According to the SBA (Small Business Administration), 33 million small businesses and 20,000 large businesses were registered in the US as of 2023.
Do you want to register a business?
If you want to join this list of registered business owners, what process should you follow to register a business?
Well, no need to worry. This article contains everything you need to know about new business registration. This 10-step guide will show you the exact steps to register your business.
So, where do you start?
Table of Contents
Main Steps to register a Business
Step 1: Choosing a Legal Business Structure
Before anything else, you need to know the business structure you want. This will determine its operations, management, tax obligations, and liability.
Business structure is also influenced by the type of business you want to start and your future growth plans. Here, you have several options to pick from, such as:
Sole Proprietorship
This is the simplest form of business, owned and operated by a single person.
In a sole proprietorship, the owner and the business are the same. This means the owner is liable for the business’s debts, expenses, and liabilities.
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As such, in case of financial issues in the business, the owner’s assets are not protected and can be used to repay business debt and other liabilities.
The owner of this business structure is also responsible for reporting business profits while filing their personal income tax returns.
Partnership
If you don’t want a solo business, you can go for a partnership. This is where several persons or partners own and operate a business.
All the partners are primarily responsible for the business’s liabilities and debts. They also share the profits based on an agreed-upon profit-sharing structure.
Partnership business structure also has several categories. These include:
- General partnership: As explained above, this is where all the partners are responsible for sharing the profits and losses. They are also accountable for debts and liabilities. As for taxes, they file personal returns once they share the profits.
- Limited Partnership: Here, there is one general partner who is responsible for the business operations, debts, and liabilities. The rest of the partners are limited partners responsible only for offering financial investments.
- Limited Liability Partnership (LLP): All the partners run the company in this entity. Each partner’s liability for the business actions and debts is limited and proportional to the investment each has made initially.
Corporation (C Corp or S Corp)
A corporation is a legal business entity whose ownership is distributed among many called shareholders. Owners of the corporations have limited liability protection.
Therefore, a corporation is responsible for its liabilities and debts. Also, the profits from a corporation are taxed separately from the owner’s income.
You should know the difference between a C corporation and an S Corporation.
According to the IRS rules, a C corporation is a formal corporation, while an S corporation has an elected special tax status, meaning it gets some tax benefits.
Some benefits include having business income and tax credits, deductions, and losses passed over to the owners rather than being imposed at the corporate level.
It’s crucial to understand your state’s registration and incorporation fees.
Limited Liability Company (LLC)This is a hybrid of partnership and corporation. Like a corporation, the owners have limited liability protection. However, it offers a flexible tax structure and management, and the owners report profits and losses and file taxes on their returns.
Step 2: Choose a Name for Your Business
Picking your business’s name is a crucial step when registering a company. A name impacts the brand’s identity and how people perceive your business.
It’s crucial to pick a unique name to help differentiate the business from others in the same industry. The name should also be easily remembered and adequately reflect the business’s values.
Here are some pointers to get you started:
- Compile a list of potential names: You can start by brainstorming names that align with your business mission and values. Consider names that are relevant to your industry and that evoke positivity.
- Confirm if the names are available. Your business name should not have a match, meaning you cannot pick a name that another active business is using. It would help if you avoided trademark infringement and conflicts at all costs. Therefore, you must verify the availability of your potential name.
One of the ways to do this is to check online on the USPTO (US Patent and Trademark Office) public search tool.
Also, by searching the internet, check if the name has already been used as a domain or social media handle. This step is vital to help ensure that your potential name is unique.
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Step 3: Reserve or Register Your Business Name
After you have a potential name, reserve it. You may be required to pay a reservation fee to reserve a name. It helps prevent others from using the same name while you make your decision. But if you are ready for that name, register it.
Currently, you have four options for registering a business name. Each of the alternatives serves a specific purpose, and they include:
Entity Name
Most states use this name to identify your business. Therefore, it is a requirement in most states to register an Entity Name for your business. The name should be unique and protect you in that specific state. This means that no other business entity will be registered under that name.
However, it’s important to note that different states have different requirements regarding name suffixes, such as corporation, limited, or incorporated. Take your time to learn and understand these.
Trademark
Registering a trademark protects your business name nationally. This means that other businesses cannot use your name nationwide.
Therefore, before settling on a business name, search the US trademark database first. This helps you ascertain that your name of choice is not trademarked.
DBA (Doing Business As)
This option involves registering a business name but using a different name for your operations. The two names should be unique at the national level (not trademarked by another business), but this is not a requirement at the state level.
Domain Name
This one protects your business name online. Your registered domain name cannot be used by any other business on the internet.
A domain name costs $5- $10, depending on your chosen provider; you can use Namecheap, which charges $10 per year.
Step 4: Apply for Tax IDs by State and Federal (EIN )
The next step is to apply for an EIN. An EIN is a tax ID, a nine-digit unique number the IRS assigns to your business.
This number helps establish your business’s legal identity when filing returns and opening a bank account. You can pay taxes, benefit from tax deductibles & credits, hire a team, and run other business operations.
But how do you apply for a federal EIN? You can do an online application via the IRS website.
You must provide basic information, including your business name, address, and structure, when applying. The information of the person handling your business’s tax matters will also be necessary.
