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Starting a business

How to register a business: 6 steps you need to take

Starting a business can be exciting, but it can easily start to feel overwhelming. We’ve created a guide that will discuss how to register a business, the reasons to register, the benefits of registration, and the steps you need to take to help eliminate any sense of dread during the beginning of your entrepreneurial journey.

How to register a business

Register your business by following these 6 steps; choose your business entity and a business location, register your business name, get registered with the IRS and local government agencies, and finally, apply for necessary licenses and permits.

Wrap your head around the process of registering a business by reading about each step in detail below

1. Choose a business structure

Choosing the right business structure will set you on the right path to success. It influences how you file taxes and how your personal assets are handled as well as having an effect on your day-to-day operations.

It'll also impact how you register your business, including how and who you register with. There are four main types of business structure, so take the time to choose the one that’s best for your business.

Let’s go through the most common business structures that will likely exist in your region or country.

Sole proprietorship

A sole proprietorship is the most common way to structure a business and doesn’t require any formal registration - think of it as an extension of you. There’s no legal difference between you as an individual and your business.

Depending on where you are and what your business does, you may need to obtain the necessary licenses and permits. For instance, if you’re selling food or drinks, you’ll likely need a license. Check the regulations in your country for more information.

As a sole proprietor, you use your own name to conduct business. Depending on where you’re based, you may use your country’s Social Insurance number as your tax ID number.

Another word for sole proprietorship is DBA, or "doing business as." This allows sole proprietors to operate under a name other than their own. For example, if John Smith started a plumbing business, he could file to do business as Smith Plumbing. The DBA designation, like any sole proprietorship, doesn’t offer the liability protection of other business designations, but it’s still valuable for marketing and credibility purposes.

Key takeaway: A solo proprietorship is what your business structure will be considered as by default if you don’t choose one of the other options.

Partnership

A partnership is a business with two or more owners. The most basic type of partnership is a general partnership, in which owners divide all profits and liabilities equally. In addition to a general partnership, other types of partnerships include

  • Limited partnership: In this type of partnership, one partner has liability exposure, while the other has limited liability.
  • Limited liability partnership (LLP): In such a partnership, all business owners are safe from the debts of the business.

Key takeaway: If you co-own a business, you’ll likely have a partnership business entity.

Depending on your country or region, you’ll need to register your business with your government. Depending on the business structure, one or both of you will be liable to pay taxes.

Private Limited Company

Private limited companies fall somewhere between a partnership and a cooperation business structure. Depending on your country of origin, you may call this business structure a limited liability company (LLC) or a limited company (Ltd).

Private limited companies combine the simplistic tax laws of a partnership with the limited liability protection of a corporation. An LLC can have one or more owners, referred to as "members".

As a member of an LLC, you file taxes as if you were a sole proprietor or partner and all of your business income and deductions pass through to your personal tax return. However, the LLC is a separate entity, so members can’t be held personally responsible for the company’s debts or liabilities.

Because of the need to register for corporation taxes, you’ll need to register your private limited company with the relevant tax authorities in your country.

Key takeaway: LLC status separates personal assets from business liability.

C corporation

These are reserved for medium to large businesses. A C-corp’s income is reported on a separate tax return—and owners, or "shareholders," are taxed separately.

Shareholders hold stock in the company, and formal company proceedings (such as electing a board of directors and assigning board duties) are required. C-corps have tax advantages that other entities don't, but they are more expensive to set up and more complicated to run. This is because both the business owners and shareholders need to get involved in operations. Requirements include submitting state, income, payroll, disability, and unemployment taxes. C-corporations are also required to set up a board of directors to oversee the management of the corporation.

Key takeaway: C-corps are better for larger business as they are more complicated to run and have different tax advantages than other types of business structures.

S corporation

Like C-corps, S-corps offer limited liability protections. However, an S-corp is taxed more like a partnership or sole proprietorship. In other words, income passes through to the shareholders’ personal tax returns. The IRS is more likely to monitor S-corps’ taxes closely, and tax mistakes can even result in the termination of your S-corp.

Depending on the country it's operating in, S-corps need to file the relevant forms with their tax authorities.

Key takeaway: S-corps are taxed similarly to sole proprietorships and partnerships, with the limited liability protection of a C-corp.

A quick guide to legal documents

When you register your business, you’ll need to sign legal documents that link you to the organisation. This will differ depending on your country and region. Typically, you’ll be asked to sign the following documents:

Tax ID Number

In almost every country, you’re required to pay taxes on all your business profits. To operate legally, you’ll need to register with your local tax authority and get an ID number, which you’ll use to pay your taxes when the time comes.

