology and provides exceptional customer service to entrepreneurs who need assistance in registering a new business.
This service provider is best known for its rock-bottom prices. In fact, you use Incfile to form your business for free (more on that later).
Not sure if Incfile is right for you? Fortunately, you’ve come to the right place. We’ll break down the service offerings, prices, packages, and everything else you need to know before making a decision. You’ll even learn more about what real customers are saying about Incfile.
Incfile’s business formation services can be segmented into three main categories—LLC services, incorporation services, and registered agent services. We’ll cover each of these in greater detail below.
Incfile LLC Services
When it comes to forming a limited liability company (LLC) with Incfile, simplicity is the first thing that comes to mind. In just a handful of simple steps, they walk you through the entire process online.
Whether you’re looking for just the basics to get you started or a customized LLC kit, Incfile has you covered.
Every LLC package from Incfile comes with the following:
Unlimited company name availability searches
Articles preparation and filing
Next-business-day processing
Registered agent services (free for one year)
You can get all of these services from Incfile for free at the lowest pricing plan; just pay the state fees. This simple and inexpensive setup is why so many entrepreneurs turn to Incfile for LLC formation services.
There are three LLC packages for you to choose from:
Silver — $0 + state fee
Gold — $149 + state fee
Platinum — $299 + state fee
If you’re on a tight budget and just want the basic services from the bullet list above, you can get that Silver package without paying a dime to Incfile. As previously mentioned, this even comes with a free year of registered agent services.
With that said, the Silver package doesn’t come with an employer identification/tax ID (EIN). This is definitely something you’ll need, so it makes sense to get it directly from Incfile. You can add that to your Silver package for $70.
Alternatively, the Gold plan comes with several additional premium services. This includes an EIN, preparation and filing of IRS form 2553, an operating agreement, banking resolution, express shipping, and a business formation kit.
The Platinum package comes with added perks like business contract templates, free domain name, email service, expedited filing, and a better version of the business formation kit.
Not all of the Platinum features are really necessary, especially the free domain and email service. These are things you should be getting elsewhere.
The state fee varies depending on your location. It’s easy to see those exact figures directly on Incfile’s website when you select your state. All of the pricing is straightforward and transparent.
Incfile can also provide you with assistance for trademarks, a Certificate of Good Standing, DBA (doing business as) names, and business license research.
The fact that you can use Incfile to register your LLC for free is probably the best value you’ll find on the web. With that said, I’d recommend the Gold package, as it truly comes with everything you’ll need to form your LLC, including an EIN.
Incfile Incorporation Services
Incfile also has exceptional incorporation services. You can use them to form a C-Corporation, S-Corporation, or a nonprofit corporation.
Like the LLC services, the entry-level Silver package from Incfile is 100% free for the incorporation services as well. So regardless of the entity type you need to form, all you’ll have to pay is the state fee (prices vary by state).
The free plan comes with preparation and filing for the articles of incorporation and unlimited name availability searches.
You’ll also get registered agent services free for the first year.
With that said, the free plan does lack some of the services you’ll need to officially incorporate. The Gold package, which costs $149 plus state fees, includes an EIN, IRS Form 2553, corporate bylaws, and more.
The Gold package also comes with a business formation kit and express shipping. So it’s really a great value. Incfile has a Platinum package ($299 + state fees). This comes with expedited filing, faster shipping, a free domain, and email service.
I also like Incfile’s incorporation services because they have so much information about each entity type. Even if you’ve never formed a C-corp, S-corp, or nonprofit, you can basically learn everything you need directly from Incfile’s website—for free.
Furthermore, there’s a dedicated learning center with research tools, guides, and seemingly endless resources for incorporations.
If you’re launching a C-Corp, S-Corp, or nonprofit, Incfile is a cost-effective alternative to hiring a traditional lawyer to handle this for you.
Incfile Registered Agent Services
Incfile’s registered agent services are available in all 50 states. They’ll help you manage crucial legal documents and prevent errors with your filings.
Every LLC or corporation is required to have a registered agent. So if you’re using Incfile’s incorporation services, it makes sense to use their registered agents as well. However, existing businesses can also take advantage of registered agent services from Incfile. They make it easy for you to change registered agents, regardless of the state you’re operating in.
