Register Your Business in 5 Steps
Choose a Business Structure
The business structure you choose affects operations, taxes and how much of your personal assets are at risk. You should choose a business structure that gives you the right balance of legal protections and benefits. Below are common business structures:
A sole proprietor is someone who owns an unincorporated business by himself or herself. However, the business owner is personally liable for all debts incurred by the business.
Partnerships are the ideal structure for two or more people to own a business together. There are two common kinds of partnerships: limited partnerships (LP) and limited liability partnerships (LLP).
Limited partnerships have only one general partner with unlimited liability, and all other partners have limited liability. The partners with limited liability also tend to have limited control over the company, which is documented in a partnership agreement. Profits are passed through to personal tax returns, and the general partner — the partner without limited liability — must also pay self-employment taxes.
Limited liability partnerships are similar to limited partnerships, but give limited liability to every owner. An LLP protects each partner from debts against the partnership, they won’t be responsible for the actions of other partners.
An LLC lets you take advantage of the benefits of both the corporation and partnership business structures.
LLCs protect you from personal liability in most instances, your personal assets.
However, members of an LLC are considered self-employed and must pay self-employment tax contributions towards Medicare and Social Security.
LLCs can have a limited life in many states. When a member joins or leaves an LLC, some states may require the LLC to be dissolved and re-formed with new membership — unless there’s already an agreement in place within the LLC for buying, selling, and transferring ownership.
A corporation, sometimes called a C corp, is a legal entity that’s separate from its owners. Corporations can make a profit, be taxed, and can be held legally liable.
Corporations offer the strongest protection to its owners from personal liability, but the cost to form a corporation is higher than other structures. Corporations also require more extensive record-keeping, operational processes, and reporting.
An S corporation, sometimes called an S corp, is a special type of corporation that’s designed to avoid the double taxation drawback of regular C corps. S corps allow profits, and some losses, to be passed through directly to owners’ personal income without ever being subject to corporate tax rates.
A benefit corporation, sometimes called a B corp, is a for-profit corporation recognized by a majority of U.S. states. B corps are different from C corps in purpose, accountability, and transparency, but aren’t different in how they’re taxed.
Nonprofit corporations are organized to do charity, education, religious, literary, or scientific work. Because their work benefits the public, nonprofits can receive tax-exempt status, meaning they don’t pay state or federal income taxes on any profits it makes.
Choose Your Business Name
You’ll want to choose a business name that reflects your brand identity and doesn’t clash with the types of goods and services you offer.
Once you settle on a name you like, you need to protect it. There are four different ways to register your business name. Each way of registering your name serves a different purpose, and some may be legally required depending on your business structure and location.
Entity name protects you at a state level
Trademark protects you at a federal level
Doing business as (DBA) doesn’t give legal protection, but it might be legally required
Domain name protects your business website address
Register Your Business
Your location and business structure determine how you’ll need to register your business.
Most businesses don’t need to register with the federal government to become a legal entity, other than simply filing to get a federal tax ID. Small businesses sometimes register with the federal government for trademark protection or tax exempt status.
If you want to trademark your business, brand or product name, file with the United States Patent and Trademark office once you’ve formed your business.
If your business is a limited liability company (LLC), corporation, partnership, or nonprofit corporation, you’ll probably need to register with any state where you conduct business activities.
Typically, you don’t need to register with county or city governments to actually form your business.
Some counties and cities also require you to register your DBA — a trade name or a fictitious name — if you use one.
Local governments determine registration, licensing, and permitting requirements, so visit local government websites to find out what you need to do.
Register with the IRS
The business structure you choose affects operations, taxes and how much of your personal assets are at risk. You should choose a business structure that gives you the right balance of legal protections and benefits. Below are common business structures:
Your Employer Identification Number (EIN) is your federal tax ID. You need it to pay federal taxes, hire employees, open a bank account, and apply for business licenses and permits.
If you want to trademark your business, brand or product name, file with the United States Patent and Trademark office once you’ve formed your business.
The need for a state tax ID number ties directly to whether your business must pay state taxes.
Tax obligations differ at the state and local levels, so you’ll need to check with your state’s websites.
To know whether you need a state tax ID, research and understand your state’s laws regarding income taxes and employment taxes, the two most common forms of state taxes for small businesses.
Apply for Licenses and Permits