This document provides a step-by-step guide for setting up and running a business in the USA. It outlines 10 key steps: 1) Establishing a legal entity, 2) Getting a FEIN number, 3) Setting up bank accounts, 4) Hiring employees, 5) Paying employees and providing benefits, 6) Getting business insurance, 7) Accounting practices, 8) Paying taxes, 9) Selling the company, and 10) Repeating the process. For each step, it provides details on requirements and considerations. It also includes additional sections on topics like raising capital, equity compensation, and outsourcing finance/HR functions.

1. How to Set Up &
Run a Business in the USA
A Step by Step Guide
by Tom Pai, MBA
Ravix Group Inc.  226 Airport Parkway, Suite 400  San Jose, CA 95110
1 Strategic Guidance, Hands-On Implementation

2. Step by Step Guide
1. Establish a Legal Entity
2. Get a FEIN – Federal Employee Identification Number
3. Set Up Bank Accounts
4. Hire Your Team
5. Pay Your Employees and Provide Benefits
6. Get Business Insurance
7. Keep Track of Your business Using Correct Accounting
8. Pay Taxes
9. Sell Your Company for $1,000,000,000,000,000,000,000
10. Repeat!
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3. 1. Establish a Legal Entity
What kind? C-Corporation (Inc.)? Limited Liability Company?
C-Corporation:
Pros: Allows for complex ownership structures; common stocks & preferred stocks with different rights;
easy to establish; C-Corp is a “legal individual” & can provide better protection
Cons: Double taxation – dividends distribution are taxable; more complicated administrative rules
regarding operation of C-Corp
Limited Liability Company:
Pros: Pass through profits & losses to shareholders; simplified administrative rules to operate (LLC =
cheaper to maintain)
Cons: Complex ownership structure is difficult to establish & manage, ownership rules for foreigners &
foreign entities complicated, complex rules & tax situations for owner/managers
California or Delaware?
For private company, very little meaningful differences. Some small advantages for founders of Delaware
company. Delaware company more expensive to maintain.
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4. 1. Establish a Legal Entity (cont.)
The BIG question:
Which is a better structure for raising capital?
C-Corporation.
• Complex ownership structure better suited to protect interests of outside
investors
• No effect to shareholders until time of sale of shares (no pass through of
profits and losses)
• Equity Compensation (i.e. stock options or stock grants) easier to
administrate with C-Corp
• Investor familiarity with C-Corp structure a big advantage
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5. 2. Get a FEIN – Federal Employee
Identification Number
A FEIN is more than an employee tax ID. It is an ID for your company,
used for doing everything from opening bank accounts, filing income tax
returns, obtaining credit from vendors, paying contractors, as well as
establishing payroll for employees.
How to Apply:
•Complete and file a for SS-4: http://www.irs.gov/pub/irs-pdf/fss4.pdf
or
•Apply online: https://sa.www4.irs.gov/modiein/individual/index.jsp
When to Apply:
Immediately upon formation of your legal entity. Ask your lawyer or accounting
professional.
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6. 3. Do’s & Don’ts of Bank Account
Set Up
• Don’t open a simple business account at the local bank branch of
retail bank – this is the wrong type of account.
• Do consider opening an account with a business focused bank that
caters to startups, such as:
Silicon Valley Bank
Bridge Bank
Square 1 Bank
Comerica Bank
• Do ask how and what they can do to help you grow your business.
• Do ask them what they know about your industry and market.
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7. 4. Hire Your Team
GET HELP FROM A HUMAN RESOURCES PROFESSIONAL WHEN HIRING
FOR YOUR BUSINESS.
• Know the rules and procedures for seeking employees, interviewing, hiring AND firing.
• Understand US laws on discrimination, equal opportunity, work rules, compensation, and benefits.
• Numerous compliance issues for workplace and employees. Need to understand and follow the laws!
• Stick with “best practice” for hiring, employment agreements, compensation, firing. DON’T try and
figure it out yourself.
If you are moving to the USA and working at a U.S. Entity:
• Need to apply for a social security number: http://www.ssa.gov/pubs/10096.html#a0=1
• Get help to understand USA personal tax system.
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8. 5. Pay Your Employees & Provide
Benefits
Payroll
• Do use a qualified payroll service with national capabilities (ADP, PayChex, PayCycle,
Paylocity).
• Don’t use a bank’s payroll service or QuickBooks payroll service.
Employee Benefits
• Essential: Health Insurance. A must for every company. There are numerous options and
plans to suit every budget and circumstances. Costs for small business health insurance is
regulated. All brokers sell the same policies.
• Optional: Retirement. If you hire more senior employees, this becomes highly important.
What is PEO? (TriNet, Insperity, ADP TotalSource)
• “Professional Employment Organization;” “employee leasing”
• Provides payroll and benefits coverage and administration for simple monthly fee per
employee.
• Can be good solutions for small companies with few employees and not expected to increase.
• Acceptable for those with transferred foreign employees here on L-1 visa.
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9. 6. Get Business Insurance
General Liability & Property
• Covers property and acts by employees while working or traveling on
business. Required for most office space leases. This is essential from Day 1.