Here’s a quick overview of the services and benefits you’ll get from an Incfile registered agent:
Always available during business hours
Available to receive state and IRS mail correspondence
Available to receive documents and legal proceedings on behalf of your LLC or corporation
Email and SMS alerts whenever documents are received
Automatic mail forwarding for legal correspondence, documents, and other information
My favorite part of Incfile’s registered agent service is the online dashboard.
You can manage everything you need online, at a glance, from anywhere with Internet access.
If you’re using Incfile to form an LLC, S-Corp, C-Corp, or nonprofit, the registered agent services are free for the first year. Then the rate renews at the regular price of $119 per year thereafter.
Customers rave about Incfile’s registered agent services. After reading through testimonials and reviews on their website and third-party platforms, it seems like the registered agent service is why business owners trust Incfile for the long haul.
While it’s obviously great to have the free registered agent initially, so many customers mention how they have been using Incfile for years—long after the complimentary year has expired. So when businesses have the chance to look elsewhere after that first year, they continue to stick with Incfile, which is extremely encouraging.
From helping you avoid missed deadlines, fines, and non-compliance issues to managing paperwork and responding quickly in the event of a lawsuit, Incfile’s registered agent services are top-notch.
This gives you the opportunity to focus on your business while they handle the little things. If something important arises, you’ll be notified by SMS or email immediately.
Overall Pricing and Value
We’ve mentioned Incfile’s prices throughout this guide. But I want to take a moment to provide you with a more in-depth explanation of the packages and rates.
Whether you’re forming an LLC or corporation, these are the plans you can choose from:
Silver — $0 + state fee
Prepare and file articles of organization
Unlimited name availability search
Free registered agent (for first year)
Statement and resignation of organizer
Statement and resignation of the incorporator**
Online status tracking
Online document access
Lifetime company alerts
Standard state filing
Electronic document delivery
Gold — $149 + state fee
All Silver services
EIN/tax ID
Operating agreement
IRS form 2553
Operating agreement
Banking resolution
Express shipping
Unlimited phone and email support
Corporate bylaws**
Corporation organizational meeting minutes**
Platinum — $299 + state fee
All Gold services
Business contract templates
Free domain name
Free email service
Expedited filing
**Services specific to corporations
Overall, the Gold package provides the best value. Things like an EIN and more are required to form an LLC or incorporation. That doesn’t come standard with the Silver plan.
I can see why some people would be enticed by the “free” aspect of the Silver package. But the $149 plus state fees for the Gold plan is such a small price to pay for starting a business.
Most people won’t need the Platinum package. The free domain and email service shouldn’t sway you at all. Those are services you should be getting directly from a web hosting provider, not a business formation service. The only real selling point is expedited filing, if you’re in a serious rush.
User Experience
Using Incfile is seamless. Getting started is as simple as navigating to the website, choosing your entity type (LLC, C-corp, S-corp, or nonprofit), and selecting your state.
Incfile will automatically generate your state fees based on the entity you want to form.
Once you sign up and choose your plan, everything is straightforward from there. You’ll enter details about your business and manage it all from Incfile’s intuitive dashboard.
You can track the status of the formation process online. Once you’re officially registered, you can use the dashboard to access crucial documents. Your registered agent will notify you via SMS or email if something requires your attention (like an urgent piece of legal mail).
Overall, the interface is really clean, and it’s easy for anyone to navigate and figure out.
Customer Support
One other key of choosing the Gold plans from Incfile is that you get unlimited phone and email support. Whether you need help finding a document or just have a general inquiry, the Incfile team will be there to provide assistance.
Phone support is available from Monday to Friday, 9 am – 6 pm CST.
As previously mentioned, Incfile has outstanding registered agent services as well. Due to the human touch associated with this service, I think it’s worth mentioning in the customer support category.
Your registered agent can receive documentation on your behalf, ensure you stay compliant, forward your mail, and alert you if something comes up.
Most of the online reviews from existing customers say great things about Incfile’s support. With that said, there are a handful of people who weren’t exactly satisfied. I saw a few recent reviews from people who said they had trouble reaching an agent. But those seemed to be outliers compared to the bulk of reviews.
