Forming a company requires proper preparation and planning for the business registry. Determining the requirements to register a business is one of the tasks a company needs to take seriously. After figuring out the target market of the company, choosing the products or services it will offer, and writing a business plan, the company has to formally register with the state. Here are some of the most important requirements:
One of the first requirements is that a company must choose the right business entity structure. It can either register as an LLC or a corporation. Each structure has pros and cons, so it is important to research them first before finalizing the decision.
- Limited Liability Company (LLC) – Offers asset protection to the business owners, who are known as members. At the same time, it has flexibility when it comes to management and taxation. Unlike a corporation, an LLC does not have to follow strict corporate requirements like keeping well-detailed minutes of meetings and resolutions.
- Corporation – Like an LLC, a corporation has asset protection since it is also considered a separate entity from the company owners. In terms of taxation, it will pay federal income tax at a corporate level. The owners will also have to include the profit they get from the business on their personal tax returns.
States impose naming guidelines. LLCs and corporations have to abide by these during the business registry.
Generally, an LLC name needs to have the phrase “Limited Liability Company” or “Liability Company.” States also allow the use of any of the abbreviations of those two phrases, such as “LLC,” “L.L.C.,” “LC,” “L.C.,” and “Ltd. Co.”
Corporations, on the other hand, can include the term “Corporation,” “Incorporated,” “Limited,” or any abbreviation of one of these words like “Corp.” or “Inc.”
There may also be a need to ensure that the company name is unique. If the desired name is already being used by an existing entity in the state, then the best thing to do is to reserve another name for a certain period. A business entity check on the database of the governing agency will help determine if the desired name is valid.
LLCs and corporations are also required to appoint a registered agent in the state. They will be accepting legal correspondence on behalf of the company. The agent can either be an individual resident or an authorized company. To learn more about state qualifications, read the article Find A New Registered Agent.
Employer Identification Number (EIN)
A company can obtain an EIN from the Internal Revenue Service (IRS). This number is equivalent to a Social Security Number.
An LLC may need an EIN for tax filing purposes. It will also be a requirement to hire employees and open a business bank account. Companies can get an EIN from the Internal Revenue Service (IRS).
State Tax ID Number
In some states, the business registry process includes getting a state Tax ID Number. It is often needed in states that collect business taxes.
Keep in mind that tax obligations and reporting requirements vary from state to state. So it would be best to visit the state website or call the governing agency. Doing this will ensure compliance and prevent fines and problems.
State And Local Taxes
As with the other requirements, taxes will also depend on the state. In most cases, an LLC may need to pay and report sales and use taxes on products and certain services that require the collection of the said taxes.
Those who have employees may also have to file and pay withholding and unemployment insurance taxes. Always check with state and local agencies to avoid facing penalties or losing the good standing status of the business. In the worst cases, it may even lead to involuntary dissolution.
Business Licenses And Permits
Depending on the industry, business activities, and the location of the primary place of business, a company may have to secure additional business licenses and permits. Check these with federal, state, and local offices.
Get Started With A Business Registry
The business registry process may vary per state, but certain legal requirements are similar in all states. It is important for a company to ensure the proper completion of all the steps.
Those who find the whole ordeal a bit overwhelming or do not have enough time to handle all the state requirements can hire a reliable third-party organization like DoMyLLC.