Here is How to Registering Your Business
If you’re looking to start a business, you may want to take some time to learn how to register it. While business registration isn’t necessary for you to conduct transactions, it comes with a few marketing and legal benefits.
Registering a business not only increases the trust of your stakeholders. It also protects you from personal liability, although it depends on the business structure you select.
The process to follow when registering your business depends on the business structure you want and your location. Once you determine these two factors, registration will be straightforward.
A Comprehensive Guide for Business Registration in the United States
This post will discuss the basics of business registration in the United States. We will go over everything you need to know about registering a business, from requirements to costs to steps to follow, and more.
Benefits of Registering a Business
Before we dive into the business registration process, let’s first explore the benefits you stand to gain.
Opening a Business Bank Account
To open a business bank account, you need to submit documents showing that you are a formally registered business. The bank may request your business license, among other details such as employer identification number (EIN) or social security number for a sole proprietorship.
Having a business bank account allows you to separate your personal finances from your business ones. It simplifies your business tax filing process and enables you to easily track your business expenses, revenues, and cash flow.
Acquiring Loans and Investments
Getting a business loan becomes easier if you have a formally registered business. Most lenders and investors may want proof that you are a registered business. It will give them confidence that they are putting their money into a legit investment, not in someone’s personal account. Before approving your loan, the lenders or investors may ask for your business registration license and other documents such as financial and bank statements.
If your goal is to hire employees to run your business, then it’s a good idea to register it with your state. Registering your business not only allows you to attract talent to your company or corporation. It also eases the process of filing and routing income taxes on your employee’s behalf. Most job seekers will view a registered business as more secure.
Once you register your business with your state, you’ll get a state tax identification number (state EIN). This nine-digit number will allow you to pay employees and report and route income taxes, as required by the laws in your state.
Good Reputation with Stakeholders
Having a formally registered business gives you more credibility with your customers and stakeholders. It assures them that you are a legit organization and encourages them to work with you. Registering your company helps improve your future dealing with suppliers, partners, investors, and even customers.
Ensuring Business Continuity
By registering a business, you give it its own identity that’s separate from yours. You allow the organization to become a separate entity from you, the owner, depending on the business structure you choose. This increases your organization’s life span and allows it to prosper, even after you leave the business. The business will not be tied to your identity when you are not around.
Protecting You from Personal Liability
Registering your business as a separate entity offers you legal liability protection. You won’t be held accountable for the debts and liabilities of your operation.
For example, assume you obtain a loan for your business and default on the payments. The bank or lender can only seize your business property, not your personal property.
Another notable advantage of registering your business is it helps protect your business name. No one else can use it to open an organization elsewhere.
Do I Have to Register My Business?
Is registering your business a requirement by your state? Well, it depends on the business structure you select. There are cases when you don’t have to register at all. For instance, sole proprietorships and small partnerships aren’t required to register in most states. They don’t become a separate legal entity. The information on who should or should not register might vary from one state to another.
Even so, if the business name of your sole proprietorship is fictitious (not your name), your state may require you to register as a DBA. DBA stands for “doing business as”, and it allows you, the owner, to run your sole proprietorship with a name that’s not yours. Whether or not you need to file a DBA will depend on your state’s requirements.
Where Should You Register Your Business?
You can register your business with any state where you operate or conduct business activities. A state can consider your business part of it when:
- You have a physical presence, for example, in a store or office
- You hold physical meetings with customers and clients in that state
- You have employees working in the state
- Your business makes a significant portion of revenue from dealings in that state
The method of registration varies from state to state. In some states, you can register online. While in others, you may have to fill in the paperwork in person or via email.
The agency to register with may also depend on your state’s requirements. In most cases, you can register with a business Bureau, Business Agency, or the Secretary of State’s office.
Okay, but what if your business has operations in multiple states? In this case, you can register your organization with one of the states and then apply for a foreign qualification in others.
You only need to file for a foreign qualification in states where you conduct business, not in all states.
Foreign qualification informs the state that there is a foreign business operating there. Your business becomes domestic in one state and foreign in others.
Information to Provide When Registering a Business
The documents and information to submit when registering your business will depend on your business structure and state’s requirements. Most states may, however, request you to provide the following details:
- Business Location
- Business name
- Type of business structure
- Registered agent details
- Amount and value of shares (for a corporation)
To register an LLC, partnership, or corporation, you need to have a registered agent in your state. A registered agent is a person or business entity you appoint to receive legal documents and other official papers on behalf of your business. This individual or entity must be living or operating within the state where you want to register your business. They need to have a physical address in that state.
