How To Start A Cryptocurrency Business
Start a cryptocurrency business by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your cryptocurrency business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
> Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
Luckily we have done a lot of this research for you.
What are the costs involved in opening a cryptocurrency business?
Programmers who are competent in C++ can create a new cryptocurrency without any financial layout, for the open-source core code that’s needed is readily available for free on Github.
Instead, the primary startup cost is time rather than money.
A competent programmer can create a new cryptocurrency in as little as 30 minutes because the core code is already written. A half-hour cryptocurrency is unlikely to be successful, though.
Successful cryptocurrency businesses usually have unique cryptocurrencies that have adjusted hashes, and changing the hash can take months. The businesses also typically invest a lot of time marketing their new cryptocurrency, for success ultimately depends on whether people adopt and start using the cryptocurrency.
At the time of writing, businesses didn’t have to register with the Securities and Exchange Commission when issuing an ICO. Businesses may choose to work with an attorney who’s familiar with ICOs and Securities issues, however. Doing so would increase startup costs but may have significant long-term benefits.
What are the ongoing expenses for a cryptocurrency business?
The ongoing expenses for a cryptocurrency business are minimal. It takes a great deal of energy to run the computer programs that cryptocurrencies rely on, but miners pay for this energy. The creating business rewards miners in cryptocurrency, which is built into the equations the business is created on.
Who is the target market?
Focusing on a community also provides businesses with a set group to market to. A targeted community can be almost any group, so long as it’s defined and has use for a peer-to-peer currency.
How does a cryptocurrency business make money?
Cryptocurrencies currently make most of their money through initial coin offerings (ICOs), which are akin to initial public offerings (IPOs) of stocks. An ICO can bring in a one-time influx of cash through the sale of coins. Afterward, any coins that a business itself has will hopefully gain value as the cryptocurrency becomes more popular and increases in value itself.
In the future, some cryptocurrency businesses will start to see more of their revenue come from transaction fees.
How much can you charge customers?
Many coins cost 10 cents each at the time of their ICOs, but cryptocurrency businesses are free to choose any amount they like. Some choose an incremental price structure to entice early adopters. After an ICO, the price of a cryptocurrency is determined by the open market.
How much profit can a cryptocurrency business make?
The profit potential for a cryptocurrency business is extremely high. For example, one business has raised $133 million in capital for a new cryptocurrency before an ICO.
How can you make your business more profitable?
Cryptocurrency businesses owners may start up mining operations to create additional revenue, but this could be perceived as a conflict of interest. Most businesses primarily focus on increasing their cryptocurrency’s value through marketing and providing ongoing technical support.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Cryptocurrency Business Name Generator
If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.
When registering a business name, we recommend researching your business name by checking:
It's very important to secure your domain name before someone else does.
> After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your cryptocurrency business is sued.
Read our Guide to Form Your Own LLC
Have a Professional Service Form your LLC for You
Two such reliable services:
You can start an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Learn how to get an EIN in our What is an EIN guide or find your existing EIN using our EIN lookup guide.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
* This separates your personal assets from your company's assets, which is necessary for personal asset protection.
* It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Get a business credit card
* This helps you separate personal and business expenses by putting your business' expenses all in one place.
* It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a cryptocurrency business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
Certificate of Occupancy
A cryptocurrency business is generally run out of an office. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
* If you plan to lease a location:
* It is generally the landlord’s responsibility to obtain a CO. Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a cryptocurrency business. After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
* If you plan to purchase or build a location:
* You will be responsible for obtaining a valid CO from a local government authority. Review all building codes and zoning requirements for your business’ location to ensure your cryptcurrency business will be in compliance and able to obtain a CO.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
> Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
> If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
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How to promote & market a cryptocurrency business
There are two primary groups that a cryptocurrency business must market to: miners and merchants. Miners use computer programs to solve the equations that a cryptocurrency relies on, and they’re rewarded the cryptocurrency for their efforts. Merchants must be on board so that people have a place to spend the cryptocurrency.
While miners and merchants must be reached through different channels, the messages given to each group are identical. Business owners want to communicate that their cryptocurrency:
* Has unique features that make it unique
* Is safe, secure and transparent
* Will be widely used by individuals and/or businesses
The more confidence businesses can create, the more likely the business’ cryptocurrency is to be successful.
How to keep customers coming back
Transparency and long-term support as extremely important to people who use cryptocurrencies. Businesses that make their decisions clearly known and have the resources needed to support their cryptocurrency will stand out from the competition.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
* All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
* Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
* Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
Other popular website builders are: WordPress, WIX, Weebly, Squarespace, and Shopify.