A software company is a profitable business. With the right team on your side, you can start to grow a successful software company. Naturally, this first step is a doozy. If you have a software platform ready to go, then you need to find a way to promote that business and run it effectively.

Getting started with a business is simple so long as you lay out the directives and limitations of your business. In this article, we will walk you through how to set up a company for your software platform.

Hash Out Non-Negotiables and Key Factors a Software Company Needs to Consider

Before you can take steps to create any business, you as the business owner need to sit down and figure out what you want the business to accomplish. These decisions will drive the business objectives and guide you in setting up your business plan, establishing operational processes, and more.

Figuring out your business’ non-negotiables is the first step in establishing what you need, what you need to accomplish to survive, and what you cannot do during the first leg of start-up. Non-negotiables lay out the boundaries for your business and establish necessary tasks that each owner, partner, or staff member needs to complete.

A software company has clear non-negotiables from the start. For example, your main product is the software itself, so you need to be able to modify the code after release. A software business needs to have a way of improving the product, updating it for patches or security, and following compliance protocols or privacy regulations. The individualized needs of the software product will differ based on industry and business, but no matter what, you will need an in-house software development team or partnership.

If you are only operating online and are choosing to forego a brick-and-mortar, then your eCommerce website is also non-negotiable. This website needs to be always running with support on-hand for potential technical issues. Your eCommerce site will be the primary way to sell your product. It will need to showcase the product and product details, process payments, handle user accounts, and transfer the product licenses and downloadable packages to the customer.

Other non-negotiables will revolve around the nuances of your business. You’ll have to figure out who the owners are, whether you will be filing as a limited liability or a corporation (we recommend either of these over a sole proprietorship), how business finances will be handled, and data storage. Think about the things that are important to your business as you go through the next steps for creating your company.

First Steps to Creating Your Company

The first step for creating your company will be to gather all of the information that you have about your company. If you don’t already have a business plan, then that is going to be the first thing that you will need. The business plan will lay out who your company is, the purposes and objectives, its relationship within the industry or market, and estimates of profit and expenses.

Once you have your business plan ready, choose how the business will be structured. If you are the sole owner, then you can start out as a sole proprietorship, but there is some risk involved with that. For example, if your software ends up infecting a customer’s computer and they lose their assets, then they could sue your company. If your company is operating as a sole proprietorship at that time, your personal assets can be held liable as damages.

No matter what, get liability protection. You’ll either want to create an LLC or a Corporation. Starting out as an LLC is usually a good idea because it requires a lot less work and fewer tax obligations. LLC owners can still file their taxes under their personal taxes and they do not have to file separate entity taxes. LLCs can also opt to file as an S Corp, which would provide the tax benefits incorporation without going through the process of becoming one.

Once you have decided on your business structure, you’ll then go about preparing to register as an LLC or Corporation.

Starting an LLC or Corporation

Decide on a business name. This is usually a big step because your business name tells customers who you are and what you are all about. You can consider finding a name in a name search tool. You can also start a business under a generic name and then operate under a Doing Business As later on. Confirm that the name you have chosen is not already trademarked.

Brand your business. With your business name locked down, you can then begin to brand your business. Focus on building the visual representation of your business, including the brand’s image or logo, business website, themes, font, and more.

Identify the location of your business. For tax purposes, you will need to operate out of a state. For an online business operating through eCommerce, the business owner would file under their home address. You can consider getting a business email address, and this might be necessary if you travel outside of the country a lot.

Prepare the necessary documents. With the above information, your business email address, business social media handles, and business domain name, you can then begin to file paperwork. Other items like a business address and phone number may also be required. You’ll need to create an Operating Agreement and an Articles of Organization for the government. You may also need an employer identification number (EIN).

Find a registered agent. Before you complete the paperwork, be sure to find a registered agent. This person is a designated business that will receive your business’ legal communication. This person is required especially for virtual businesses because there needs to be a legal address and legal representative available during normal business hours.

Figure out your finances. Separating your finances between business and personal is optional. Look into whether a business bank account and accounting app are right for you. Your software platform will need a payment processor. There are numerous ways to do this, including a payment processor API integration, a third-party redirect, or building the payment process directly into your eCommerce website.

Submit your documents. Once you have gone through this, you can then submit your documents to your state representative. You can use a formation service, which usually provides all of the documents and guides for you.

Marketing and business development. After you have officially registered your business, you can then do all of the next steps for operating your business. This might include marketing through digital marketing or social media, using tools like Google Analytics and Google Search Console, and content marketing.

Starting a Corporation. Starting a corporation is a lot like starting an LLC. The only difference between a Corporation and an LLC is in how you file and annual requirements. At its core level, though, LLCs and Corporations are treated differently in three major areas: business ownership, taxation, and liability. Corporation ownership considers the business different than the owners, and the owners are usually paid a salary. Corporations are therefore taxed as business entities, whereas LLCs might end up paying self-employment taxes or franchise taxes. In this instance, tax rates are different. LLCs are also considered a pass-through tax structure, which offers the members limited liability compared to corporations that offer more liability protection. If you are looking for more separation between personal and business, then go with a corporation.


How to Set up Your Software Company

Setting up your software company does not have to be daunting or difficult. In reality, there are a lot of little steps that need to be taken in order to achieve this. And luckily there are many services out there that exist to help individuals start companies. If you’re not comfortable doing this on your own, reach out to a business consulting agency like Rotate.

If you have yet to create a business plan, then that is the first thing you need to do, and Rotate can help you with this. This should help you choose a name, create a brand, and get things like a phone number, website, and domain address. Once you feel like you can move on to the next steps, register your business name with the state you live in.

You can still sell your product online if your business is operating under your name, but know that you are risking your assets because sole proprietorships have no liability. Having the liability in place will protect you as well as establish the core structures of your business.