Product/Service Liability
• Provides coverage for claims against your product or service. Cost and
coverage varies by type of business you’re engaged in.
Directors & Officers (“D&O”)
• Protection for claims by employees and shareholders against the Directors
and Officers of the company. Usually required by outside investors.
Costs can vary a lot. Make sure you work with a knowledgeable
insurance broker.
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10. 7. Keep Track of Your Business Using
Correct Accounting
HAVE AN ACCOUNTING PROFESSIONAL DO YOUR ACCOUNTING
CORRECTLY FROM THE BEGINNING.
USA GAAP (Generally Accepted Accounting Practices) is different than IFRS in
terms of:
•Reporting format
•Consolidation of multiple companies
•Treatment of R&D expenses
•Revenue and expense recognition methodologies
GAAP Reporting vs. Tax Reporting
•Cash vs. Accrual Accounting
•Categorize expenses correctly for tax purposes – certain items not 100% tax
deductible (e.g. Travel and Entertainment)
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11. 8. Pay Taxes
Federal & State Income Tax Returns – Filed Annually
• Estimated tax payments due quarterly
Other Income Tax Filings
• 1099 reporting of payments to independent contractors. – Annual
• 3921 Reporting of Stock Options - Annual
Sales Tax (similar to VAT) – Quarterly & Annual filing
• Varies by state. CA= 7.5%-9.0% (currently)
• General principle is that it is only applicable to physical goods (not services or digital content). This varies
by state.
Payroll Tax
• Covered by payroll service
Misc. Taxes
• San Francisco Payroll tax. 1.5% if over $250,000 annually.
• Use Tax: Sale tax for out of state purchases (including online) that would be subject to sales tax-filed
annually.
• Personal property tax on assets of company. ~ 1%
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12. 9. Sell Your Company for
$1,000,000,000,000,000,000,000
When it comes to selling your business, there are important things you
might not know…
Liquidation preferences.
• Distribution of proceeds based on terms of investment and may not be equal for
all shareholders.
• Important to understand and negotiate at time of investment.
Selling your company to a public company for stock.
• Public stock is often subject to restrictions as to when it can be freely sold.
Deal structure and terms means some of what you receive may
be treated as Capital Gains and some as “Earned Income.”
• Capital Gains tax rate for individuals is 15%.
• “Earned income” tax rates that go up to 39%.
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13. 10. Repeat!
“I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games.
26 times I’ve been trusted to take the game winning shot and missed. I’ve
failed over and over and over again in my life and that is why I succeed.”
- Michael Jordan, Basketball Legend & Entrepreneur
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14. Raising Capital in the USA
Key requirement for U.S. investors is Intellectual Property
ownership by U.S. legal entity. The “flip up.”
Different Types of Investors:
• Angels: $25,000 - $100,000. Focus is early stage. Proof of concept.
• Early Stage Funds (super angels): $50,000 - $2,000,000. Proof of concept to
early revenue.
• Venture Capital Funds: $3,000,000 and above. Early revenue to scaling for
growth.
• Venture Debt: $2 million and above. Sustained revenue to scaling for
growth. Moderate interest rate plus option to purchase small amount of
equity. Availability dependent on quality and source of prior equity
investors.
• Bank Debt: Available to those with sustained revenue. Based on accounts
receivable, recurring revenue stream, assets.
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15. Equity Compensation for
Founders & Employees
Stock Options vs. Restricted Stock Awards (RSA)
• Both can be subject to vesting and continued employment
• RSA can provide tax advantages to holders
Can be good for founders and early employees when value of stock is very low
“Fair Value” of grant is compensation to employee and taxable
Not practical for later stage of company when stock value has risen
• Stock option rules complex from tax perspective
Must be price at “fair value” to avoid taxable gain at time of grant
ISO vs. non-ISO (NSO) rules and taxation are complicated
How to establish “fair value” for company stock
• Legally must be set by Board of Directors
• Most companies get a 409a valuation to set “fair value”
What is an 83(b) election?
• Form sent to IRS within 30 days of receipt or purchase of stock to declare “value” of shares
for tax purposes. Has complex effect on each person’s tax situation.
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16. Ravix Group provides seasoned consulting
expertise to outsource the finance/accounting
and human resources functions for early-stage
and middle market companies.
Strategic Guidance, Hands-On Implementation

17. Background
• Principals have over 25 years of experience; Controllers,
Accountants and HR Managers have an average of 10-15
years of experience.
• 160 active clients; over 600 clients since inception in
2000.
• Serves primarily technology companies, venture capital
firms, nonprofit entities and consulting/services
businesses located in Silicon Valley.
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18. Tom Pai - Principal
Over 25 years of financial and operations experience in technology, media, and consumer products
companies ranging in size from start-up to Fortune 100 global enterprises.
Expertise
•Strategic and operational planning
•Venture capital financing
•Mergers and acquisitions
•Corporate restructuring
•Chapter 11 reorganization
Prior to joining Ravix, Tom was the CFO and COO for several venture backed companies in online
media, publishing and high technology. He was also the co-founder and principal in DART Partners, an
investment firm specializing in underperforming mid-sized companies, and was a senior associate with
Bank of America's venture capital group. Tom received his M.B.A. from Carnegie Mellon University and
his B.S. in Computer Engineering from University of California, Santa Barbara.
