How to register a business legally

Registering your business not only helps protect your personal assets but also provides credibility, access to funding, and tax benefits. Below is a step-by-step guide on how to register your business legally.

1. Choose a Business Structure

Before registering your business, you need to determine its legal structure. The type of business entity you choose will affect your taxes, liability, and other legal aspects. Common business structures include:

Sole Proprietorship: The simplest form, where you are the sole owner and responsible for all aspects of the business.

Partnership: A business owned by two or more people who share profits, losses, and liabilities.

Limited Liability Company (LLC): A hybrid structure that provides limited liability protection to owners while allowing for flexibility in management.

Corporation (Inc.): A more complex structure offering limited liability but with more regulation and paperwork.

S Corporation: A special type of corporation that allows profits and losses to pass through to the owners' personal tax returns, avoiding double taxation.

Consider consulting with a legal or business professional to determine the best structure for your business.

2. Choose a Business Name

Selecting a unique business name is an important step. It should reflect your business’s mission, be easy to remember, and be free from trademark conflicts. Once you've chosen a name, check its availability:

State Business Registry: Ensure that the name isn't already taken by another business in your state.

Trademark Search: Perform a search through the U.S. Patent and Trademark Office (USPTO) or your country’s equivalent to make sure your name isn’t trademarked.

Domain Name: Consider securing a matching domain name for your business’s website.

3. Register Your Business Name

Once you’ve selected your business name, you need to register it with the appropriate authority:

Fictitious Business Name (DBA): If you’re using a business name different from your legal name (for a sole proprietorship or partnership), you may need to file for a “Doing Business As” (DBA) registration. This is typically done at the county or state level.

Corporation or LLC Name: If you’ve chosen a corporation or LLC, the business name will be registered when you file your formation documents.

4. Obtain an Employer Identification Number (EIN)

An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is necessary for most businesses, especially if you plan to hire employees or establish a business bank account. You can obtain an EIN for free through the IRS (in the U.S.) by applying online or by mail.

Even if you don't plan to hire employees, you may need an EIN for tax reporting purposes or to open a business bank account. Sole proprietors may be able to use their Social Security Number (SSN) instead of an EIN in certain cases.

5. Register for State and Local Taxes

Depending on your business location and type, you may need to register for various state and local taxes. Common types of taxes include:

Sales Tax: If you're selling taxable goods or services, you’ll need to register for sales tax collection with your state’s revenue department.

State Income Tax: If your state has an income tax, you will need to register with the state tax agency.

Employment Taxes: If you have employees, you must register for unemployment insurance, workers’ compensation, and payroll taxes with the appropriate state agencies.

6. Obtain Necessary Permits and Licenses

To operate legally, you may need certain permits or licenses. These vary depending on your industry, business location, and the services or products you offer. Common licenses and permits include:

Business License: Most businesses need a general business license to operate legally within a specific municipality or county.

Health Permits: If your business involves food preparation, public health concerns, or handling hazardous materials, you’ll need health permits.

Specialized Licenses: Professions such as real estate, law, finance, and healthcare require specific licenses issued by state or federal agencies.

Check with your local city or county office to determine what permits are needed for your business.

7. Comply with Zoning Laws

Zoning laws dictate where certain types of businesses can operate. If you’re setting up a physical storefront or office, check with your local zoning board to ensure that your location is in compliance with zoning regulations.

8. File the Necessary Formation Documents

For LLCs, corporations, and other formal business entities, you need to file the required formation documents with your state. These include:

Articles of Incorporation (for Corporations): This document outlines the purpose of your business, its structure, and key information about the owners.

Articles of Organization (for LLCs): Similar to the Articles of Incorporation but specific to LLCs.

These documents are typically filed with the Secretary of State’s office. A filing fee may be required, which varies by state.

9. Open a Business Bank Account

Once your business is registered, you should open a separate business bank account to keep your business and personal finances separate. You’ll need your EIN, formation documents, and any necessary licenses or permits to open an account.

10. Stay Compliant with Ongoing Requirements

Once your business is legally registered, remember that compliance is ongoing. This includes:

Filing Annual Reports: Many states require businesses to file annual reports to keep their registration active.

Paying Taxes: File and pay your taxes on time, including sales tax, employment taxes, and income tax.

Maintaining Business Licenses: Renew any necessary licenses or permits as required.