Step 5: Apply for Permits and Licenses
Business permits and licenses are essential when running a business. Depending on your location and industry, a legal permit to operate a company would help.
Here are the basic steps to follow when applying for licenses and permits:
Identify the Necessary Permit
You first need to know the exact license your business requires. Some common ones include business activity permits and professional or industry-specific licenses. You can check with the Department of Revenue or the Secretary of State’s Office. You may also learn more about it online using the SBA’s permit and license guide.
Confirm the Requirements with the Issuing Agencies
After identifying the license that your business requires, check the requirements with the issuing agency. The agencies will also help with the application process.
The requirements differ with states, counties, and cities. So, be sure to check with the specific laws of your state.
Gather the Required Documents
Depending on the license, you must have different types of documents. These can include zoning approval, educational and professional certificates, proof of insurance, etc.
Complete the Permit Application
After you have all the documents, you can complete the application. Depending on the agency, this can be done by mail or online.
Pay the License Fees
Most permits attract a fee, which varies with the state, license type, and issuing agency. So, be prepared to pay that expense.
Wait for Approval
After you complete the application and pay all the fees, wait for approval. The duration varies and can take weeks, so plan accordingly.
Display the License in Your Business Premises
After the license has been approved, it will be sent to you. Display it on your business premises if the law requires you to do so.
Step 6: Register with State Agencies
Once you have your business name and EIN and pick your business structure, it’s time to register your business with the state agencies. Generally, the requirements and fees for registration at the state level differ from state to state.
This means it is wise to confirm your specific state’s requirements first.
Registration usually involves filing paperwork based on your business structure. For example, an LLC needs to file its articles of organization.
On the other hand, corporations need articles of incorporation, and partnerships need partnership agreements. You must file these documents with the proper state agencies and await approval.
Other requirements here will include:
- Your official business name
- Official business address
- Members information
Some states might ask for more details based on their state laws.
Step 7: Open a Bank Account
Your next step should be opening an official business bank account. A separate bank account for your business is essential, regardless of its business structure, whether a limited liability partnership, LLC, or corporation.
This ensures that you keep your personal distinct from business finances.
A business bank account is legally optional if your business is a sole proprietorship or general partnership. But it is still ideal for you and your partners’ peace of mind.
Non-US residents can open a virtual US bank account using Wise, which allows them to accept and send money from their respective countries without stepping into the US.
Step 8: Protect Your Intellectual Property
Do you have some intellectual property you wish to protect? This is the time to do that. It could be your business name, logos, or even products.
So, how do you protect these intellectual properties?
Trademark it.
Trademarking gives your business exclusive rights to use the name and prevents others from using it. Also, it gives you a strong brand identity and a competitive advantage in the market.
A trademark could be a name, logo, symbol, or phrase a business uses to differentiate its products and services. For instance, McDonald’s has trademarked the phrase “I’m lovin’ it” or the name “Coke” by Coca-Cola.
Patent it.
A patent protects an invention, including a product or machinery. This means anyone with a patent can only produce and sell such a product for a specified period.
However, the process can take up to five years, so initiating it as soon as your product invention is out is crucial.
Copyright.
Copyright protects original written work, sound recordings, software, films, etc. Copyrighted material cannot be reproduced, distributed, or sold by anyone other than the creator.
Copyright protection is usually offered automatically once someone creates any of the above-mentioned works. However, these rights are transferable. For instance, you can sell, gift, or willingly transfer the rights to another person under an agreement.
Step 9: Ensure Regulatory Compliance
These are the rules and regulations that your business must comply with to operate legally in a particular state or location. Non-compliance undoubtedly leads to financial penalties and, in some cases, legal consequences.
Therefore, comply with the set rules and regulations to avoid financial penalties and legal issues. Compliance also helps you protect your business reputation, access funding, and stay competitive.
Step 10: Consider Tax Obligations
Different states have varying tax rules and regulations that businesses must adhere to. As such, when you register your business in a specific state, you should ensure that you understand the tax obligations that your business attracts.
You should also know the other costs of running your business in a specific state. Some states offer tax benefits, including tax credits and reliefs. Research and understand them all.
For example, operating an LLC or an LLP in Alaska doesn’t incur tax. However, registration is $250. Also, there is a $50 annual license renewal fee and a $100 biennial report filing fee.
In Delaware, the tax rate for an LLC or LLP is at least $300, while the registration fee is also $300 minimum. The annual reporting fee here is $50, plus tax.
How to Make Your Ecommerce Successful
Registering and starting your business is one thing, but running a successful business is another challenging task. So, how do you ensure that the registration process is worthwhile? How do you guarantee a successful business, especially an ecommerce one?
The key pillars for a successful business are a great product or service, customer relations, and marketing strategies. The right combination of these factors leads to a satisfied customer base and, ultimately, more sales through repeat purchases and referrals.
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Now, you can incorporate AI automation tools in your business to streamline these activities. For example, the EcommerceBot ads automation feature allows you to automate your marketing campaigns and create targeted ads for the right audience.
On the other hand, the Omnichannel Chatbot streamlines your customer engagement activities by offering live chat and automated AI responses. This way, customer queries are answered, and no problems go unsolved.
