You have a great idea, a proven concept, and passion. It’s time to make your small business official by registering it.
This crucial step in your entrepreneurial journey can seem overwhelming, but it’s actually quite simple. Let’s dive into everything you need to know about registering and how to make your small business official.
Is Registering Your Business Necessary?
In many ways, registering your small business is what sets it apart as a legitimate venture instead of just a hobby. Registering your business isn’t always required (especially if you operate a business under your own name), but it is widely recommended because of the many benefits and protections it provides.
Registering your business creates a public record of the name and address of the business owner and protects your business name from being used by other companies. Registering your small business also establishes it as a legal entity. This step gives credibility to your business and can make it easier to receive loans, access capital, secure tax benefits, protect yourself from liability, and more. It can also make securing partnerships with suppliers and hiring employees easier because you have legal backing and legitimacy.
A Step-by-Step Guide to Register Your Business in the U.S.
Ready to register your business? Don’t worry if the process seems daunting — it can actually be one of the most exciting parts of being a business owner! Depending on where you live, the whole process can take a few days to a week.
Here's what you need to do:
Select a business structure. Before you officially register your small business, you need to choose the business structure based on the structure, liability, and tax obligations. Most small businesses fall into one of these common structures:
- Sole proprietorship. This is a small business owned and managed by one person. The owner is personally responsible for all business financial liabilities and reports business profits on their personal income taxes.
- Partnership. This type of business is owned by two or more people. The partners share financial responsibility and report business profits on their personal income taxes.
- Corporation. An S corp or C corp is a business owned by shareholders. This structure protects owners from financial liability.
- Limited liability company. Otherwise known as an LLC, this structure offers the same financial protection as a corporation but doesn’t have a strict shareholder structure.
- Choose a name. Now comes the fun part: picking a business name. You don’t always have to call your business the name you choose, but it will be what it is known as officially and on your tax records. When brainstorming name ideas, consider available websites, social handles, and if there are any conflicting trademarks.
- Apply for an EIN. Next, apply for an Employer Identification Number (EIN), which is similar to a social security number for your business. This process is relatively simple on the IRS website and only requires some basic information before you instantly receive your EIN.
- Identify and apply for a business license. The type of business license you need and where you get it depends on the type and location of your business. You’ll likely need to register with a federal agency and smaller agencies in your state or county. Here is a list of federal license and permit agencies. Your state’s Secretary of State office can provide more details. In general, applying for a business license requires filling out forms, showing proof of EIN and other credentials, paying an application fee, and waiting for approval. Once your business license has been approved, you can proudly display your license and move forward with opening a small business bank account and securing additional funding, if necessary.
- Report beneficial ownership information to FinCEN. Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or run a company. This is a fairly new law that was passed, and is a requirement for domestic corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States. There are 23 types of entities that are exempt from the reporting requirements, so it’s important to carefully review the qualifying criteria to see if you are in fact exempt or not. For more information on reporting, including an extensive list of FAQ’s, check out the Beneficial Ownership Information section of the Financial Crimes Enforcement Network website.
Registration Questions, Answered
When should you register? The earlier, the better. The sooner you register your business, the sooner you can take advantage of the benefits. Having a business bank account and loan is especially important in the early days.
Where should you register? Register in the state or county in which you’ll do business. If you have a brick-and-mortar store, you need to register in that city and state. If you have an online business, register where you live and work.
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Registering your business is the first step to successfully launching and running your business. With your business license in hand, you’re ready to take your company to the next level.
Disclaimer: Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.