U.S. small business owners can protect their commercial interests by registering with state and federal agencies.
Some businesses cannot operate without registering. For others, registration isn't necessary. By registering your business, however, you can increase the credibility of your enterprise and shield it from legal and administrative snafus.
By understanding business registration, you can avoid legal problems and tax complications.
Most large businesses need to register with several state and federal agencies. However, the same doesn't apply for small companies and sole proprietorships. Still, there are scenarios where a small business owner will want or need to register their enterprise.
Typically, it's not difficult to register a business. However, the process is more comprehensive for certain enterprises. Registration requirements vary depending on the type of business, the company structure and whether or not the entity is a partnership.
Municipalities typically consider individuals and their sole proprietorships as the same entity, so they do not have to register. Some states don't even require registration for small partnerships.
Two things typically determine whether you need to register your business - your state and your business structure. Once you decide the state where you will operate (which is especially significant if you plan to work in multiple states) and your desired business structure, figuring out the rest is relatively simple.
As a rule of thumb, if you operate as yourself using your name, you don't need to register. Note, however, that failure to register with the city or state could negate your ability to secure personal liability protection as well as disqualify you from legal and tax benefits.
When using a fictitious business name, you should register the name in your city or municipality. A fictitious business name is also called a Doing Business as Name (DBA). In most cities, you can file your DBA for nominal fee at the County Clerk or City Hall.
If your business uses an image or logo as an identifier, you'll want to register with the United States Patent and Trademark Office (USPTO). Trademark registration will prevent others from using your branding - and vice versa.
For some business owners, it makes sense to register with the state. For example, if you want to secure a DBA for statewide use, you must go through the process of registering.
Typically, you can search an online state business database to check the availability of your desired fictitious name. Some states also require you to register a business for tax collection purposes.
You most certainly will have to register your business if you hire employees and must withhold state taxes. In this instance, you'll apply for an employer identification number (EIN). Some individuals without employees may prefer to use an EIN rather than their Social Security number for tax forms.
In general, all corporations, limited liability companies (LLCs) and limited liability partnerships must register in their state of operation.
For more complex business structures, entrepreneurs typically hire attorneys to aid in the process of establishing the commercial entity. Counselors typically include registration as part of setting up the business.
It's good practice, to contact your state office and find out if there are special registration requirements in the jurisdiction where you'll operate your business. Even if a lawyer is helping you establish your business, it's your responsibility to ensure that your business is in legal compliance.
While some municipalities may have lax registration policies, others may require everyone who owns a business to register with the state. No matter how small your enterprise, it's highly advisable that you know the local regulations regarding registration requirements before conducting any business.
Each year, the regulations may change. By talking to a state department agent, you are sure to find out the most up-to-date information.
Typically, you can fill out any necessary paperwork online. However, a state agent can inform you if there any discrepancies between recently changed laws and the website instructions.
Some states allow you to create your business taxpayer identification number online or register with an existing tax number. Most states will allow you to register free of charge and provide you with immediate confirmation of your registration. Others may ask you to mail in your payment along with a printed invoice.
Other than applying for a federal tax ID, most small business owners don't need to register with the federal government. However, some may want to register with the federal government for trademark protection or tax exemption purposes. For example, nonprofit corporations must register with the Internal Revenue Service (IRS) to qualify for tax-exempt status.
You can apply online for your federal EIN. According to the IRS website, in EIN applicant must have a valid taxpayer identification number. A valid taxpayer identification number is either a Social Security number (SSN) and employer identification number (EIN) or an individual taxpayer number (ITIN).
Furthermore, states the IRS, the applicant must own or maintain responsibility for the registering entity. Also, only individuals can apply for an EIN.
Before you apply for an EIN, gather all necessary documentation. You cannot save your work. You must complete the application in one sitting. Also, your application will expire after 15 minutes of inactivity.
Once you complete your application, you'll receive immediate validation from the IRS website. You can download your EIN confirmation for reference. The site will also direct you to further information, such as documentation outlining tax responsibilities for employers.
If you're a tax-exempt organization, federal tax registration is more comprehensive. You must form your organization legally before applying for your EIN.
If the IRS approves your tax-exempt EIN, make sure to renew your filing annually if required. The IRS will automatically exempt your nonexempt tax status if you fail to reapply annually.
The IRS will also nullify nonexempt tax status if an organization fails to file tax returns for three years. If you operate a nonprofit organization, the onus is on you to remain in compliance to uphold your tax-exempt designation.
The government awards billions of dollars to contractors every year. Of those contracts, the government earmarks 23% of its awards for small businesses.
If you meet the requirements, the U.S. government might make a great client. The federal government even provides small businesses with resources that help with securing contracts.
For instance, the Contracting Opportunity Finder introduces new small businesses to federal government contracting. The GSA Vendors Toolbox can help you decide if contracting with the government is a good fit for your enterprise. You can even access live counselors through the Procurement Center Representative (PCR).
If you decide to pursue contracts with the federal government, you must register for a Data Universal Numbering System (DUNS) code. It's a nine-digit number required to work on any federal contract.
The government uses the number to track your credit. Dun & Bradstreet manages credit reporting for the system. You can register for a DUNS number for free.
You must also register with the System for Award Management (SAM) to apply for federal contracts. Registration for SAM is also free. Finally, you'll want to register with FedBizOpps to receive contract bid notifications.
It's better to err on the side of caution. If you're starting a business, you should seek the counsel of an attorney and the expertise of an accountant.
For various reasons, you may not have a budget for professional services and consulting. You may have exhausted your startup funds on equipment, or your business idea is something that you want to try out part-time first to see if it works. Despite your circumstances, you may place your assets at serious risk by operating a business without proper registration and structure.
If you're running a part-time business as a sole proprietor with a tight budget, expert advice can prove especially helpful. Some small and part-time startups, however, may not have a budget for ongoing consulting, but that doesn't relegate you to risk launching your business without professional help.
The government supports small businesses. Even without a budget for professional services, there are ways for you to access the expert help needed to safely launch your enterprise.
For over half a decade, the SCORE Association has mentored and advised small business owners. The organization supports 10,000 volunteers and 300 chapters across the United States.
Most SCORE services are free. The group is a nonprofit run by volunteers.
SCORE is the top resource partner for free training and mentoring for small businesses. The group works with the Small Business Administration (SBA). Through the partnership, SCORE has helped over 11 million business owners.
No matter what your service or offering, you can connect with the organization for help planning and establishing your business. SCORE will give you access to executive volunteers who will meet with you to launch your business and provide ongoing support.
The organization also hosts free online workshops covering a range of topics. You can also access the SCORE online library to browse a wealth of educational business content.
Don't launch a venture using guesswork. Start your new business the right way. Do your homework, then have an expert review your findings. No matter what your budget, there's expert help available to help you register and launch your business.