Final Verdict
If you need to form an LLC, C-Corp, S-Corp, or nonprofit corporation, Incfile should definitely be taken into consideration.
They provide a cost-efficient alternative to hiring a lawyer. Some of their services are completely free; you just have to pay the state fees.
When you sign up for one of Incfile’s business formation plans, you’ll also get registered agent services free for one year. It’s tough to pass up on a value like that.
Cash is slowly becoming obsolete. The cashless trend is forcing more and more businesses to start accepting credit credits.
A recent survey found that just 16% of Americans say they always carry cash. 58% of respondents plan to stop using cash altogether in the near future.
Whether you’re launching a startup or you’ve been in business for decades, accepting credit card payments has become crucial in today’s day and age. For online businesses and ecommerce stores, credit cards are the only reasonable way to get paid.
Ready to get started? I’ll teach you how to start accepting credit card payments for your business in just a few simple steps.
What to Expect When Accepting Credit Card Payments
Accepting credit cards is easy. The bulk of the effort will be spent choosing a processor and setting up your equipment.
The best part about accepting credit cards is convenience. As previously mentioned, consumers are carrying less cash (if any). By taking credit cards, you’ll appeal to far more customers.
Credit cards improve efficiency as well, especially for in-person payments. They can help eliminate long lines and reduce the time each customer spends at the register. A quick swipe, dip, or tap is much easier than counting cash and making change.
It also helps minimize human error, such as incorrect change counted. Card payments help prevent cash theft by employees as well.
Recent world events have also increased the demand for touchless payments. Consumers often use smartphones, wearables, digital wallets, and tap-to-pay credit cards to purchase goods and services. This helps prevent the spread of germs during checkout.
Modern credit card processing systems make life easier from a bookkeeping standpoint as well. The majority of these solutions sync with accounting software to minimize manual journal entries. These systems can even integrate with software for things like inventory tracking and more.
The Bad
The most frustrating part about accepting credit cards is the fees. Between the card network, processor, issuing bank (cardholder’s bank), and acquiring bank (your bank), there are many players associated with each credit card transaction.
Each party charges a small fee for their role in the process, which is ultimately paid by the merchant.
Depending on your contract’s pricing structure, you could be paying different fees for each transaction, which makes it tough to predict your total processing costs. For example, an ecommerce purchase paid with an American Express card could be more expensive than an in-person payment with a Visa—even if the two customers had the exact same transaction total.
Corporate credit cards, consumer cards, and debit cards could all have different fees.
Credit card processing requires updated and stable hardware and software. If you have problems with a terminal or your internet connection is unstable, you might be unable to process certain transactions. Setting up specific hardware can be a time-consuming task as well.
Chargebacks are another paint point associated with accepting credit cards. A chargeback occurs when a cardholder disputes a charge directly with their card network or bank. Credit card companies and banks are more likely to side with a cardholder during a dispute, which can be expensive and frustrating for businesses.
Certain types of businesses might have trouble getting approved to accept credit cards. This is known as “high-risk credit card processing.” High-risk industries include tobacco, gambling, drug paraphernalia, vitamins and supplements, weapons, multi-level marketing, life coaching, adult services, marijuana dispensaries, and more. Even business owners with poor credit could be considered a higher risk.
If approved, merchants that fall into those categories are typically imposed with higher credit card processing fees.
Step 1 – Find a Payment Processor
There are many ways to start accepting credit cards. Each method has its fair share of pros and cons. To get started, you need to find a payment processor that accommodates your needs.
Payment processors facilitate credit card transactions. They act as a mediator between the business and other financial institutions involved with a transaction. Here’s a brief overview explaining the different roles associated with credit card processing.
Processors authorize transactions and facilitate the transfer of funds from the issuing bank to the merchant.
But payment processors come in different shapes and sizes. Let’s take a closer look at the types of payment processing companies you can choose from.
Payment Service Providers (PSPs)
Using a PSP is the easiest way for your business to start accepting credit cards. These are typically considered “all-in-one” solutions, as they offer everything you need to get started.
