After deciding to start a business, owners need to learn how to properly register it. This way, the owner can make sure that the company’s activities and operations are legal. The business registry process depends on the entity structure that has been chosen and the state where the business owner plans on organizing the company. Generally, it involves the filing of formal paperwork, payment of corresponding fees, and completing compliance obligations.
Here are the steps that need to be taken:
- Step 1: Choose the appropriate business entity structure.
Before proceeding to register the business, an entity structure must be decided on first. There are four main structures that can be chosen from. Weigh the options well, and select the one that is most beneficial for the company.
- Sole Proprietorship – This is known to be the simplest business entity structure. It is suitable for a singular business owner. So if you are planning on working alone, this may be the right choice.In terms of taxation, a sole proprietorship is a pass-through entity. Business income is passed through to the owner, so the owner will be reporting profits and losses on their individual income tax return. Additionally, the owner will also be held personally liable for any debts and losses that the company incurs.
- Partnership – A partnership is similar to a sole proprietorship. However, it has more than one owner. There are two types of partnerships: general and limited.General partnerships are for companies wherein the partners manage the business operations and assume responsibility for the debts and obligations of the company. To put it simply, the general partners will be held personally liable for the company’s debts and losses.On the other hand, in a limited partnership, the limited partner serves only as an investor. They do not have any control over the business and do not have liability for the company’s debts and obligations, either. That means that they can only lose what they invested.
Partnerships are pass-through entities as well.
- Corporation – This structure creates a legal entity separate from the owners and officers of the company. That means the business owners will not have any liability for the actions, debts, and obligations of the company. The company will also be taxed at a corporate level.Corporations are also allowed to raise money through the selling of stocks. Another advantage is that a corporation continues to exist even if a shareholder dies, becomes disabled, or decides to sell their shares.
- Limited Liability Company (LLC) – A lot of startups choose this structure. It is known as a hybrid structure because it combines the features of a corporation and a sole proprietorship or partnership.An LLC is a separate entity. The owners, who are known as members, will not be held personally liable for the actions, debts, and obligations of the company. At the same time, an LLC can also be a pass-through entity. If that is the case, the company will not be taxed at a corporate level.
- Step 2: Select a state.
The place where the business is formed will have an impact on the taxation and compliance obligations of the company. This state will be the company’s home state.Every state has laws and regulations governing companies. So how to choose? The simple answer is to select the one that offers the most benefits and fits the needs of the company. First, consider the primary place of the business’ operations. Where are the targeted customers? Where will the company do the majority of its transactions?
- Step 3: Complete the business registry process.
The process of forming a company will vary depending on the state that has been chosen. But, generally, it involves the submission of formal paperwork.Here are some of the things to prepare for:
- Come up with an appropriate company name. Choose a name that complies with the naming guidelines of the state. That means the business owner will have to include a proper designator. For example, if they decide to form an LLC, be sure to include the phrase “Limited Liability Company” or any of its abbreviations like LLC or L.L.C. The business owner should also make sure the company name is distinguishable. Make sure no other entity in the state is already using it. That means that companies have to conduct a business entity name search first to check the availability of the name that they want to use.
- Appoint a registered agent. States require companies to nominate a registered agent. They will be in charge of receiving services of process, government correspondence, and other business-related mail on behalf of the company. Businesses can also appoint an individual or a third-party organization like DoMyLLC. Learn more about what to look for by reading our article Five Traits Of A Good LLC Registered Agent For Your Business.
- Obtain an Employer Identification Number (EIN). Your company may also need to get an EIN from the Internal Revenue Service (IRS). The purpose of this number is similar to that of a social security number. The business will use it in filing taxes, hiring employees, and opening a business bank account.
- Complete other compliance requirements. Depending on the activities of the company and the location of its primary place of business, it may be necessary to obtain certain licenses and permits. It may also have other state tax obligations. In most cases, companies will have to file annual or biennial reports with the state too.
States may have additional steps for certain business entity structures, especially for corporations. If you want to learn more about the process of incorporating a company, check out our state-specific articles.
How DoMyLLC Can Help With The Business Registry
Pursuing entrepreneurship requires courage and preparedness. Understand the business registry process to ensure that you do not make any mistakes that could lead to serious issues in the long run.
Fortunately, you do not have to do everything on your own. If the whole ordeal is a bit overwhelming or too much to handle, get help from a third-party organization like DoMyLLC. Our team of experts offers a wide range of services covering everything from the formation of a business entity to compliance with state obligations. We can also serve as the company’s registered agent. Additionally, a personalized solution can be created to fit the needs of the business. Contact us now to get more information about our services.
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