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.
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:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
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 very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
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
Establishing a legal business entity such as an LLC prevents you from being personally liable if your cryptocurrency business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
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?.
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.
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: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
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:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
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.
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: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Cryptocurrency Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
Anyone who likes to be on the forefront of technology and isn’t afraid to experiment may be interested in creating a cryptocurrency. This is truly the frontier of technological currency and there’s still much to be discovered, so starting a business in the industry comes with inherent risk.
What happens during a typical day at a cryptocurrency business?
The activity at a cryptocurrency can be separated into pre- and post-launch. Before an initial coin offering, business owners spend time coding the coin and marketing it. Afterward, they focus on marketing it.
What are some skills and experiences that will help you build a successful cryptocurrency business?
Creating a cryptocurrency requires only basic coding knowledge. Programmers who are familiar with C++ can amend the open-source code used for Bitcoin or Litecoin (which itself altered Bitcoin’s code). Those who don’t know C++ can learn by taking a course online from Udemy or Coursera, or at their local college or community college.
While not absolutely necessary, it’s very helpful to have a knowledge of how blockchains work. The fundamentals are detailed in Bitcoin: A Peer-to-Peer Electronic Cash System, which was the seminal paper written by the founder of Bitcoin.
Alternatively, business owners who aren’t interested in the technical aspects of cryptocurrencies can hire a company like Blockchain App Factory or CryptoNoteStarter to create one. Before using one of these companies, however, business owners should carefully consider how their coin will be unique and add value. If a coin only duplicates the technical aspects of other coins that a company makes, it will be difficult to attain long-term success.
What is the growth potential for a cryptocurrency business?
Cryptocurrency businesses can grow to an immense size. Bitcoin has thus far been the most successful, once having a market capitalization of $835.69 billion. The cryptocurrencies value has been volatile and it no longer is as high, but this shows the potential that exists. Additionally, this was the value of all Bitcoins produced and not the value of the company that created Bitcoin.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a cryptocurrency business?
Before focusing on the technical aspects of creating a cryptocurrency, businesses should first identify a community that could use a new cryptocurrency. By focusing on a community rather than technical issues, business owners can better understand what features matter to the community. The features can then be built into the new cryptocurrency when it comes time to focus on technical aspects.
How and when to build a team
While it’s technically possible to create a cryptocurrency on one’s own in 30 minutes, attaining critical mass for a cryptocurrency takes a lot of time and labor. Therefore, business owners should bring marketers, ambassadors, miners and merchants onboard from the outset.
Rewarding these people with some coins in the cryptocurrency being created costs a business nothing and makes everyone invested in the cryptocurrency’s success.