You’ll need to learn how to register business before operating your business if you have an effective business idea and a well-developed business plan. The legality of your business relies on the fact that you’re legally registered and complying with tax laws.
When setting up a new business, you will almost certainly have to register with state or local authorities. Understand how business registrations differ and the needs for each type.
You probably realize that you need to register your business with the city or state if you’re starting one. It may also be embarrassing for you to admit that you do not know what that phrase means. Why is a business registered with whom?
Business registration is a broad term that can mean several things, so, understandably, you’re confused. A business registration may entail creating a false business name, registering with state and local taxing and licensing authorities, or registering a trademark.
What Is Company Registration?
Business registration is the process of registering an entity and obtaining the appropriate licenses and licenses to operate the business in a specific state.
You will need to weigh your options, fill out and submit the required forms, and then pay the filing and registration fees at each stage of business registration.
If your business structure, ownership, and activities are complicated, you will need the assistance of an accountant and a lawyer to register a corporation.
Register Business Name
You can register a business name in either of two ways. Your company must be incorporated as a corporation or limited liability company as a first step.
Your business name will be automatically registered with your state, ensuring that no other firm with a similar name can be formed in that state.
Another option is to create a fictional business name and register it. Imagine you are Joe Smith, the owner of “Joe’s Lawn Care” through which you operate.
For example, you can form a limited liability company called “Lawns and Things, LLC,” but still conduct business under the name “Joe’s Lawn Care.” This is sometimes called a “doing business as” name, or DBA.
You must register your DBA with the state agency that handles business filings, typically the state’s secretary.
You will need to submit a form and payment, and in some areas, a newspaper notice may be needed.
The state may not require a statewide registration of your DBA, so you may be required to register it with your city or county. Some states don’t require DBA registration.
Registering With Taxing and Licensing Agencies
Local licensing organizations may require you to register for licenses or permits, depending on your type of business and its location. The government requires all businesses to possess a permit or license in some municipalities.
You may also need permits for parking or to occupy a building. Further, certain types of enterprises, such as restaurants, require particular licenses and permits.
Small Business Administration of the United States maintains a website with links to numerous state and municipal regulations.
A federal tax ID number does not require registration with the Internal Revenue Service (unless you are a sole proprietor without employees), but you need an identification number. You can apply for a tax identification number online. You will use the tax identification number to report and pay employment taxes and prepare the federal tax return.
Your state taxing office may require you to apply for a seller’s license if you provide tax-exempt goods or services.
You are generally obligated to pay sales tax on all transactions that occur within a state where your business has a physical presence.
There are, however, different standards in each state. You can find out more about your responsibilities by contacting the tax department in your state.
You may also be required to register with your county to pay real estate and personal property taxes.
The trademark serves to identify your goods or services and differentiate them from those of your competitors. Traits are designs, symbols, words, or phrases.
The use of your trademark in commerce confers trademark protection, although your registered trademark holds no national protection.
A trademark can cover your company’s name, logo, label, product packaging, and other identifying components.
The Trademark Office requires a trademark application that identifies the trademark and the class of products and services it uses. You can do this online.
The term “registering” a business can signify a variety of things in a variety of contexts. It depends on the type of business you run and where it is located, whether you need to register a business name, apply for licenses or permits, or register for taxes. You may also register trademarks.
The necessary registrations will help you set up your business on the right foot and protect your brand, as well as comply with applicable local, state, and federal regulations.
Steps To Register a Business
If you are trying to register a business, here are the steps you need to take.
Decide on a company name and reserve it.
Choosing a name for your company will require you to examine the state’s database of names used by companies established in Illinois and those from other states approved to conduct business there.
There are restrictions on using the same name in the state, so be prepared to think of several alternative names if your first choice is unavailable.
The terms “Incorporated,” “Corporation,” “Inc.,” or “Corp.” in the name of corporations may be required by each state, whereas LLCs may be required to use “LLC” or “Limited” or something similar.
