Keeping an eye on the legal and regulatory requirements of simply being in business is a constant struggle for small business owners. One of the areas that creates the most confusion, particularly to new business owners, is the process of “business registration.” What’s required?
There are many aspects to “business registration” – including incorporation, registering with tax authorities, registering a trade name and so on. However, not all businesses need to complete all these steps.
Here’s what you need to know:
Registering a “Doing Business As” Name
If you are starting out in business, or even if you are already established and incorporated and you want to name your business something other than your given name, you’ll need to register for a “Doing Business As” name, also known as a DBA, trade name, or assumed name.
When you form a business, its legal name always defaults to the name of the person or entity that owns the business, unless you choose to rename it and register it as a DBA name.
For example, if Peter Smith sets up a landscaping business and rather than operate under his own name, he wants to call it “Smith’s Landscaping Solutions,” the name is considered an assumed name and will need to be registered with the appropriate local authorities.
If you’re not sure whether you need to register a DBA, check with your city or county government office. This will also be the place where you’ll apply for registration. Not all states require you to register a DBA, but as a general rule, a DBA is needed in the following scenarios:
- Sole Proprietors or Partnerships: If you start a business under anything other than your real name, you’ll need to register a DBA.
- Existing Corporations or LLCs: If your business is already set up and you are incorporated or an LLC but want to change your business name, you’ll need to register it as a DBA.
The other thing to note is that a DBA registration does not provide the benefits of trademark protection. For that you’ll need to apply for a trademark with the U.S. Patent and Trademark Office.
Incorporation is another aspect of business registration that business owners need to consider. Incorporation is a broad term that encompasses the variety of options you have when it comes to legally structuring your business – whether it’s as a limited liability corporation, an “S” or “C” corporation, a partnership or a cooperative.
Incorporation is not a legal requirement. In fact, over 70 percent of U.S. businesses are owned by sole proprietors and operate successfully without incorporating.
You should consult a lawyer or legal expert to help you determine the pros and cons of incorporation for your business and how to register.
Obtaining Licenses and Permits
Registering for the right licenses and permits is a must for all businesses; even home-based business owners need a permit to operate legally. Contact your local government to understand the requirements in your town.
Register with the IRS and Tax Authorities
Property tax, sales tax, employment tax, state and federal income tax are just a few areas of taxation that require business owners to apply for the right permits and IDs and register with the right tax authorities.
The main considerations are as follows:
- Get a Federal Tax ID – If you have employees or are structured as a partnership, corporation or other types of organization, you’ll need to get an Employer Identification Number (EIN) from the IRS. Consider it the business equivalent of a social security number. You can apply for an EIN from the IRS online.
- Get State Tax IDs and Permits – You should also contact your state and local government to find out whether you need a sales tax permit (if you sell retail)and to understand your obligations for property, income and employment taxes.
What About Certifying Your Business as “Small?”
If you own a small business, perhaps you’ve heard about small business certification. But do you actually need to certify your business as small?
Most businesses don’t need to do this. However, if you are interested in selling to the U.S. government then yes, you will need to. Why? The government sets aside contracts for small businesses. To qualify for these contracts, you must obtain certification that you are indeed a small business according to SBA sizing standards.
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