Starting a business is an exciting, independent venture filled with many decisions. Before launching, however, you’ll need to register your company with the appropriate agencies. Completing the registration process swiftly and accurately will help you put the right foot forward and be well on your way to success.
Here’s how to register your business.
[Read more: Need a Business Idea? Here's Where to Start]
Define your business structure
Different business types will have different registration requirements, so it’s crucial to make sure you undergo the correct process for the structure best suited to your business goals. This will also determine which income tax return forms you will need to file. Here are some of the most common business entities:
- Sole proprietorship. A sole proprietor serves as the only owner of an unincorporated business. This is considered the default business structure. In a sole proprietorship, the proprietor’s business and personal assets and liabilities are not separated. Note that sole proprietorship is different from being the sole member of a limited liability corporation.
- Partnership. If two or more individuals own a business together, they are entering into a partnership. There are multiple types of partnerships but the most common are limited partnerships (LPs) and limited liability partnerships (LLPs). In an LP, one partner is exposed to personal liability while the other partners have limited liability. In an LLP, all partners are personally protected from any business debt.
- Limited liability corporation (LLC). Starting an LLC allows an individual to protect personal assets from business liabilities. An LLC’s profits and losses are then taxed as personal income or loss. Note that even if someone is the only member of an LLC and their business is functioning as a corporation, they are not considered a sole proprietor.
- Corporation. In this structure, a business operates as a separate legal entity from its owners, offering the most protection for any personal assets. The default corporation status is a C corporation, which is a separate taxable entity that files a corporate tax return. An S corporation, on the other hand, has taxes “passed through” to the business and reported on an owner’s personal tax return.
Federally registering a business is a relatively simple process.
When to file with the federal government
Some businesses, especially single-person entities using their legal name to conduct business, don’t necessarily need to register with the federal government. However, not doing so may mean missing out on potential tax exemptions and more benefits.
Business owners who want to trademark their company, brand or product name must file with the United States Patent and Trademark office (USPTO). Certain corporations (such as nonprofits) can also receive tax-exempt status by registering as a tax-exempt entity with the IRS. Finally, businesses must be a federally recognized entity to apply for government contracts — so if your business plans to bid on government contracts, ensure you’re filed with the federal government.
Federally registering a business is a relatively simple process. In many cases, business owners simply apply for a federal tax ID, commonly referred to as an employee identification number (EIN) and the process is complete.
[Read more: How to Register Your Business With the Federal Government]
How to register your business
Once you’ve defined your structure, you’ll need to register at the following places to start your business:
- Register your business name. This step is typically part of the process of registering separate entities, such as LLCs or corporations. However, if you are starting a sole proprietorship or partnership under a name that is different from your own, you may need to file a “doing business as” or DBA name. You will also need to ensure that your chosen business name is eligible for use.
- Register with the IRS. For businesses that are required to (or may otherwise opt to) register at the federal level, the next step is registering with the IRS to receive an EIN. The application process is free of charge and can be completed online, by mail, by fax or by phone. To do this, you must possess a valid taxpayer identification number, such as a Social Security number.
- Register with local or state offices. Most business structures will require you to register with state offices, such as the Secretary of State’s office or a business bureau. Certain counties and cities may also require you to register your DBA name (if you have one).
- Apply for permits. While you typically won’t have to register with county or city governments to form your business, you may need to file for local permits to become operational depending on your location or what your chosen industry requires. Visit your local government websites for more information.
[Read more: When — and Why — to Consider Changing Your Business Entity]
Stay tuned for our next Startup2021 article on trademarking your business name.
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