Once you establish a company, you need to register it with the State in which the business operates, except for alcohol, firearms, and tobacco businesses which require federal government registration. Business registration is pretty straightforward and should not hassle you when you have all the requirements. Here's a how-to on business registration in the shortest time possible.
The first step in business registration is to decide on the business structure. Different business structures require specific kinds of documents to present to the State. First, you have to understand the different structures, needs, and goals when you’re registering a business. There are various structures, each with its benefits and drawbacks. It would be best to decide based on what's best for your specific situation. Some business models exist include:
One of the simplest business structures, sole proprietorship, involves one person being the owner. The owner has the mandate of everyday business operations running. The owner is also responsible for paying the business tax returns. Since the business doesn't function as a separate legal enterprise, it's not supposed to pay separate income tax. The proprietor only needs to file a 1040 Form consisting of Schedule C and Schedule SE Forms for self-employment tax.
Sole proprietorship comes with many advantages. Some include it being relatively affordable with minimal registration fees. You only need operating license fees and taxes to operate this type of business. As a proprietor, you may be entitled to tax deductions like health insurance. You also don't have to elect directors or host shareholder meetings. The drawback with this business structure is that it's not a separate legal enterprise for its owners. So, the owners are held responsible for liabilities, debts, and business obligations.
With a partnership comes two or more business owners. This business form is one of the simplest and not far from a sole proprietorship in that the company is not a separate legal enterprise from its owners. In this structure, partners file taxes by reporting information concerning the profits earned and losses incurred in the 1065 Form alongside their tax returns. For more information about taxes, you can check the Hong Kong tax services guide. Partnerships come with the same advantages as sole proprietorships in terms of minimal registration fees and tax deductions. However, the owners are jointly responsible for any business liabilities, debts, or obligations.
The partners also pay self-employment tax, which depends on their business profit share.
The benefits of this business model are that minimal paperwork is involved during registration, and partners have a special taxation arrangement where they report their business profit or loss amounts on the income tax return. The disadvantage is that partners are responsible for business obligations and debts, and any misunderstandings can interfere with business operations.
A business has a legally separate entity from the owners with a corporation model. This business type is expensive and difficult to set up (mostly done with attorneys) as it requires more tax obligations and requirements compliance from its owners. That is paying state and federal taxes and shareholders' paying personal tax through dividend wages deductions.
The corporation business model is divided into C-corporation and S-corporations. A C-corporation operates as a separate legal enterprise from its owners, while an S-corporation functions as a partnership and includes up to 100 shareholders.
Limited Liability Company (LLC)
This business model combines different structures, having both the corporation and partnership features. LLC offers personal, limited liability protection to its owners, protecting their assets from compensating for the company's liabilities. Profits and losses are also divided among owners, which are supposed to be included in personal tax returns.
LLCs have reduced business and tax requirements, a limitless number of shareholders, less paperwork, and fewer registration requirements. The downside is that this business structure is expensive and would need professional personnel like accountants and attorneys to ensure tax and obligations compliance.
You can now go for name-hunting after settling on your preferred entity model. When selecting business names, go for those that can easily communicate your business, the products you sell, or the services offered. Since two companies cannot operate with one name in the same State, it's crucial to act as backups if you have as many names as possible should your priority name be taken. Your business name should also include certain designations like Company, Corporative, Corp., Inc., and Co.
You can apply for your business registration with the Secretary's office of the State you want your business to operate. Different business structures require specific documentation. For example, applying for a corporation business form requires Articles of Incorporation, while the partnership model needs a Partnership Agreement.
All business enterprises should get the IRS. The IRS, or Internal Revenue Service, is similar to a Security number that a company uses to file business tax returns. You can obtain the number by simply filing IRS Form SS-4 or IRS Form 2553 if you plan to register your enterprise as a corporate entity.
The nature of your business and your location (city, state, country) determines whether you'll need a business license or not and the type of license required. Some enterprises need one license to operate, while others need more. Similarly, you cannot manage your business without a license in specific states, but you can freely run your unlicensed company in Texas. Whatever the case, take time first to understand where you reside, whether you need a license, and the business laws. Then head to the county's clerk and obtain your business license.
Maintaining Business License
Obtaining a business license is one thing, but maintaining it is another. Maintaining your business license is crucial in complying with its rules and your business. Depending on where you're operating your business, you may have to renew your license annually, semi-annually, or quarterly. Expanding your business by incorporating new products or services may require a new license. You may also be required to fill out some Forms when planning to close your enterprise failure, to which you can incur penalties. So, to avoid trouble and unnecessary headaches, equip yourself with knowledge about maintaining a business license so that you don't regret later failing to comply with regulations.
The advancement of technology has eased lots of things. Nowadays, registering a business is straightforward, and anyone can do it. With a computer or a smartphone and a good internet connection, you can easily register your business in a few minutes and follow up on legal issues later.