Notable Clients
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19. How We Help
Strategic Advice and Counsel
• Senior consultants partner with the CEO in CFO or VP-Human Resources
capacity:
* Strategic planning * Operations
* Equity * Compensation
* M&A
Tactical Execution
• Provide Controllers, Accountants, HR Generalist, as needed to do:
* Monthly Close * On-Boarding of Staff
* Cash Management * Financial Reporting
• Audits
• Setup, implementation and maintenance of accounting & HR
systems.
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20. Why Outsourcing To Ravix
Makes Sense
“In a society of knowledge worker specialists, organizations will focus on
the work their specialists do best. They will contract out (outsource)
the rest.”
-The Post-Capitalist Society, Peter F. Drucker
• Receive expert advice and services at optimal cost.
• Have an objective and unbiased professional handle sensitive
matters.
• The CEO is free to focus on the core business.
• Ravix professionals receive ongoing training and are held to strict
standards.
• Clients have unique access to proprietary database for information
on industry trends and management tools.
• Ravix has an established reputation with venture capitalists as a
trusted resource.
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21. Ravix Value Proposition
Experienced professionals in 2 key areas of G&A:
Finance & Human Resources
+
Knowledge database of shared information & tools
+
Ability to leverage established vendor relationships
=
Time & money savings for your company
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22. Finance
 Strategic & operations planning, Board participation & expectations
budgeting & analysis management
 Oversight of fundraising & due Audit & bank relations
diligence process Annual audit preparation
 Cash flow forecasting Systems implementation
 Setup books & records Revenue recognitions & commission
 Monthly close & financial reporting plans
 Foreign currency translation & Cost accounting & inventory control
reconsolidations Policies & procedures
 Debt financing & asset lease Mergers & acquisitions
relationships
FAS 109 & FIN 48 tax accounting &
 Stock administration & footnote preparation
capitalization tables
FAS 124r valuations
 Contracts tracking & admin
 Risk management
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23. Human Resources
 Recruiting  HR policies & procedures
 Offer letters & employee file setup development
 Immigration/visas  Labor law compliance
 Payroll setup & processing  Employee reviews; performance
management programs
 Benefit plans
 Employee relations & negotiations
 401(K) administration
 RIF’s, terminations & exit interviews
 Audit & assessments
 Workers’ compensation
 Employee handbook
 Organization development
 Total compensation planning (cash
& equity)  Training & development
 Stock option planning &  International comp/benefits
administration  Cobra administration
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24. Stock Administration
 Reconciliation and clean-up of historical  Track stock option grants, exercises
capitalization records and cancellations in Ravix Group’s
 Issuance of option grant notices upon proprietary capitalization tracking
approval by the Board system
 Provide employees with exercisable  Interface with stock transfer agent
option calculations (attorneys) to process option
 Issue stock option notices upon exercises & repurchases
employee termination  Issuance of annual ISO Information
 Handle share repurchases upon Statement as required by IRS code
termination (if early exercise)  Capitalization table updates and
 Track authorized plan shares and reconciliation with stock transfer
shares available for grant agent to ensure up to date records in
 Budget share option requirements the event of a financing or M&A
base on anticipated hires transaction
 Preparation for FAS 123r & warrant  Provide supporting data for annual
issues audit
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25. Vendor Relationships
• Banks • Commercial insurance
• Audit & tax firms brokers
• Attorneys – General & • Architects
Immigration • Real Estate brokers
• Leasing & debt sources • Building contractors
• Benefits insurance brokers • IT vendors
• Recruiters • Payroll services
• Furniture & telephone • Workstation installers
vendors • Moving/relocation
vendors
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26. Industry Experience
•Saas/Cloud based services •Consumer Goods & Devices
•Non-profit •Venture Capital
•Medical Devices •Software
•Biotechnology & Life Sciences •Green Tech
•Internet •Hardware
•Services/Consulting •Communications & Networking
•Mobile Apps •Semiconductor
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27. Pre-Funded Companies
As part of our marketing process we
work with pre-funded companies to:
• Assist in business plan modeling and preparation.
• Introduction to potential investors through bank,
legal and CPA relationships.
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28. Conclusion
Clients are looking for:
• Strategic guidance and hands-on implementation by experienced
experts at optimal cost.
• G&A infrastructure to prepare for growth while staying focused on
building their business.
Ravix Group provides:
• The knowledge and service to cost-effectively manage all G&A
functions, allowing the Client to focus on the core areas of their
business.
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29. Contact Information
Ravix Group Inc.
226 Airport Parkway, Suite 400
San Jose, CA 95110
Telephone: (408) 216-0656
Fax: (408) 982-5446
Email: info@ravixgroup.com
Website: www.ravixgroup.com
Tom Pai, MBA
Email: tpai@ravixgroup.com
Mobile: (415) 710-7050
Skype: tomcp314
Follow us on Twitter! @RavixGroup
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