Business Insurance

Depending on where you’re operating, you’ll be legally required to get business insurance in case anything goes wrong. Choosing the right business insurance for your needs depends on your business structure, the number of employees, and your assets.

Business Licenses and Permits

In order to operate legally, you may need to obtain the necessary licenses and permits for your country of operation. Of course, this depends on your small business idea. Check your government website to ensure you’ve obtained the right licenses.

Business Bank Account

To exchange funds securely, you’ll need to get a business bank account. Separating your personal and business accounts won't only help you better organise your finances, but help you stay compliant with the laws and regulations of your country.

Key takeaway: To ensure you sign the right documents for your country, we recommend consulting with a tax professional or legal associate. Alternatively, you can do your own research by logging into your government account.

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2. Find a location

After choosing the structure, it’s time to settle on a location for your business. Even if your company operates mostly online, you still need to register a location for operations like receiving government documents or filing taxes.

You can use a PO Box to communicate with customers and suppliers, but some government agencies require a street address to do business. Many lenders and suppliers also prefer to work with businesses that have a street address.

When researching potential locations, keep in mind the costs and taxes you’ll have to pay for filing at that address. If you work from home, ensure your business is allowed to register at your home address—some states won’t allow you to use your personal address as your business address.

3. Register your business name

Next, you’ll want to register your business name to prevent other businesses from using it now or in the future. Here’s how to register a business name successfully:

  • A separate entity, like an LLC or corporation: Registering your business name is part of the registration process. These entities can be registered through a lawyer or an online legal service.
  • Operating under a name other than your legal name: You’ll need to file a DBA. In some states, business owners have to file DBA registrations with the state agency in charge of business filings (usually the Secretary of State’s office).

4. Register with the relevant tax authorities

Wherever you're doing business, you’ll need to register with the tax authorities as part of your business setup. Most authorities will give you some form of tax number that acts as an identification number for filing day. You’ll also need this number to open a business bank account and pay yourself as a small business owner.

Remember that if you file your business as a sole proprietorship, you’ll likely use your personal tax number as ID. However, you’ll still be able to report income tax, sales tax, franchise tax, and any other business taxes.

5. Register with your country’s local agencies

You’ll likely need to register separately with your country’s local agency, which will have its own requirements depending on your location.Consider hiring an attorney or legal professional to ensure that everything is done correctly.

6. Apply for a business license and permits

Specific licenses and permits are required to run different businesses, and they vary by industry and state. It’s a good idea to have any necessary licenses or permits before you start your business to avoid future problems.

Do you need to register your business?

Ultimately, this depends on the type of business structure you’ve chosen. Existing businesses that are perhaps expanding should be aware of registration requirements, and new businesses should consider the following:

  • Sole proprietorships: These generally aren't required to be registered, though registering would likely be beneficial to you and your business.
  • DBA: You may need to register your business with your state. This does vary state to state, so it is best to check with your state regulations.
  • Partnership: It’s always best to register a partnership with both the IRS and the state.

Why should you register your business?

Clipboard illustrating the different reasons to register a business

The benefits of registering your business far outweigh the amount of time it takes to complete the process. By separating your personal assets from your business assets, you’re protected if you ever encounter financial difficulties. You’ll also be protected from personal liability, which means you won’t risk losing your personal assets if something goes wrong on the business side. Furthermore, if you intend to open a business bank account, you’ll need to provide proof that your business is properly registered.

While there are plenty of legal and tax reasons to officially register your business, there are some real benefits for business owners as well:

  • It helps you build your brand’s reputation because potential customers will see you as a legitimate organisation.
  • It means that you can hire employees and pay them per your Country’s laws and regulations. When you register your business, you’ll likely receive a unique business and tax number that allows you to collect taxes for your employees.
  • It comes with its share of financial benefits, including tax benefits and the ability to officially apply for loans and other funding. Investors prefer to work with registered businesses. Finally, registered businesses earn insurance premium deductions, deferred tax payments, and more.

What to do next

Now that you’ve got all the information you need to register your new business, it’s time to get your operations off the ground. Get out there and bring your business to life!

You’ll want to ensure you have digital and physical copies of your registration information. Work with a lawyer to collect all the information you need so that you can draw up contracts, begin marketing, and prepare for tax filings. For tax filing, work with a CPA and track your expenses and accounting software for small businesses.


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