Registering your small business can seem like a huge step, but for any new business owner, it is the right move if you want to establish and protect your unique brand and identity. As a savvy entrepreneur you also want to make sure your new business is operating legally. In addition, you want to ensure that your personal finances will not be affected in case anything happens to your business.
There are more reasons why you should register your business. These include enhancing your business profile and adding credibility to your operation, attracting business and funding opportunities, turning your small business into a formal business into a separate financial entity, and most importantly, protecting you from personal liability.
However, registering your brand isn’t as simple as filling out a form in the local office and you’re done. It commonly involves several procedures such as nailing down your business structure, registering to pay taxes, obtaining a permit, and so on. Moreover, the process of registering a new business varies depending on the type of operation the company is establishing, how big it is, and what state the owner lives in.
This article will help make the process easy for you, outlining the five important steps you need to take to register your small business.
Choose Your Business Structure
Before you register your small business with the state, you will need to choose a business structure or business entity. The choice that you make about what type of business structure is suitable for your company influences everything including day-to-day operations, how much you pay in taxes, your ability to raise money from venture capitals or angel investors, the paperwork you need to file, as well as how much of your personal assets (your personal savings and your house) are at risk. That’s why you should decide on a business structure that provides you the right balance of benefits and legal protections.
The type of business entities you pick out will depend on three primary factors: taxation, legal liability, and record-keeping. If you decide to make your business a corporation, a Limited Liability Corporation (LLC), a non-profit, or a partnership (LP, LLP), you will have to file certain documents and register your business with your local state government. On the other hand, if you are planning on operating a sole proprietorship under your legal name, then you don’t need to do this. Though, if you want your business to operate under any other name other than your own, you’ll need to formally file your “Doing Business As” (DBA name) or trade name with your state.
Deciding on the type of business to form should be done carefully. Should you wish to convert to a different business entity in the future, there may be restrictions to follow based on your location. This could result in unintended dissolution and tax consequences, among other complications. Consulting with business counselors, small business accountants, and lawyers can prove helpful.
Register Your Business Name
After choosing a business entity to form for your new company, you will want to register a business name to prevent others from using it. Your business name will be everything you put out to the public such as business cards, advertising and marketing, business formation documents, business loans, and so on. But before you start using that name, you’ll need to be sure no one else is operating it. To do this, you need to search your business name by checking with two government databases: registry of all businesses in the state, and registry of all trademarked names in the state through the US Patent and Trademark Office (USPTO).
Once you’ve verified your chosen business name is not being used by anyone else, you can now register it. When it comes to registering your company name, you have a lot of ways to accomplish this, which you can make the most of separately or together. These include forming a business entity and simply registering under that name, filing the registered name as an assumed name or “Doing Business As” (DBA), and trademarking your business name. The options may vary depending upon whether the business is structured as a corporation, a sole proprietorship, some form of partnership, or an LLC. Moreover, determining the best method to register a business name will take into consideration a few more factors such as the geographical area in which the company will operate as well as the extent of protection needed.
Register with The IRS
This process does not apply to all new employees, your chosen business structure will determine if and what type of federal tax your small business has to pay. If you have employees, are a corporation, any business partnership, or other organization, then you‘ll have to register with the IRS to receive your Employer Identification Number (EIN). This is also called Federal Tax Identification. Your EIN is like a Social Security Number for your small business and is required for filing your taxes.
The good news is you can apply for an Employer Identification Number (EIN) online with three easy steps. Determine your eligibility–your principal business must be within the territory of the US and you must have a valid Taxpayer Identification Number (SSS, ITIN)– understand the online application (this can only be done in one session), and lastly, submit your application. You can download, save, or print your EIN confirmation notice afterward. Again, there are particular situations where you may not need an EIN. To check if you do, the IRS also has a short survey you can fill out.
Register with State and Federal Agencies
You’ll likely need to register with any state where you operate business activities. Usually, you’re considered to be “conducting business” when: your company has physical presence in the state, any of your employees work in the state, a significant portion of your business’ revenue comes from the state, or you often have in-person meetings with customers in the state. Some states make you file paper documents through the mail or in person, and some states allow you to register online. Bear in mind that the documents you need–and what goes in those papers–will vary from state to state and based on your business structure.
While most businesses are not required to register with the federal government to become a legal business, other than simply filing to obtain a federal tax ID, some companies register with the federal agency for tax exempt status or trademark protection. As mentioned, if you want to trademark your product name, business, or brand, file with the US Patent and Trademark Office once you’ve decided on your business structure.
If you’re a non-profit corporation and you want tax-exempt status, you can register your company as a tax-exempt entity with the IRS. To create an S Corp entity, you will have to file form 2553 with the IRS.
Apply for Licenses and Permits
For you to run your small business legally and begin serving your clients, make sure you have obtained some type of state and/or federal licenses and the right permits. Most small businesses need a combination of permits and licenses from both state and federal agencies. Each industry may have different requirements and fees depending on your location, business activities, and government rules.
Good thing applying for licenses and permits and determining their laws and regulations got a whole lot easier. The US Small Business Administration has launched an easy way to search for registrations, permits, and licenses needed to run any type of business. The tool generates links and instructions to get you started. Plus, searches can be customized to meet your location and specific type of business.
There you have it, five easy steps to get your small business registered. While registering a business can be complex and costly, we strongly recommend working with a small business consultant or attorney to help you weigh your choices, file, and take the necessary steps. Once you have completed the process and processed all the paperwork, you can now showcase your business to the public and provide the best service to your customers.