How to Register Your Small Busines

January 16, 2021
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Are you getting ready to launch your own startup? If so, you’ll need to know how to register a business to legitimize it. Since registration can be tricky, we’ll run you through the process to get started, including:


  • Determining your business structure
  • Registering your business 
  • Preparing for taxes
  • Applying for appropriate business paperwork 
  • Acquiring business insurance 


Step 1: Choose Your Business Structure

There are a number of business structures you can use to model your startup. The one you select could have a significant impact on your taxes and personal liability when you go to register startup businesses.


The Five Common Business Structures

There are pros and cons to each type of business ownership. When founding a company, consider all the different types of business entities and what would be best for your specific startup. Some offer limited liability, others offer tax incentives. Some are ideal for companies that plan on seeking investment. 


Here’s a quick rundown of the five structures and why business owners may choose them:


  • Sole proprietorship – A sole proprietorship is owned and operated by a single person. These businesses are easy to form and cost little to get started. That said, there is no legal distinction between the owner and the business entity. Your personal finances and those of the business are one and the same. As a result, you’re personally liable for any of the business’ debts or obligations.   


  • Partnership – A partnership is a business agreement between at least two people where all partners manage and operate the company in exchange for a share of the profits and ownership. Benefits of partnerships include division of labor, access to funds, and the sharing of liabilities. These are typically Limited Partnerships (LPs) or Limited Liability Partnerships (LLPs). 


  • C-Corp – A C corp is a business where the owners are completely separate entities. This structure—common among larger enterprises—allows for the least liability and the largest potential for high rates of growth. Additionally, C corps are more attractive to venture capitalists. As a publicly traded company, the major shareholders can easily seekout capital investment to grow their business.  


  • LLC – An LLC is a private company that makes a legal distinction between the owner and the business. This means that if the business gets sued or files for bankruptcy, the owner’s personal assets remain safe. This type of business is also relatively simple to set up, but has a harder time raising capital. 


  • S-Corp – An S-corp is a business that has been granted special tax status by the IRS to avoid double taxation. Other than this, it is very similar to a C corp. 


It’s worth noting that these aren’t the only business structures, just the more common ones. There are also B corps, close corps, nonprofit corps, and cooperatives. 


Step 2: Register Your Business 

After determining which structure you’d like to make your business, it’s time to explore how to register a business. The local, state, and federal governments need to be able to keep tabs on your business’ actions, which means you’ll need to start by choosing a location and name for your enterprise. 


Choose a Location 

You do not need a physical space tied to your business, but you will need an address for tax and filing purposes. Also, depending on where you’re operating, you may need to register your business in multiple counties or states. 


Foreign Qualification 

Once you register your business in your chosen state, you may need to file for what is called foreign qualification if you're operating in other states. 


The extent of this operation is not always easy to define—online-only companies typically will not need to worry about this—but if you have a physical presence in another state or have employees located in another state, you need to file for foreign qualification.


To do this, you will file a Certificate of Authority with the state in which you are sometimes operating (not to be confused with your state of formation). Foreign qualification requirements and fees vary by state. 


Register Your Business Name 

Unless you’re operating as a sole proprietorship, you’re expected to register a Fictitious Business Name (FBN) or a Doing Business As (DBA). The four steps involved with registering your name include:


  1. Check for availability 
  2. File the name 
  3. Pay filing fees 
  4. Publish the name 


Procure an EIN 

Once you have registered the name and settled on a location for your business you’ll need to acquire an Employer Identification Number (EIN). The EIN acts like a social security number for your business, helping to identify you for tax purposes. To qualify for an EIN you must:


  • Operate your business within the U.S. or a U.S. territory
  • Be the owner
  • Have a legal Taxpayer Identification Number (TIN)
  • Fill out an IRS Form SS-4


Step 3: Prepare for Taxes 

Depending on your business structure, you may be required to pay multiple taxes. It’s critical that you prepare for this ahead of time so that you’re not blindsided.   


Breakdown of Taxes

Once you start your own business, the tax filing process can be far more complex than the days when you filed as an employee. 


Common federal, state, and local taxes include:


  • Income tax
  • Payroll tax
  • Self-employment tax
  • Excise tax
  • Employer Tax
  • Estimated tax
  • Sales tax


Taxes for hiring employees include: 


  • Federal income tax withholding 
  • Federal wage and tax statement 


Other potential taxes may be:  


  • Property tax
  • Unemployment


What You Need For Tax Day 

As teeth-grinding as it may be, preparing for tax day well in advance of April 15 will serve you and your fledgling business in the long run. A few ways to prepare for the tax filing process include:


  • Start saving – The general rule of thumb is to set aside 30-40% of earnings for taxes.


  • Detail your deductions – Educate yourself about what you can and cannot write off as a business expense. Common write-offs include meals, travel, home office, and internet. 


  • Invest in real-time visibility of company finances – To keep tabs on company spend and receipts, it helps to have automated systems in place. Ideally, your expense management platform comes integrated into your corporate card, tracking expenses and inputting them into the general ledger in real-time.


Step 4: Apply for the Appropriate Business Permits and Licenses 

The vast majority of businesses require some type of governmental permit or license in order to legally operate. Check both your local and state websites in order to determine what you need to do to get up and running. 


Federal Licenses and Permits

Federal licenses and permits are required if your business is regulated by a federal agency. The registration requirements and subsequent fees vary depending on your business activity and the agency that is issuing your paperwork. 


According to the U.S. Small Business Administration, some common industries which require a federal stamp of approval include:


  • Agriculture
  • Alcohol sales
  • Aviation
  • Broadcasting 
  • Firearms and explosives
  • Fish and wildlife
  • Maritime transportation
  • Mining 
  • Nuclear energy
  • Transportation/logistics 


State and Local Licenses and Permits 

State and local requirements for licensure are far more varied—states regulate a spectrum of businesses, from construction to plumbing—so you’ll need to check what protocols your state has in place. Visit your state’s website to find the list of permit requirements, and be sure to renew your license before it expires.  


Step 5: Obtain Business Insurance 

Just like car insurance and health insurance, business insurance exists so that in the case of minor or major catastrophes, your entire life’s work will not be wiped out. Different types of business insurance to consider purchasing include:


  • Workers compensation insurance 
  • Property insurance
  • General liability insurance


Additionally, errors and omissions insurance (E&O) is a type of professional liability insurance that protects companies against claims made by a client. Lawyers, dentists, and hair stylists are just a few examples of professionals who generally need this kind of business insurance. 


Strengthen Your Finances with Ramp

Once your business is registered and running, you’ll want a corporate card to match your financial needs. That’s where Ramp can help. With Ramp, you can automatically find cost-saving opportunities and increase efficiency across every branch of your small business.


Ramp’s automated expense management platform allows you to track company spending in real-time—no more manual expense reports eating away your employees’ valuable hours and energy. When you use Ramp, all purchasing is immediately tracked and logged, syncing up with hundreds of popular accounting providers.  


Ready to take your new business up a notch? Ramp can help

Sources:

IRS

SBA

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