Dos And Don’ts In The First Year Of Company Formation

The first year of company formation is always crucial for most businesses. Here are some important dos and don'ts if you want to survive your early days.

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Starting a business can be an exciting yet daunting experience. Let’s face it: launching an idea and being a full-time entrepreneur is not for the faint of heart! It will require a lot of time, effort, and patience on your part. And as longtime entrepreneurs will tell you, the first year of company formation is the most crucial.

The Bureau of Labor Statistics likewise confirms this fact. According to their data shared online by Fundera:   

  • 20% of small businesses fail in their first year
  • 30% of small business fail in their second year
  • 50% of small businesses fail after five years in business

With that in mind, you really need to play your cards right at the start of your journey.

As you take the big leap and embrace entrepreneurship, there are certain things you need to do – and others that you need to avoid – to succeed in your industry.

Read on and we’ll give you a few practical reminders you can use in your first year of company formation.

DO comply with the local requirements

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We cannot emphasize this enough: comply with the local requirements. It will save you from any potential headache in the future.

In order to operate legally, a new business needs to observe local regulations after its formation or incorporation.

Requirements may differ from state to state plus, it will depend on the type of business you own. For example, according to, the most common registrations, permits, and licenses necessary are as follows:

  • General business licenses
  • Tax registrations
  • Employer registrations (unemployment insurance and workers compensation)
  • Public health permits
  • Environmental permits
  • Occupational and professional licenses
  • Liquor licenses
  • Lottery licenses
  • Zoning and land use approvals
  • Building and occupancy permits

The government site also mentioned that companies that fail to comply may face consequences such as “fines, notices, and forced closure of its business.”

DON’T forget to protect your intellectual property

As a business owner, you should work on protecting your ideas and creations – your intellectual property.

According to Forbes, IP protection covers:

  • patents
  • copyrights
  • trademarks
  • service marks
  • trade secrets
  • confidentiality agreements
  • terms of service and privacy policy

“To those who have not tried to protect intellectual property, it feels complex and expensive,” Forbes also added. “Too often, startups end up forfeiting intellectual property rights by neglecting to protect their ideas and inventions.”

Despite all that, intellectual property protection is definitely worth it in the long run.  

DO have a solid support system

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Running a one-person show can be difficult. In fact, it can be a backbreaker!

You certainly want knowledgeable people in your corner as you navigate your way during your first year. These people can be composed of your family members, friends, and fellow startup owners who can provide you with motivation when tough times come.

“In many cases, you can’t launch a venture alone,” according to CNBC. This also means you will need “partners or investors for funding and know-how.”

DON’T hesitate to work with experts who can help you out points out that “a good lawyer and a good accountant” will be useful to any startup owner. The business website says:

“Starting a business is complicated and rife with landmines. There are laws that must be followed and those include tax laws. The IRS doesn’t play around.”

In addition to accounts and startup attorneys, you should consider having a registered agent. These professionals will be particularly helpful, especially if you formed your company in a different state than your location. For example, you’re a New York resident but have chosen to incorporate in Delaware. Your registered agent will receive legal documents “such as court summons and any communications from the State,” explains

DO hire employees for the right reasons

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For the most part, your organization’s productivity and efficiency will heavily rely on the type of employees you have. So when recruiting your team members, keep in mind that they will represent your brand to your customers.

Sure, it’s important to assess applicants’ qualifications. You ultimately want to end up with those who share your vision.

Marius Pharmaceuticals CEO Shalin Shah put it this way:

“If you hire people only because they can get the job done, they won’t stay long. If you hire people who believe in your company, they will be your best employees.”

If necessary, DON’T think twice about outsourcing

During the early days of your business, you may need some extra hands to help out in certain tasks. The good news for you, of course, is that there are professional consultants and freelancers out there who are ready to assist.

You can check out websites such as:

With the service of these specialists, you can “avoid taking on employee costs and benefits payments,” said Forbes. This can definitely be a great time and money-saver during your first year of company formation – and beyond.

DO avoid using your personal bank accounts and credit cards for your business

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“Keep bank accounts and credit card transactions for business separate from personal ones,” USA Today encourages entrepreneurs. The article continues:

“In addition to opening up credit and bank accounts for your business, Jennifer Croshal, a CPA, also suggests consulting a tax professional to help you understand the tax implications of your new business.”

Finally, DON’T be afraid to invest in marketing

Last but not least, you will need to spend on marketing to reach more prospective customers.

Obviously, most of your target market will be unaware about your business during your first year of company formation. That’s why you need to exert some extra effort in spreading the word.

“Too many entrepreneurs have good products or services, but do a lousy job of marketing,” a CNBC article remarks. “Whatever you do, you must market. If you’re shy, don’t understand marketing well, or don’t see its value, hire someone who can help.”


Entrepreneurship can truly be a roller coaster ride, especially during the early years. You’ll make mistakes and gain valuable lessons along the way. You’ll experience successes and failures first hand.  

What’s most important, of course, is that you keep going and do your best to apply things you have learned. Listen to your customers. Tweak your offerings as needed. Test out new solutions.

In no time, you’ll get a fuller grasp of what your market needs and how you can position your business against your competitors.

Best of luck in your first year of company formation!

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