Companies like Square and PayPal all fall into the payment service provider category.
PSPs have revolutionized the credit card processing industry in recent years. They allow businesses to accept credit cards without setting up a merchant account. They typically offer month-to-month contracts and flat-rate pricing.
Flat-rate processing is easy to comprehend, but it’s not always the cheapest option. Rates typically cost around 2.9% + $0.30 per transaction. There’s not a ton of room for negotiation here unless you’re a high-volume merchant.
But PSPs are really easy to set up and have become increasingly popular for startups and businesses new to accepting credit cards.
Merchant Account Providers
Merchant account providers are ideal for businesses that want to get the best possible processing rates. Payment Depot and Fattmerchant are two popular solutions in this category.
Both of these companies offer membership-style pricing. For a monthly fee, transaction fee, and interchange, businesses have access to “wholesale” credit card processing rates. Here’s an example from Payment Depot’s pricing page so you can see what I mean:
An interchange is the cost imposed by the card networks. So you could pay as little as $0.05 + interchange per transaction with a merchant account provider, compared to nearly 3% per transaction with a PSP.
Ecommerce Platforms
Businesses with an online store should consider using an ecommerce platform for credit card processing. Like PSPs, this type of processor can become a one-stop-shop or an all-in-one solution for your processing needs.
Shopify is an industry leader in this space. In recent years they’ve essentially become the gold standard for managing an ecommerce website.
I like Shopify because they offer integrated payment processing with every plan. So, you won’t have to worry about using third-party shopping cart software to accept payments on your ecommerce site. Shopify even has POS (point-of-sale) solutions for ecommerce sites that also have a physical retail presence.
This ecommerce platform integrates with 100+ additional payment providers as well. So, if you find another processor in the future, you could always switch without having to change your online store.
Step 2 – Negotiate Your Terms
Once you’ve narrowed down the type of processor you want to use, shop around for the best rate. Believe it or not, credit card processing fees can actually be negotiated. This is especially true if you’re getting competitive quotes from multiple processors. You can use those quotes as leverage to get the best possible deal.
To negotiate successfully, you need to understand where credit card processing fees come from. Generally speaking, there are three main components to credit card processing rates:
Interchange – Imposed by the credit card network and issuing bank.
Assessment – Smaller fee paid directly to the card network.
Markup – Charged by the processor.
Interchange and assessments are non-negotiable. But processors might be willing to negotiate their markup. Interchange fees vary by card network and transaction. For example, here’s a snippet of Visa’s interchange rates:
The type of card that a customer uses will impact the fees. Keep this in mind as we discuss the types of credit card processing structures shortly.
In addition to the direct costs of credit card processing, you should also consider factors like:
Contract length
Setup fees
Early termination fees
PCI compliance fees
Statement fees
Terminal fees
Gateway fees
The list goes on and on. Some processors will try to sneak these extra costs into your contract. Review everything in detail before you commit. That’s why negotiating your terms is so important.
Now let’s take a closer look at the different contract structures in the world of credit card processing:
Flat Rate Pricing
Flat-rate credit card processing is the easiest to understand. This is the most common pricing model offered by PSPs.
With this structure, the interchange rates imposed by the card network are irrelevant. You’ll pay the same cost per transaction, regardless of the interchange category being used. The only factor that would impact the rate here would be how the card is processed (online vs. in-person).
Interchange Plus Pricing
Interchange plus processing is typically more cost-effective than flat-rate pricing. As the name implies, this contract structure involves paying the interchange rates plus the processor markup.
As previously mentioned, processors might be willing to negotiate their rates, which potentially gives you access to lower credit card processing fees.
Subscription or Membership Pricing
Subscription pricing can best be described as a hybrid between flat-rate and interchange pricing. Businesses pay a monthly fee to merchant account providers for access to lower flat-rates.
For example, a $99 monthly subscription fee could give you access to a $0.07 plus interchange fee per transaction. The processor charges a lower markup but still collects a monthly membership fee.
Tiered Pricing
Tiered pricing is the worst. Stay away from this at all costs.
With this pricing structure, the processor charges three different rates—qualified, mid-qualified, and non-qualified. Each category has a different processing rate (qualified being the cheapest, and non-qualified being the most expensive).
