If you’re considering starting a small business, chances are you’re wondering whether you’ll need to register that business at a local, state, or federal level. While an accountant, business manager, or attorney can help you best determine how to complete registration in your state, there are some basics you may want to know ahead of time. Read on to learn more about registering a business.
Do you need to register your business?
The first thing you’ll want to determine is whether you need to register your business at all. According to the U.S. Small Business Administration, if you’re using your legal name to conduct your own independent business, you don’t need to register anywhere.
Still, if you want to name your business, you’ll likely need to register your business name with your state and local governments. Whether you file a Doing Business As (DBA) form—which is sometimes legally required—or hire an attorney to trademark your business name, you’ll want an expert to confirm you’re doing everything by the book.
Deciding between business types
A variety of legally-recognized business types afford business owners certain liability protections and tax and legal benefits. Here’s a summary of some of the most common business types:
If you work independently and use your legal name to provide services, you’re already a sole proprietorship. You do not need to register a sole proprietorship, although you may need to file a DBA form at a local level. However, remember that a sole proprietorship is not a separate business entity, which means that you are personally liable for any debts, problems, or challenges that may arise between your business, your customers, and your vendors.
If two or more people own a business together and want to create the simplest, least formal business entity possible, a partnership is usually the answer. This can be a limited partnership (LP) or a limited liability partnership (LLP). In the former, only one partner has unlimited liability. In the latter, both owners have limited liability.
Limited liability companies
An LLC can help protect your personal assets in case your company is sued, files for bankruptcy, or encounters other significant challenges. If you are a member of an LLC, you’re still considered self-employed. That means you’ll have to pay self-employment taxes. Usually, LLCs are a good choice for higher-risk businesses and owners who need to protect personal assets.
If your business has decided to organize as a corporation, it will choose between a C corp, S corp, B corp, close corporation, or nonprofit organization. Each corporation has a laundry list of requirements and a distinct set of benefits and drawbacks, especially when it comes to personal liability and tax implications.
No matter what kind of business you choose to organize and register, you’ll want to work closely with an attorney and CPA to determine you’re selecting the best business entity and that you’re registering that business properly.
Related: Small Business Hiring Tips for 2023
How to register a business
Now that you know what kind of business you’d like to register, you’ll want to determine precisely how to make your business official—and legally compliant. Remember that these steps differ in every state, so your best bet is always to consult with the SBA, an attorney, and a CPA.
Registering with federal, state, and local agencies
On a federal level, many small businesses only need to file for a federal tax ID. If you want to trademark anything, that happens federally, too–but only after you’ve formed your business. If you’re creating an S Corp or filing for tax-exempt status, you’ll also need to file with the IRS.
On a state level, you’ll likely need to register if you decide to form an LLC, partnership, corporation, or non-profit organization in every state where your business is active. Your business is considered “active” in a state if it maintains a physical presence there, frequently conducts in-person meetings with clients located in that state, generates a significant amount of revenue in that state, or any of your employees work and resides in that state. You’ll need to verify the requirements for registering your business with each state.
Locally, you’ll want to check whether your county and city require you to register a DBA or FBN (fictitious business name). You’ll also want to determine what licenses and permits you may need to operate at your physical office.
How to register a business name
As you form your business, you’ll need to look for a business name that makes sense for your brand and is also available for you to use. You’ll register your business name as you register your business, but certain steps, including trademarking the name and securing a matching domain address, need to be handled separately.
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