The people who can become registered agents for your business include:
- A partner or employee in your business
- Your business’s attorney
- Your relative or spouse
- A registered agent service company
How Much Does It Cost to Register a Business?
The fees for registering a business may vary depending on the business structure and your state. The total cost, in most cases, will not exceed $300.
States with the most favorable business registration costs include:
- New Mexico
- South Carolina
States that are the most expensive to register a business include:
- Washington DC
- North Carolina
How to Register a Business as a Foreigner
Can you register a business in the United States as a foreigner? The good news is, yes, you can, but there are limitations. You can only register a C-corp or a Limited Liability Company (LLC). To register an S-corporation, you should be a United States citizen or a green card holder (permanent resident).
You also don’t need a United States visa to start and register an LLC or C-corp in the United States. But again, there’s a caveat.
If you plan to start a business and become a passive investor, you don’t need a United States visa. You need a United States visa if you want to open a business and run daily operations from within the United States. In short, you need a United States visa to work for your business while in the United States.
Steps to Register a Business in the United States
As we highlighted above, the process to follow when registering your business depends on your state’s requirements and your desired business structure.
Here is a stepwise procedure to guide you in registering the right way:
1. Decide on a Business Name
When registering your business, your first step should be choosing a name that’s unique, memorable, and best defines your offer. Your business name should also stand the test of time. It shouldn’t limit your growth opportunities. Take some time to brainstorm on business names with your team, then research online on Google or social media to see if the one you want is available.
Once you find a suitable business name, you need to ensure it isn’t registered with the USPTO (the United States Patent and Trademark Office). Try using USPTO’s free tool to see if the name is available. Here is a comprehensive article on how to register a business name.
2. Select a Business Structure
Next, you must choose a business structure that best fits your organization. There are five common structures that you can select in the United States. They include sole proprietorship, partnership, corporation, Limited Liability Company (LLC), and cooperatives.
Each structure comes with its advantages, disadvantages, and characteristics. Before proceeding with your registration process, learn the different types of business structures available.
The information required may vary per structure. The documents and articles to fill out may also differ. A corporation, for instance, requires you to fill out articles of incorporation. A company, by contrast, calls for articles of organization. Here’s another extensive post to guide you in choosing a business structure.
As mentioned above, some states don’t require registering a sole proprietorship or a small partnership. You only have to file for a DBA if your business has a fictitious name.
3. Choose Your State of Registration
Registering your business in the state you plan to operate in is always advisable, but this isn’t a requirement. If you’re an online business or you have operations in multiple states, you can register your business in any state where you conduct business. In this case, you may want to go for a state with favorable tax rates.
Different states have varying tax rates. Some, such as Delaware and Montana, charge no sales tax. Take some time to learn the tax rates in each state to find the one best for your business.
4. Choose a Registered Agent
You need a registered agent to register your business in the United States. The registered agent will be responsible for receiving legal documents on your organization’s behalf. You or anyone in your team that lives within your state of registration can become a registered agent. You can also hire a registered agent service company from within the state.
5. Apply for an EIN (Employer Identification Number)
You’ll need a federal tax number (also known as EIN) if you plan to hire employees and file tax returns for your business. You can’t submit business tax returns without your EIN. Your EIN is similar to your social security number, but for a business. This nine-digit number helps the IRS identify your entity for tax filing.
If your business is a sole proprietorship with no employees, you don’t need an EIN. You can use your social security number for tax reporting. Getting an EIN is free, and you can request it from the IRS website. Once you fill in and submit the required forms, you can get it the same day.
6. For Additional Permits, Contact City Hall
You will need to check with city hall or your municipality to determine if you require a license or permit after your business has been registered with your state.
It depends on your location, and the type of business you are running, to determine whether you need a permit or license.
You want to ensure your business does not violate zoning or bylaws.
See How to Get a Business License for more on this topic.
You now know how to register a business in the United States and the benefits that come with registration. Go ahead and register yours in your state. The first thing you need to do is choose a unique and memorable business name. Afterward, select a business structure. The five common business structures in the United States include sole proprietorship, partnership, corporation, Limited Liability Company, and cooperatives.
In some states, you don’t need to register a sole proprietorship. You, however, should file for a DBA if your business has a name that’s not your own. If you are a U.S non-resident, you can only register an LLC or a C-corp. The fees payable for business registration will depend on your state’s requirements and business structure. The total cost, in most cases, won’t exceed $300.
Written By Melissa Rae