Vinita,

The first step I would suggest would be to figure out what state you want your business to be registered in. Every state has their own fees and such, so it’s a good idea to begin by researching business entity requirements in your state of residence. If your software company would be conducted as an online only web business, then you could look into registering in the corporate heaven states such as Delaware or Wyoming.

Once you decide which state would be most beneficial to your business, the next step is to decide which entity type to register. Typically, for smaller businesses, an LLC is more practical in that it is more flexible and easier to maintain, while a larger business that plans to have investors and shareholders would register a Corporation. (I’d like to invite you to read our article ‘LLC vs. Corporation’ to compare the differences in the entity structures).

After deciding which state and entity type you want for your business you could apply and have the company registered. Then when the company is active you can apply for a federal EIN (a the tax ID). After those steps you are free to conduct your business under the company umbrella.