Not only your business structure but also registering for paying tax, permits and license are crucial to operate it legally. The necessary documents are required to form your business. Following proper procedure will help you to launch successfully. Once you are ready, you can run your business according to the law.

The US Small Business Administration (SBA) provides support and guidelines to start up a new small business.

How to Start a Business

  • Do market research
  • Make a plan
  • Generate funds/capitals
  • Choose location
  • Register your business along with business structure and business name
  • Get State as well as Federal Tax ID
  • Get license/permit
  • Open business bank account

Steps to Register a Small Business

The following 5 steps will help you to understand how to register your business.

1. Choose a Business Structure

You can register your business at three levels: federal, state, and local agency level. Depending on it, you can proceed to register your business structure. The main business structures are:

  • Sole Proprietorship: If you own an unincorporated business, you are considered as sole proprietorship. That means you’re not registered with any other business. You’ll have full control over the business. Also, you’ll be solely responsible for any debt or legal obligations in this individual proprietorship.
  • Partnership: A partnership is a mutual relationship between two or more owners of a business. This means fewer legal obligations, more capitals, and the ability to share burdens, but ownership can’t be controlled by any individual.

You can register your business at three levels: federal, state, and local agency level.

In a Limited Partnership, one can have unlimited liability while others have limited. Limited liability partners have limited control over business and also pay self-employment taxes. In a Limited Liability Partnership (LLP), liability is the same for every owner. Here everyone has an active role in business.

  • Limited Liability Company (LLC): Owners are not personally liable for any debt or bankruptcies. It mostly protects your personal belongings like vehicles, house. But an LLC is more expensive than the previous two.
  • Corporation: Costlier than the other structures. It make profits, is taxed, and offers protection to personal liabilities. Corporation is a good choice while raising higher capital through generating funds. The four types of corporations are: C Corp, S Corp, B Crop and Non-Profit.

2. Choose Your Business Name

Your business name represents your brand identity. There are four ways to register business names:

  • Entity name: Register your business name under state Government. Once your entity name is legally registered under the state, no one can use it in the state.
  • Doing Business As:You can register your business name as “Doing Business As” following the state or country name. It enables you to conduct business in a different name rather than using your personal name.
  • Trademark:Trademark protects your business name on the national level. This name structure distinguishes products from one another. It can be a name, symbol, logo or figure.
  • Domain Name: For registering an online business, use domain name. Your unique URL or website address can’t be used by other once it’s registered.

3. Get Federal Tax ID/EIN

Not all business comes under IRS (Internal Revenue Service) regulations. If you have a corporation or partnership business, you may need to register under Federal tax. You will receive a unique EIN or Employee Identification Number. It is a social security number for your business.

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4. Get State Tax ID

The next step is to get a state tax ID. You have to register your business in the state revenue office to pay state taxes. State tax registration is important to set up any small business to obey the state income tax.

The top three states with highest income tax are: New York, Massachusetts and Connecticut. There are also seven states which don’t have state income tax: Alaska, South Dakota, Nevada, Florida, Washington, Texas and Wyoming.

So, before you start your business you can research the location. You may find that you do not need to pay state/local income tax.

5. Apply For License and Permit

You need a Government permit or license to operate your business even if it is a small business. The license cost depends on the business type and the agency giving you the license or permit. For an example, annual license fees for animal dealers range between $30 and $750, issued by the US Department of Agriculture. Registering for and receiving the license may take 1-6 weeks.

To know the license laws and regulation, you can use the Permit Me search tool from the US Government. This will provide you with details of registration along with permits and licenses depending on your desired business structure and location.

Overview

Follow each and every step discussed above to register your business set-up. Though it is a lengthy process, once you get registered you can run it legally. The unique trademark or entity name allows you to conduct business separately from competitors as no one else can use that name. The US Small Business Administration website will guide you thoroughly.

Article prepared in cooperation with LOCAL MARKET.