However, the processor determines which category each transaction falls under, based on relatively unknown criteria. So businesses typically end up paying mid-qualified and non-qualified transactions more often than they initially thought.
Step 3 – Get Your Equipment
If you’re processing transactions in-person, you’ll need to get the appropriate equipment. Lots of processors out there advertise free equipment, but these are rarely actually free.
Don’t rent equipment. It might seem like a cost-effective solution in the short-term, but it’s always more expensive for the lifetime of your equipment.
It’s worth noting that some equipment is proprietary to specific processors. For example, let’s say you’re using Square as your processor. If you decide to switch processors in a year or two, you’ll no longer be able to use any Square equipment.
Here are the different types of equipment you might need to accept credit card payments.
Credit Card Terminals
This is a traditional countertop piece of hardware used for accepting credit cards. They are standalone pieces of equipment, separate from registers or POS stations.
Make sure you choose a terminal that’s modern and compatible with multiple payment options. For example, legacy terminals and outdated hardware won’t accept chip payments, tap-to-pay, or mobile wallets.
Integrated POS Terminals
POS systems with built-in credit card terminals are becoming increasingly popular. Clover has some of the best POS equipment on the market today.
These are useful in quick-serve restaurants and retail shops. Integrated POS terminals are a bit more expensive than a traditional standalone terminal, but they are user-friendly and offer more functionality.
Mobile Card Readers
For businesses that operate on-the-go, a mobile carder is an absolute must-have. They’re really useful for food trucks or field-service jobs where technicians can accept payments directly at a customer’s home or job site.
Square offers free mobile card readers that can turn any smartphone or tablet into a POS station.
Mobile readers can even be used within retail stores so customers can pay without having to visit a checkout counter.
Software
In addition to the hardware requirements of accepting credit cards, you’ll likely need to get the appropriate software as well. For example, to use the Square mobile reader (mentioned above), you’d need to download the Square POS app.
Online credit card processing requires shopping cart software. But if you’re using an all-in-one ecommerce platform like Shopify, this will come included with your plan.
Virtual terminals are software designed to turn computers into payment processors. This software is perfect for processing credit card information over the phone.
Step 4 – Accept Payments
Now that you’ve chosen a processor, agreed to terms, and have your equipment set up, it’s time to start accepting credit card payments.
Depending on the solution you chose, customers should be able to swipe, dip, tap, use mobile wallets, pay online, or pay over the phone for your goods and services.
But you don’t technically receive payment at the time of the sale. There’s an extra step in this process.
Settle Your Transactions
“Settling” or “batching” is the final stage of accepting credit card payments. The initial swipe, chip, or keyed entry is known as the authorization stage. This is only to approve or deny a transaction.
But the sale isn’t fully processed until the settlement.
Once per day (typically at the end of the business day), those authorizations must be sent to your processor. The exact steps to complete this process will vary based on the equipment you’re using and the processor.
If you don’t settle transactions within 24 hours of a sale, the transaction could be subject to higher interchange rates.
Monitor Your Bank Account and Statements
Finally, you want to verify that you’ve been paid. Funds typically appear in your bank anywhere from 24 to 72+ hours after the settlement.
Always make sure that your statements match the deposit amount in your account.
As previously mentioned, some credit card processors are notorious for imposing extra and unnecessary fees. So, make a habit of reviewing your statements each month for any irregularities. If you’re unsure about a charge, call the processor and find out what it’s for.
This will help keep your credit card processing costs as low as possible.
The global pandemic has had an enormous impact on large and small businesses alike.
Not only have day-to-day operations had to change for many businesses (e.g. regular sanitation, social distancing), but some are seeing large-scale changes come into effect—and a lot of them may be permanent, such as remote working.
These changes are going to have short and long-term implications for economies across the world. In the United States, one great example of that is in business formation.
For business owners, the way you ultimately decide to form your business is one of the most consequential ones you could possibly make. It determines everything from how you’re taxed and how you seek funding (if you do at all) to the profits you’re able to make and the type of services you’re able to provide to customers.