You may be required to register an “assumed name/fictitious name/doing business as” form with your state and/or municipal governments if you choose to do business under a different name.
Consult an Attorney
You have several choices to make when you begin a business that will affect your tax liability and finances. This type of decision should be made as often as possible with the assistance of a company lawyer. Your friends and family may be able to recommend a qualified attorney.
If someone within your circle cannot refer you to an attorney, your state’s bar association may offer a lawyer referral service or lawyer search tool. You can, for instance, contact a specialist for free in California who can examine your case and connect you with a qualified attorney.
- Make sure you schedule an initial consultation before you hire a lawyer. When meeting with an attorney, ask about their experience forming and registering businesses, their degree of success, and their record of legal discipline.
- When you find a lawyer you like, be sure to negotiate a reasonable fee structure and get a written agreement.
How you file your tax returns and what types of taxes you owe depend on your company’s organizational structure.
Individuals and corporations must file income tax returns, for example. On the other hand, partnerships are required to file information returns, including a statement of income and expenditures.
- The entity you form as a corporation is subject to both state and federal corporate income taxes. You are also responsible for taxing dividends that you distribute based on each individual’s marginal tax rate.
- The Internal Revenue Service (IRS) treats a limited liability company (LLC) as a corporation, a partnership, or a disregarded entity. You will be able to pay your taxes differently depending on how you choose.
- You may be eligible for federal and state tax exemptions if you establish a nonprofit organization.
Form a Business Entity
Whether your business will be run as a sole proprietorship, limited partnership (LP), general partnership (GP), limited liability company (LLC), or corporation, your lawyer can provide you with advice.
You must decide what your business’s intended activities will be, who will own it, whether limited liability is required, and whether to tax it as a corporation (taxed separately) or as a partnership (income passes through to the owners, who pay individual taxes).
A second decision to make involves which state to incorporate in. It could be the state where your firm is physically located or a state such as Delaware that provides more favorable business regulations.
You must qualify to do business in your state of physical location if you choose Delaware, which has no operational ties to your business. A few additional documents and additional registration fees must be submitted for this to be accomplished.
The formation documents must be filed with the state once you have decided on the type of business entity.
Set your limits for personal liability
The owners of certain business models are shielded from personal liability for the business’s debts. These enterprises, on the other hand, are frequently more complex and demanded more paperwork and reporting.
Choosing the wrong business structure may mean you are still responsible for your organization’s debts, even if it is a non-profit.
- An LLC or corporation typically offers liability protection, while a sole proprietorship or partnership usually does not.
Plan How You Want To Raise Funds
The methods of securing capital vary according to the type of business. You should assess your ability to raise money through different methods before forming and registering a business.
- As a new company, you will need to raise money via loans and personal contributions (such as purchases of stocks or the use of venture capitalist firms).
- Creating a nonprofit organization allows you to raise funds through individual contributions and grants.
Obtain a Federal EIN
You must complete a short form with the Internal Revenue Service (IRS) to obtain an Employer Identification Number (EIN) for your business. Federal tax purposes require your company to have this number, which is like a Social Security number.
Tax Registrations in Your State
Your firm must register with the states where it does business and where its employees live if you collect sales tax from clients or have employees. You will need to speak with your state to determine if you need a state tax identification number.
Obtain business licenses and tax permits
The towns and cities where you maintain your business’ office, retail, manufacturing, or storage facilities may require a business license and/or permit, as well as municipal tax permits if you are subject to such taxes. You will most likely need federal, state, and municipal licenses (based on the nature of your business).
Apply for a Trademark and Register Your Business Mark
Your company’s name, slogans, and logos might need to be protected by a federal trademark. If you wish, you may also consider registering your trademark at the state level, which is often more straightforward, faster, and less costly.
Renewing permits and filing annual reports
Many businesses are obligated by state and local laws to file annual reports and renew their registrations at regular intervals. Ensure that you are familiar with state and local regulations to ensure that your company adheres to all requirements.