So you've got an awesome business idea, you've researched your market and competitors, you've got a viable business plan... it's time to make it official! Business registration is the exciting first step to establishing your own small business. In this post, we'll explore what's involved in registering a small business with your local, state, and/or federal authorities so you can be on your way to making your dream a reality.
Is It Necessary to Register Your Business?
It's not always necessary to register a small business, but it's always a good idea. If you're a sole proprietor--meaning you're running a one-person show--you're not legally required to register a new business. However, if you want to open a business bank account, the bank might require you to have an EIN (Employer ID Number), which you get from registering with the IRS.
Furthermore, if you don't register your business, you might discover that someone else is already using the awesome business name you chose--so if you use it, you might be infringing on their trademark. Even if you're not, if your business's name is identical or very similar to that of a competitor, potential clients might get your businesses confused with each other. Good branding means keeping your brand distinct and memorable.
If you're planning to use any business name other than your real name, or if you've already registered a business but want to use a different name for part of your business, you'll need to file a DBA ("Doing Business As"/Factitious Name/Trade Name) with your local county. For example, if you've registered your personal trainer business as John Smith, but then decided to open a studio called Get Fit with John, you'll need to let the public know the association between your business and that studio.
If your business is a partnership, a limited liability company (LLC), or corporation, you're required to register with your state as part of the process of setting up the business.
Having a website is essential for running a business today. So aside from registering your business name with the authorities, you'll want to register a strong domain name. You won't want to start Get Fit with John Studio only to discover that all decent, memorable variations on getfitwithjohn.com are taken!
How to Register a Small Business
The first step to small business registration is deciding how your business will be structured. Will it be just you (sole proprietorship)? Just you and a partner (partnership)? If a partnership, should it be general or limited? Corporation or limited liability company? These decisions depend on the size of the business, who you want making the decisions and managing things, how you plan to distribute the profits and losses, and more. Do your research, and once you've made a decision you can proceed to the registration process.
Registering with the State and County
Your first stop will be the state authority. Regulations and requirements vary from area to area, but all states have websites with clear instructions on business registration; just Google your state and "business registration" to find the relevant information. Depending on the kind of business you're starting, you might need special permits or licenses from the state or local county. You'll need to find out what's required in your area and for your particular business model. If you're in construction, for example, you might need building permits or zoning variance. If you're in the food industry, you might need a health permit. If your business will be run out of its own premises, you might need to have a fire inspection before moving in. Every locality has its own rules and you'll need to check exactly what those are for your area.
Remember that if you're doing business in more than one state, you'll need to register in each. If you're registering in a state that's not your state of residence, you'll need to file as a "foreign entity."
Registering with the IRS
Once you've registered with your state and/or county and have been approved, it's time to apply for an EIN, an Employer ID Number. You can use the EIN to open a bank account, apply for business licenses, and file your tax returns. All you need to apply for your EIN is a valid Taxpayer Identification Number (Social Security Number, Employer Identification Number, or Individual Taxpayer Identification Number). You can apply online on the IRS website, by fax, or by mail. If you're applying from abroad, you can also apply by phone.
Can You Register a Company Online?
These days, registering your business has never been easier. Many states make it easy to register a business online. The IRS registration process is fully online, and you can also file and pay your federal taxes online using the Electronic Filing and Tax Payment System (EFTPS) on the IRS website.
I'm Registered! Now What?
Congratulations! Now that you're official, you're just a few steps away from getting your business off the ground. Here are a few things we recommend considering before you serve your first clients:
Get Insurance
If you want to make sure your business is protected, general liability insurance is a must. Having insurance means that you won't have to worry about financial harm to your business if something goes wrong or your clients aren't satisfied. You may need additional kinds of insurance, depending on the size of your business, whether you'll be working with a vehicle, whether you'll be hiring employees; make sure to research the options and find out what makes sense for your business. You might want to check out our business insurance page to see what's available.
Get the Word Out
Marketing your business is one of the small business challenges many entrepreneurs find daunting, but especially now that you're pursuing your passion, you might find it easier than you thought. Make sure you've pinpointed your target audience, do your research on how best to reach them, and make sure you've set aside room in your budget and your up-front investment to advertising and producing marketing materials. Find your competition in your area and see what they've done to appeal to that audience: what catches your eye and makes you want to try out a new business in your field?
Above all, remember that having a good reputation and making clients so happy they'll want to recommend you to all their friends is often the most surefire way to spread the word.