But with everything that has happened because of the global pandemic, is it the right time to start a business? If so, what’s the best type of business to start in this uncertain period?
That’s what inspired us to write this guide.
We want to go deep into the numbers behind business formations and how COVID-19 has impacted them while giving context to how they’ll impact you. Later, we’ll also give you some resources to help your new business grow, no matter what business formation you choose.
Let’s dive in.
Disclaimer: All of the information we will cover in this article will focus primarily on the United States. Apologies to our international readers! However, if you work with business partners in the United States or you have a client or vendor based here, you will be able to gain a lot more context on the economic and business landscape they’re working in with information and data we’ll provide in this piece.
COVID-19 and Business Formations: 4 Key Pieces of Data
Data is crucial when it comes to your business, helping to guide your business decisions and provide context for the world you’ll be working in.
However, this information only tells part of the story. That’s why we want to give you a few crucial data points about business formation and how COVID-19 has impacted them—as well as reasons for why they’re important.
Data #1: Business formations dropped significantly due to lockdown measures in 2020
In March 2020, the United States was just beginning to come to grips with the fact that the novel coronavirus was a deadly serious issue. When that happened, we saw a rush of new protective measures, as well as mandates from states across the country to lock down and enforce mandatory stay-at-home orders.
When that happened, businesses were forced to make the tough decision to shut their doors, lest they add to the spread of COVID-19. As such, we also saw a significant drop in business formations.
In fact, the United States saw a 20% decrease in new business applications from March 1, 2020 through April 11, 2020 compared to the previous year.
Data from the United States Census Bureau also discovered that different regions of the country were impacted in different ways.
For example, the northeast region of the country saw a 31% reduction of business registrations, whereas the western region “only” got hit with a 15% reduction. Altogether, the United States saw a bigger drop off in business applications than any other time during the Great Recession of 2008-2009.
This depicts a grim picture of business formations. But, it makes sense—after all, these are grim times. And when the number of applications dropped over a “sustained time period” during the Great Recession, they never rebounded to their pre-recession levels, according to the Economic Innovation Group.
So things looked bad across the board at the beginning of the pandemic in spring 2020. But does that mean things have stayed that grim or will be as bad again? Not necessarily…
Data #2: Business formations bounced back in a big way in 2020
As the year went on and summer arrived, people began to get more confident in applying for businesses. By Q3, the United States saw more business applications than it had in the previous 15 years.
Nearly 1,600,000 businesses applied for formation since the year began!
Altogether, 2020 is on track to be the year with more new, high-propensity business applications than any year in recent history. And that’s even with the drop-off in applications in the spring.
Unemployment. Many people lost their jobs in the wake of the pandemic. With no consistent career to go to each day, many might have taken this as an opportunity to start their own business ventures.
Stimulus. The $1,200 stimulus check as well as the Paycheck Protection Program rolled out by Congress in 2020 might have done its job in spurring confidence in entrepreneurs to start their own businesses.
Backlog. Certain states and cities require business applications to go through the courts for approval. When the initial lockdowns happened, that meant that courts needed to be closed as well. When they opened back up, they were likely addressing a big backlog of business applications.
New opportunities. With the pandemic came new needs in the market. Products and services from masks and sanitizers to home deliveries are seeing a boom in consumer demand. Many people might have recognized these demands and gaps in the market, and sought to fulfill it with their own businesses.
Gig economy. This point ties into the first one. There is evidence to suggest that mass unemployment has led to many turning to become independent contractors via services such as Uber, Lyft, Grubhub, and Postmates. Most independent contractors fall under the “sole proprietorship” business formation (though they can be corporations, LLCs, or partnerships, too).
Regardless of the reason, many people should be heartened by the fact that business formations are now on the rise again. In fact, strong business formation numbers are a big indicator for an economy’s growth. It represents more jobs and income for the people within that economy.
Think of the economy right now as a powder keg. Each day, more and more gunpowder (i.e. businesses) gets added to the keg. It’s all waiting for the right time—when the pandemic is over or, at least, when a vaccine is widely available— for us to light it up.
Data #3: Business formations are looking better than the Great Recession
We’ve mentioned the Great Recession already. And it’s a pertinent thing to mention.
