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How to register your small business
This article is part of our How to start a business playbook, which covers topics like finding the right business idea, writing a business plan and finding small business loans.
Some aspects of starting a new business are exciting and glamorous. Others… less so. For most people, registering your business falls into the latter group. It can be hard to figure out the steps you have to take to get registered, much less actually complete them.
What documents do you need? Who should you file them with? Do you need to get an Employer Identification Number? Should you register as a sole proprietor or limited liability company? You have a lot of questions. This guide is designed to help lead you through the complexity to a clear cut path for what you need to do to get your business fully registered and ready to launch.
In the United States, registering a new business can be broken down into four main buckets:
- Registering your business name
- Registering your legal or business structure
- Registering with the appropriate tax authorities
- Registering for any applicable licenses and permits your business may need
Step 1: Register your business name
The first step to registering your business is ensuring you can legally do business under the name you’ve chosen. That involves a few things including choosing a name free from existing copyright and filing a “Doing Business As” (or DBA) with your state government.
Do you need to file a DBA?
Typically, if you plan to operate your business under anything but your own name, you need to register it. For example, if your name is Jane Smith and you want to call your business “Copywriting by Jane,” you’ll need to register that as your trade name by filing a DBA.
The exception here is if you choose to register your business as a limited liability company or corporation (more on that in the next section.) If that’s the case, your registration for LLC or corporate status will automatically include registration of your business name.
However, registering as an LLC or corporation often means you must include “LLC” or “Inc.” in your business name. If you want to do business without those, you’ll need to file a DBA.
If your business will be registered as a sole proprietorship and use your name, you don’t need to file a DBA.
Abiding by copyright law
Choosing a name for your business all comes down to your preferences and the image you want the business to project. Once you’ve chosen one, it’s important to make sure that name isn’t already being used by another business.
Before you file a DBA, take a few steps to ensure your business’ name is free from any copyright conflicts.
- Check with your local county clerk’s office to make sure the name isn’t already registered to another business
- Contact your state’s filing office and ask how to search their database of corporations, LLCs, and limited partnerships
- Search the U.S. Patent and Trademark Office’s trademark database
- Lastly, do a quick Google search to see if anyone is using the name online
When you’ve checked all of those places to ensure your business name is free and clear of any copyright infringement, you’re ready to file your DBA. Contact your town or city clerk’s office (or check out their website) to find out about filing a DBA in your area.
Trademarks and other intellectual property considerations
Once you file your “Doing Business As” form, your business name is protected from copyright infringement at the state level. However, a DBA doesn’t offer you legal protection, and it isn’t valid on the federal level.
That’s why it’s important to consider filing for trademark protection of your trade name. In addition to legally protecting your business name, a trademark can also include symbols, logos, or slogans your business may use.
To trademark your business’ name or visual elements, you’ll need to file with the U.S. Patent and Trademark Office (USPTO) and pay a fee between $200-$300. Find out more about registering a trademark on the USPTO website.
Step 2: Choose and register your business’ legal structure
Now that your business name is taken care of, it’s time to register your business as one of the legal entities or structures recognized by the government. There are several business structures you can choose from, but the most common are: sole proprietorship, limited liability company, and corporation. The vast majority of small businesses in the United States—over 70% of them—operate as sole proprietorships.
There are benefits to registering as an LLC or corporation for certain businesses, though, so it’s important to research and weigh your options before registering. Here’s what to consider before making a decision about your business structure:
- Legal liability
- Tax implications
- Cost and complexity of formation
- Flexibility of management
- Your business’ future needs
For the purposes of this guide, we’ll focus more on how to register as each type of entity. To learn more about the pros and cons of each legal structure, check out Fundera’s guide to choosing a business entity.
Sole proprietorships are far and away the most common type of business. The U.S. Small Business Administration (SBA) defines a sole proprietor like this:
A sole proprietorship is the simplest and most common structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the business and you, the owner. You are entitled to all profits and are responsible for all your business’s debts, losses and liabilities.
The important distinction here is that, in the eyes of the government, you (the owner) and the business are one entity—when it comes everything including debt, income, and taxes.
Sole proprietor businesses are the easiest to start up, simplest from a tax filing perspective, and allow owners to retain full control over business decisions. That’s why operating as a sole proprietorship is the simplest way to do business for most new businesses.
How to register as a sole proprietor
The short answer is that you don’t need to do anything to register as a sole proprietor. Simply start doing business under your personal name or the trade name from your DBA and—congrats!—you’re a sole proprietor.
In reality, there are still some state and local registrations and licenses you’ll need to obtain. These vary widely from one state, and even town, to the next.
That’s why the best way to ensure you have all your bases covered is to contact your local Small Business Development Center. They can provide you with step-by-step instructions that are specific to your local requirements. Find your local SBDC by searching the Small Business Administration’s list.
Limited liability company
Limited Liability Companies (LLCs) are a middle ground between sole proprietorship and corporation. They combine the best benefits from each—affording business owners the flexibility and tax benefits of a sole proprietorship with the liability protection of a corporation.
The distinction between a sole proprietorship and an LLC is primarily focused on the liability piece. As a sole proprietor, you’re personally liable for your business’ debts and you can be sued personally for business dealings. That means your personal assets, like your house and car, could be seized to settle a business debt.
An LLC protects you from that kind of personal liability, effectively separating you from the business in the eyes of the government. At the same time, you still benefit from the simplicity of filing taxes the same way a sole proprietor does—by passing business profits through to your personal income tax return.
