Whether you’re a startup or you’ve been in business for some time, registering your business is an important step in the process. Registering your small business basically means you’re listing it with the appropriate local, state and federal agencies to gain official business status.
Why Register Your Business
There are several benefits to having a registered business. Among them: the ability to open a business bank account, benefiting from small business tax deductions, protecting your business name, and in some cases applying for a business loan.
Opening a Business Bank Account
Being able to open a bank account is one of the most important advantages of registering your business. Most banks won’t open a business account for you unless your business is registered. This includes merchant accounts, which allow you to accept credit and debit cards.
Small Business Tax Deductions
Small businesses qualify for many tax deductions, each of which can help cut down your tax bill.As a registered business, you’ll be entitled to deduct business expenses from your income.
Protecting Your Business Name
Registering is also the first step in protecting the name of your business from being used by someone else. It doesn’t give you the same, full protection of registering a trade name or trademark, but it does help to establish you as using the name. Registering can also give you legitimacy in the eyes of potential customers and vendors.
For more on how to protect the name of your business, read Definition of Intellectual Property.
Applying for a Small Business Loan
When applying for a business loan, most lenders will ask you to supply important legal documentation, as part of the process. At a minimum, you’ll be asked to present your lender a “Doing Business As” (DBA) name. And getting that DBA name is one of the key steps in registering your business.
Four Steps to Register Your Business
There are four important steps to registering your business.
1. Choose your business structure and file the appropriate paperwork.
2. Register your business name.
3. Register with the IRS and your state.
4. Register for any necessary permits and licenses.
Let’s look at each of these steps in more detail:
Choose Your Business Structure
The legal structure of your business will dictate whether or not you have to register. If you’re setting up a corporation or limited liability company (LLC), you will legally have to register your business. Whereas if your business is a sole proprietorship or partnership run in your own name, you legally do not have to register your business.
When you form an LLC or corporation, filing the legal paperwork with your state will automatically register your business. The state will make sure no one else is already operating in the state with your company’s name, and once the name is approved, no one else in the state will be able to use it.
Register Your Business Name
If you have a sole proprietorship or partnership with a business name other than your personal name, most states will require you to officially register the name. You’ll see this referred to as a “Doing Business As” (DBA) name, a trade name, or a fictitious name. Even if your town or state doesn’t require a DBA filing, you most likely won’t be able to open a bank account with a fictitious name unless you have proof that it’s been registered. Depending on where you’re based, registering your DBA is done with either your county clerk’s office or with your state government.
If you’ve already registered your business name by filing for a corporation or LLC, and later decide to use a business name that differs from the one filed with your original paperwork, you’ll need to get a DBA.
Additionally, if you started out as a sole proprietorship and want to change the business structure to a corporation, LLC or partnership, you’ll have to register to do so.
Register With the IRS and Your State
How and where you register will depend on what kind of business you have, its legal structure, where you’re located, and where you plan to operate. The Small Business Administration (SBA) has links to the agencies in each state that handle business registration.
In addition to registering your business name with your state, you’ll need to register with the IRS and the tax office in your state. Small businesses are responsible for paying taxes, and in some cases, collecting sales tax. Making sure you know what taxes your business has to pay is imperative. The SBA has another list of links to state tax agencies. Also, banks will require your tax ID or federal Employee Identification Number to do business with you.
Register for Permits or Licenses
Some states or municipalities may require you to register or become licensed depending on what type of business you have. Find your local requirements through the SBA’s links to state licenses and permits.