The housing market crash of 2008 brought with it a recession that many Americans are still suffering from. We’re seeing a lot of similar impacts, such as mass unemployment and sustained joblessness, due to the current global pandemic.
However, one area where it’s not the same is in business formations. In fact, business formations are doing much better than they were at a comparable time during the Great Recession.
Below is a chart showing the change in business applications through week 45 (November 2-8, 2020):
In 2008, the United States dropped by 16.4% in business applications. However, in 2020, we saw a 14.3% increase in business applications when compared to the previous year.
One big factor that has helped in this (aside from the four points we outlined above) is because the economic foundation of the country is still pretty good. Housing prices are stable, as are most asset classes.
All things being equal, the United States is in okay shape.
The state of U.S. business formation is like a house that is currently going through a very bad storm. Our windows are broken. A tree crashed through our ceiling. And we probably can’t sleep in a few bedrooms. But the foundations of the building are still good, and we will be able to rebuild once the storm is over.
Data #4: Sole proprietorships are popular (and the pandemic likely made them moreso)
Even before the pandemic hit, sole proprietorships were the most popular type of business formations. That’s due to a combination of how easy it is to start and its lack of double taxation.
In fact, you don’t even have to register as a sole proprietorship unless you’re going to conduct business under a different name (i.e., your “Doing Business As” name).
Sole proprietors encompass a lot of different types of businesses. For this data point, we’ll be focusing on freelancers in varying capacities and industries.
Freelancers are often sole proprietors because of how easy it is to get started. You just find a client, fill out a 1099 form, and you’re on your way.
And while we don’t have a lot of hard data on exactly how many sole proprietors have emerged because of the pandemic, we can make educated guesses based on a few factors:
More people are freelancing now than ever before. In fact, 36% of the U.S. workforce is made up of freelancers. That’s an increase of 2 million people since the year before.
Since 2019, freelancers have contributed $1.2 trillion dollars to the U.S. economy. That’s a 22% increase compared to the year before.
88% of current freelancers say they’re likely to keep freelancing in the future. That means there will likely be more sole proprietorships in the future.
Does this mean you should become a sole proprietor or that sole proprietorships are the best method of business formation? Not necessarily. It’s just an indicator of how people across the country have been coping with the impact of the pandemic.
However, it does tell us that there’s a demand for freelancers out there—especially since the vast majority of current freelancers intend to keep doing it in the future. In fact, 75% of freelancers who quit their full-time job to freelance say they earn more now than they did when they were employed by another entity.
How to Form a Business During a Pandemic
Starting a business in the middle of a pandemic is no small task. Heck, starting a business when we’re not in a pandemic is difficult enough.
However, there are plenty of people starting their own businesses right now to great success. So as long as there is demand for your products or services, there will be business for you.
To that end, here are a few tips for you to keep in mind when forming your business during a pandemic.
If you don’t know where to start, start small
There are five different types of business formations your business can take:
Sole proprietorship
Limited liability company (LLC)
Partnership
S-corporation
C-corporation
Some of them require you to file the business with your state or city. However, if you don’t have a lot of startup money or if you just aren’t sure where to start, we recommend you start smaller with a sole proprietorship. It’s the simplest type of business formation and it’s the easiest one to start.
You can get started as soon as you find customers. Plus, you don’t have to worry about filing fees or documents to sign (other than your tax documents).
However, a word of caution: Sole proprietorships mean that you are open to liability.
That means if you get sued by a disgruntled client and you lose the lawsuit, you’re going to have to pay for the damages out of your own pocket. That opens up your personal assets for seizure by courts, including your car, house, or savings account.
That might seem scary, but the chances of that happening are very small. So, as long as you provide good service and treat your clients fairly, you shrink the window of risk for that happening.
Starting small also refers to practically every other aspect of your business, including the website, marketing, and the products/services you provide. In fact, to get a business running you really only need a website and a good way for your customers to get into contact with you (which can be a function of your website!).
It’s no secret that many businesses that were thriving before the pandemic are suffering greatly now. From loss of income and letting employees go to catastrophic supply chain troubles, the list is endless.