How to register as an LLC
Registering as an LLC is a more intensive process than registering as a sole proprietor. You’ll start by filing formal paperwork, usually called your Articles of Organization. The information you include in your Articles of Organization may vary depending on your state but all states require:
- Your LLC’s name and address
- The nature of your business
- The name and address of your LLC’s registered agent
- The names of any other managers or members of the LLC (as of filing)
Once you’ve filed your Articles of Organization and paid the corresponding filing fee (which can be anywhere from $100-$800, depending on your state), you need to create an LLC operating agreement. The operating agreement outlines the rights and responsibilities of everyone involved with the LLC—even if that’s just you right now.
When you register as an LLC, you file with your state, so it’s important to research any additional steps or requirements with your state government. Nolo has a handy guide to filing as an LLC in all 50 states that you can reference.
Corporations are the most formal business structure. Registering as a corporation requires the most paperwork and upfront cost, but you get the benefit of complete personal and business separation. Incorporating also comes with rigid management and operating procedures that all corporations must legally follow.
Unlike the first two structures, corporations can come in a variety of forms—each with their own operating requirements and tax benefits. These include:
- C corp
- S corp
- B corp
- Close corporation
- Nonprofit corporation
Each type of corporations offers different benefits and obligations. Generally speaking, though, incorporating is best for businesses that aspire to grow into a medium or large company, those with high potential for liability, and businesses that may be sold or “go public.”
How to register as a corporation
Similar to an LLC, incorporating your business means registering as a corporation with your state. Again, the steps and requirements to register will vary from one state to the next.
The important thing to know is that registering as a corporation is a lot more time- and cost-intensive. Here’s just some of the steps you’ll take to form a corporation:
- File Articles of Incorporation that detail the name and address of the business, the purpose of the corporation, names and address of the board of directors, and stock information, among other things.
- Pay the filing fee, franchise tax, additional government filing fees, and attorney fees—often costing upwards of $1,500.
- Draft corporate bylaws that govern the management and operations of the corporation
- Establish a board of directors and hold your first board meeting
Because of the complexity and cost of registering as a corporation, we strongly recommend working with a small business lawyer or consultant to help weigh your options, take the necessary steps, and file.
Step 3: Register with tax authorities
Once you’ve registered your business’ legal structure, it’s time to register with all the appropriate tax authorities. This step ensures that all the right government agencies recognize your business and its tax structure. You’ll need to do this before you collect or file any taxes. For most businesses, you’ll file taxes quarterly, so it’s best to register with tax authorities right away.
Get an Employer Identification Number
Your first step is to register for an Employer Identification Number (or EIN) from the Internal Revenue Service (IRS.) Your EIN works like a social security number for your business—it’s how agencies like the IRS will identify your business when it comes to tax filings.
Not every business has to have an EIN. For sole proprietors and LLC owners who report business income on their personal tax return, you aren’t required by the IRS to have an EIN. However, in this case, you may be required to hand out your personal social security number to vendors and suppliers. That’s why we recommend securing an EIN, even if you aren’t required to.
Luckily, getting an EIN is one of the easiest parts of registering your business. Just fill out this application on the IRS website, and you’re good to go!
Request quarterly tax vouchers
As we mentioned before, most businesses pay estimated taxes on a quarterly basis (every three months.) That’s because, unlike when you work for another company, there aren’t any taxes withheld from each paycheck. So you’ll make quarterly payments to keep up with your tax liability.
Since the IRS processes tax returns once a year, your business will use a particular voucher from the IRS to submit your payments. To request quarterly estimated tax vouchers, fill out form 1040-ES to estimate your tax liability for the year. Once, you’re up and running, you’ll be able to submit your quarterly payments online, over the phone, through the IRS mobile app, or by cash, check, or money order through the mail.
Apply for a tax permit
Enough about paying taxes—let’s talk about collecting them. For some businesses, you’re required to charge and collect state tax on the goods or services you sell. The most common small businesses that need to collect state tax are restaurants and retail stores.
Some ecommerce businesses may also have to collect tax in certain states now, too. If you’re launching an ecommerce business, take a look at TaxJar’s guide to ecommerce sales tax.
If you need to charge sales tax, register your business with the state’s Department of Revenue and secure a permit to collect state tax. To do that, visit your state’s Department of Revenue website and search for “sales and use tax.” With your EIN and other identifying information about your business, choose to register.
Step 4: Register for applicable licenses and permits
A few businesses might be able to skip this last step, but the SBA estimates that almost every small business requires some form of license or permit, from either the federal or state government. Licenses and permits apply to industries that are regulated in one way or another by the government.
These licenses and permits are specific to each industry, so we won’t go into too much detail here. You’ll need to secure federal licenses if your business deals in:
- Alcohol sales
- Firearms, ammunition, and explosives
- Fish and wildlife
- Maritime transportation
- Mining and drilling
- Nuclear energy
- Radio and TV broadcasting
- Transportation and logistics
State licenses and permits vary widely from one state to the next. Here’s a sampling of the industries that are usually regulated by state governments:
- Dry cleaning
Unsure if your business needs any licenses or permits to do business? Fundera put together a handy guide to each state’s licensing requirements.
Get all your ducks in a row
Registering your business name and legal structure isn’t the most exciting part of starting a new business, but it’s an important part nonetheless. If you’re feeling unsure about any part of registering your business and acquiring the right licenses and permits, it’s worth it to chat with a small business lawyer or consultant to ensure your business is in good shape.
By getting all of your ducks in a row from the very outset, you can set your sights on building and and growing your new business—without worrying about taxes or trademark lawsuits.