So you’ve decided to start a business. Now it’s time to register it. The process of registering a business is different depending on the type of operation you’re starting, how big it is, and what state you live in. Below, we explain the basics of how to get your business registered. But remember, Square does not provide legal or tax advice, and this article is not a substitute for advice from an attorney or tax advisor.
1. Choose business structure
The first step is to decide on a business structure. The business structure (also called a business entity) you choose affects the way you file for taxes, your day-to-day operations, and how much your personal assets are at risk if your business fails. Because the business structure you choose affects so much, it’s important to do this first.
Learn how to formalize and grow your business. Check out the Employer Launchpad.
Here is a brief overview of some of the most common business structures.
Sole proprietorship: This is the default business structure. If you never select a business structure but operate your business, then you are considered a sole proprietorship. In a sole proprietorship your business and personal assets and liabilities are not separated.
Partnership: This is the business structure for two or more people that own a business together. There are various types of partnerships. In a limited partnership (LP) there is typically one partner (the general partner) who is exposed to personal liability while the other partners (the limited partners) enjoy limited liability. Limited liability partnerships (LLP) protect all partners from the debt of the business.
Limited liability corporation (LLC): This business structure allows the business owner to protect personal assets from the business’ liabilities. The profits and losses of an LLC are typically taxed as personal income or loss to the members.
C-Corp: This structure makes your business a separate entity from the owners (the shareholders). That means the business can be taxed, make a profit, or be held legally liable for its actions separate and distinct from the shareholders. For this reason, this structure offers the most protection for an owner’s personal assets. Because the IRS typically views a C-Corp as a separate entity for tax purposes, it is possible to be taxed twice: once when the C-Corp makes a profit, and again when dividends are paid to shareholders.
The laws and registration process for sole proprietors, LLCs, corporations, and partnerships vary state by state. If you’re stuck, the IRS is a good place to start.
2. Find a location
Once you select the business structure that works best for you, you need to choose a location. That doesn’t mean your business has to have a brick-and-mortar location. As far as registering your business goes, it means the address you use for tax filings, receiving important documents from government agencies, or your business bank account.
3. Register your business name
Next comes registering your name. Registering a business name is usually part of the process of registering separate entities like LLCs and corporations. But if you’re starting a sole proprietorship or a partnership operating under a name that isn’t your own (e.g., your name is John Smith but you want your business name to be something else), you may need to file a DBA (a “doing business as” name).
A DBA can also be used by existing LLCs and corporations to register other businesses under them. For example, if you own a cafe and want to open another one under a different name, you would file a DBA. It keeps both the first and second cafe as one legal entity but with two different names.
A few states may not require a DBA as part of your business registration. But before you register your name, make sure it’s eligible for use. You may also want to trademark it. A DBA does not automatically protect the name from being reused elsewhere.
4. Register with the IRS
Next, you need to register your business with the IRS to receive your Employer Identification number (EIN). Your EIN is like a Social Security number for your business and is necessary for filing your taxes. You can sign up for one online here. Again, there are certain circumstances where you may not need one. To see if you do, the IRS has a short survey you can fill out.
5. Register with state and local agencies
Once all the federal registrations are done, you likely need to register your business with one or more agencies in your state or local government, such as revenue offices. If you plan to run payroll, you may also need to register with your state agency to file payroll taxes.
6. Apply for licenses and permits
Last, make sure you have all the right licenses and permits you need to begin serving customers. Each industry may have different requirements. Thankfully, the U.S. Small Business Administration has created an easy way to search for the permits and licenses you need by entering your location and type of business.
Once you’ve registered your business and gotten the paperwork out of the way, you can focus on the fun part of your job: spreading the word and providing excellent service.
Running a business is no easy feat, but Square is here to help. We have all the tools you need to start, run, and grow your business, whether you’re selling in person, online, or both. And we’ve made all our tools to work together as one system, saving you time and money — and making decisions easier. So you can get back to doing the work you love and focusing on whatever’s next. See how Square works.