However, there are plenty of businesses out there that are actually in fine fettle. In fact, there are many that are doing even better than they were before.
As you can see, those that are experiencing the greatest financial risk and impacted the most by the pandemic are industries like food service, transportation, education, and entertainment.
The ones that are doing well are those such as finance and insurance, company management, real estate, healthcare, and construction.
Does this mean that you should run and start up an insurance company right now? Not at all. It’s just an indicator of the type of businesses that are more resilient than others in our current situation. These evergreen industries last a long time and can persist through bad periods like a global pandemic.
If you’re looking for some inspiration, the US Chamber of Commerce provides a great list of business types that thrive during the pandemic. They include:
Delivery services. From groceries, to meals, to home goods, delivery services of all stripes are in high demand as people stay at home during lockdowns and for fear of catching COVID-19.
Cleaning services. This includes commercial sanitation of offices and other workplaces, along with medical-grade sanitation for medical facilities.
Liquor and wine stores. Crack open a cold one with the boys (over Zoom, of course). Alcohol suppliers of all stripes are doing well as people turn to the world’s oldest way of taking the edge off.
Virtual tutoring/education. As schools shift to online learning, parents are hiring virtual tutors at a high rate. Also, online courses for adults are seeing a boom as people stay indoors and need a way to occupy their time.
Home health services. Looking to avoid clogging up hospitals with non-emergency visits, people are looking to bring healthcare home with home health services. These are medical providers who will consult you online and/or come to your home to assist you. It doesn’t just have to do with physical health either. Mental health providers are also in high demand.
Basically any business that allows your customer to be at home and receive your products or services is a good one for the pandemic.
It’s also worth mentioning that the marijuana industry is also booming right now. With the stress of the pandemic as well as the rise in marijuana legalization, people are turning more and more to Willie Nelson’s favorite pastime. A (legal) startup centered around getting people their jazz cigarettes is one that has the potential to do really well.
(Talk about evergreen business. Am I right?)
Nail your digital marketing
Digital marketing played a big role in modern businesses well before the pandemic. Now, it’s downright essential that you nail all facets of it if you want your business to be discovered and successful.
After all, traditional methods such as subway ads, newspaper ads, and billboards are seeing a dramatic decline due to the pandemic. And while digital advertisements have seen a similar decline, we would argue that it’s more important than ever to know how to position yourself on the internet to draw in more customers.
That’s because when people can’t go out for entertainment, they turn online. If you have a service that they can do from home, your digital marketing efforts will have an impact.
To that end, there are three areas you should focus on to start laying the groundwork for your digital marketing strategy:
Know your brand’s story. This is one of the most powerful ways you can win the hearts and wallets of customers. Being able to effectively tell your company’s story is a good way to connect emotionally with your customers. When you connect with them emotionally, they’re going to be more willing to click through, sign up for a newsletter, or purchase a product. Learn more about developing a brand story here.
Create your marketing framework. This is the overall system you will be building in order to create a sustainable marketing practice. Remember: Your marketing is more than just one campaign or one funnel. It’s an entire framework you build in order to create a sustainable, scalable revenue engine for your business. After all, you wouldn’t start building a house without the blueprints—why should you jump into marketing without a plan? Learn more about creating a marketing framework here.
Find where your customers live. No, I don’t mean literally (unless you want a sweet restraining order). The best way to increase traffic to your website (and, therefore, customers to your business) is by going to where they are online and letting them know you exist. Identify the Facebook groups they like to frequent, the subreddits they subscribe to, or the Quora communities they ask questions on. Of course, that’s not the only way to build web traffic. You can also draw them in by offering great and helpful content on your website using the principles of inbound marketing. Learn more about increasing web traffic here.
Only by developing a good digital marketing strategy can your business succeed in attracting customers in the pandemic age and beyond.
Conclusion
The SARS-CoV-2 pandemic has changed the way we form and conduct business. While there is a lot of pain around, there are also signs of good things to come.
The best thing for you to do is to take action on the things that you can control and ignore all the rest. That means creating a business and positioning it for success.
No matter what type of business you choose, Quicksprout is here with the resources to help you through this time. Remember, we’re all in this together. We want to be there for you when you need us the most.
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