A Beginner’s Guide To Registering Your Business

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When it comes to achieving financial independence, one of the best routes to go is starting your own business. It's a hefty endeavor, but with an abundant money mindset, a healthy work ethic, and strategic planning, it can be fruitful labor of love. A good area to start reading up on is the ins and outs of registering your business. It may not be the most exciting part of building your own empire, but it is a necessary one — especially if you want to avoid legal issues.


Figuring this out early can also be helpful when considering costs and logistics while mapping out your financial and operational plans. So with that in mind, here are a few tips to guide new entrepreneurs.

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Pin down your business structure

There are different business structures out there, and each of these will have varying pros and cons.

The first step is to figure out which one fits your goals, especially as they also determine the benefits and regulations that affect your taxes — something that is covered more in-depth by Certified Financial Planner Stoy Hall.

In the article, he emphasizes figuring out the most common business expenses and checking the tier of your business structure to match your tax planning.

Below is a brief explanation of business structures you can register as.

Sole Proprietorship

If you don't specify another business structure, you default to a sole proprietorship. Here, both business and personal assets fall under one branch, so you claim sole liability over everything.


Partnership

As the name itself dictates, this structure is usually the one to go for when more than one person owns the business. Depending on the partnership type, one or all partners can have personal liability, while others are limited, meaning they don't have liability over business debts and the like.

C-Corp

This basically works for corporations that are established as their own, which means they can continue on even with a change of ownership. This is because shareholders are considered separate, and while this is good for longevity and personal asset protection, it can also mean double the taxation.

S-Corp

This type of corporation is limited to U.S. citizens, with a max of 100 shareholders to a company. Here, you can avoid having to pay taxes twice, but all debts are directly passed to the shareholders. Each shareholder is taxed in place of the business.

Limited Liability Corporation (LLC)

This structure essentially combines all the above into one. Like a corporation, the owner is protected from being completely liable over the profits and losses of the business entity, but without the double-taxation. However, like a sole proprietorship and some partnerships, business income is considered personal income for tax purposes (though personal and business liabilities are separated).

Getting licenses and registration

Permits, licenses, and proper registration are all very important, especially because they are dependent on your specific industry and location. Here are the main ones to keep in mind.

State requirements

It is important to understand the tax rules and business regulations that apply to your specific state. Certain products need permits, and you need to register with your local government offices after getting all the federal requirements done. This is especially important if you plan on having employees.

On top of local permits, entrepreneurs looking to start an LLC here in New York are also required to publish their business’s articles of incorporation or organization in two separate state newspapers. Though it is a one-time thing, the publication requirement is something that entrepreneurs need to plan around carefully — especially given the costs. States like Arizona, Nebraska, and Georgia have similar requirements for new businesses.

Business name

You'll then need to register and trademark your business name and protect it from copycats. This also helps with your accounting. LLCs and corporations get their own name, but sole proprietorships require a Doing Business As (DBA) name. Business News Daily's DBA guide notes that some states like Alabama, Arizona, and Oklahoma don't require it for registration.

Employer Identification Number (EIN)

This is a crucial registration step with the IRS, and is important for filing taxes. Most businesses require it, though tax expert Jean Murray's EIN guide lists exceptions to that rule, like sole proprietorships without excise tax returns.

All this may seem overwhelming, but at the end of the day, getting the basics down is already a major step forward in achieving business success.

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Disclaimer: the content presented in this article is for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.