Do you aspire to designing, building, and selling your own personal finance app? If so, it may be helpful to consider some of the steps required in making that dream a reality. To turn your app idea into a successful startup, there are a number of legal, financial, and logistical requirements to keep in mind.
Choosing the Right Legal Structure
First things first: Any time you launch a business startup, it’s important to consider the legal structure you’ll employ. By default, any self-employed income classifies you as a Sole Proprietor. Operating as a Sole Proprietorship can be beneficial in some respects, but it is important to know that there are also some drawbacks. For example, this structure makes it harder to welcome new employees into the fold, and it offers little in the way of personal liability protections.
A better option might be forming a Limited Liability Company, or LLC. When you register your app business as an LLC, you establish it as its own legal entity. This allows you to keep your personal and business assets separate and distinct; likewise your personal and business liabilities. And, it allows you to ensure some distance between yourself and the business, should a lawsuit or an aggressive creditor ever come your way.
What are the Advantages of the LLC?
The LLC model offers several benefits, particularly for personal finance app entrepreneurs.
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In the litigious tech environment, it’s crucial to have some way of protecting your personal wealth (and your familiar wealth) from lawsuits.
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The LLC format provides different options for taxation, including the simple pass-through taxation route.
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Registering as an LLC helps you to establish professional credibility. This in turn can help you earn the trust of lenders, vendors, partners, and customers.
To be fair, there are also some notable downsides. In particular, the LLC format does not allow you to sell shares, which can make it challenging to court external investors. The LLC format is not recommended if you ever wish to take your app company public. If that’s your goal, we recommend forming a Corporation.
What are the Steps for Forming an LLC?
To register your app company as an LLC, you’ll need to complete just a few basic steps.
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Choose the state where you wish to register. Generally, this should just be the state where you are based and where you’re making money.
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Select a Registered Agent, someone to receive legal correspondence on your business’ behalf. This must be someone with a physical mailing address in the state where you register; so, if you register in California, you will need a Registered Agent in CA, as well.
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File Articles of Organization with your state. This is the legal document that officially establishes your app company as its own LLC.
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You’ll also need to pay the filing fee with your state, which could be anywhere from $20 to a couple hundred bucks.
By following these simple steps, you can formally register your app company as an LLC, and begin taking advantage of all the LLC’s advantages.
Securing the Funding You Need
To get your product developed and into app stores, to say nothing of sales and marketing, you’ll likely need some startup capital. There are a few different options to explore.
Fund it yourself. Self-funding may mean dipping into your personal nest egg or seeking a loan from your family or friends. This may be the easiest option from a legal and regulatory standpoint, but of course, you may be severely limited by the amount of capital you have access to.
Seek business financing. Another option is to go to a lender to seek either a business loan or a line of credit. Both options will provide an influx of cash that will allow you to expand your operations. Registering as an LLC is really helpful here, as it provides you with the credibility needed to secure the best terms.
Bring in investors. Still another option is to court outside investors. Again, incorporation can help with this option, as it enables you to issue shares to your investors. Of course, this also invites more regulatory compliance concerns, including the need to share annual financial disclosures and to hold regular meetings with your shareholders.
What’s important to note in all this is that the business structure you choose for your app company can have a direct impact on the range of financing options available to you.
Attending to Other Legal and Administrative Concerns
There are a few other steps that can help you position your app company for long-term success. For example:
Create an Operating Agreement
An Operating Agreement is sort of like a charter for your app company. It clarifies things like how you and your business partners allocate profits, and how you split day-to-day responsibilities. This document is not something you are legally required to have, but it can help you avoid legal tension down the line.
Claim an Employer Identification Number
Your EIN is sort of like a Social Security Number, only it denotes a business entity as opposed to an individual. You can get it for free from the IRS, and having one is necessary before you can administer payroll or pay your taxes.
Set Up Your Banking
Naturally, every business needs a bank account in order to pay vendors and suppliers, and in order to receive payments from customers. As a rule of thumb, unless you run your business as a Sole Proprietorship, it’s best to create a business bank account that’s distinct from any personal savings or checking accounts.
Position Your App Store for Lasting Impact
The personal finance space can be a lucrative one for app developers. To maximize your odds of success, ensure you lay the foundations for a successful business entity, attending to key legal and logistical concerns.
Website of Source: https://youteam.io/
Source: Story.KISSPR.com
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