One person owns and runs everything in this kind of business and makes all the decisions. A sole proprietorship is the simplest business to start since it doesn’t need to be formally set up.
The IRS will automatically classify your firm a sole proprietorship if you establish it without setting up any kind of organizational structure. As of recent data from the U.S. Small Business Administration, there are over 33 million small businesses in the U.S. You may register your own small business by following these six easy steps.
Choose a business structure
It’s essential to comprehend the many business structures offered when creating a company in the United States. Selecting the business structure, you will choose is the first step in launching your company. The four most common types are limited liability companies (LLCs), corporations, partnerships, and sole proprietorships. varied types of structures have varied levels of personal responsibility, tax requirements, and legal consequences. Read this guide to find out which structure will result in the most tax savings.
1: Sole proprietorship
Under this arrangement, the company is owned and run by a single person who also makes all of the decisions. The easiest to establish is a single proprietorship as there is no formal setup required. The IRS will automatically classify you as a sole proprietorship if you begin operating your firm without establishing any kind of organizational structure.
Pros:
Easy to set up and maintain
No need to file separate business taxes
Cons:
Personal liability for business debts
Difficulty in raising capital
2: Partnerships
General partnerships and Limited partnerships are the two categories of partnerships
In a general partnership, each partner is accountable for the company’s obligations and has the same amount of power to run the business.
Limited Partnership:
Limited partners provide money but have limited responsibility, while one or more general partners run the company.
Pros:
Common resources and expertise
simpler tax preparation than for companies
Cons:
General partners’ personal responsibility
Possible disputes between couples
Are you a small business owner? Check 8 Ways to Reduce Costs in Small Business
3: Corporations
Shareholders own corporations, which are independent legal entities. Because the company is in charge of its own debts and liabilities, this form offers its owners little liability protection. C corporations and S corporations are the two primary forms of corporations.
C Corporation: Dividends given to shareholders are subject to additional taxes once profits are taxed at the corporate level.
S Corporation: To prevent double taxation, profits and losses are passed through to shareholders’ individual tax returns.
Pros:
- Shareholders’ limited liability
- Capital raising is simpler.
Cons:
- Continuous filings and complicated setup
- Double taxation for C corporations might occur.
- Limited Liability Company (LLC) is the fourth.
- The limited liability protection of a corporation and the less complicated tax reporting requirements of a partnership are combined in an LLC, a hybrid entity. Members, often referred to as owners, may be businesses, other LLCs, or private persons.
Step 2: Register the name of your company
Developing a distinctive company name. A unique company name helps clients remember your company and distinguishes it from rivals. Start by making a list of relevant words and phrases. Put them together to come up with a name that really fits your company, target market, and industry. After you have a list of potential names, use the USPTO website and the company register database in your state to see whether they are available.
Check out our collection of name suggestions if you’re having trouble coming up with a name for your company.
Name of Doing Business As (DBA), A DBA name, also referred to as a “fictitious name” or “trade name,” permits a company to function under a name other than the name of the legal corporation. Make sure you adhere to the county’s or state’s registration procedure before employing a DBA. Businesses that operate under a name other than the owner’s legal name, including partnerships and sole proprietorships, could need a DBA.A DBA does not protect you legally or restrict other individuals from using a name that is similar to yours.
Protection of Trademarks
Although it is not required, registering your company name as a trademark might help prevent unauthorized usage. Make sure your company name is accessible and distinctive before registering it as a trademark. To prevent any conflicts, do a thorough search using the USPTO’s Trademark Electronic Search System (TESS).
Once verified, send your trademark application to the USPTO with the needed paperwork and costs. Though trademark protection gives your brand long-term worth, keep in mind that the registration procedure might take several months.
Step 3: Obtain an Employer Identification Number (EIN).
The IRS gives each firm in the US a unique nine-digit number called an Employer Identification Number (EIN). In essence, it functions similarly to a Social Security number for your company, allowing the IRS to uniquely identify it for tax reporting and identification reasons.
Getting an EIN is a vital step in the US company registration process After selecting “Begin Application,” adhere to the prompts shown on the screen.
Applications may be submitted online by companies based in the United States or its territories. After you finish the process, you will have your EIN right away.
Conditions for Online Applications:
- A current Individual Taxpayer Identification Number (ITIN) or Social Security Number (SSN) is required of the applicant.
- The company has to be based in the US or one of its territories.
- Using online apps, each responsible party may only send in one EIN every day.
- Applying via the mail
- You may fill out Form SS-4 (Application for Employer Identification Number) and submit it to the IRS if you would rather apply for an EIN by mail or are unable to do so online. To apply by mail, do these actions:
- Fill out the form with the necessary details.
- Send the filled-out form by mail to the relevant IRS address, which is shown here.
Processing Time: The postal delivery of your EIN might take up to four weeks.
If you have any concerns regarding registering your company in the US or need help with the EIN application process, don’t hesitate to speak with a tax expert or legal counsel.
Step 4: Establish your place of business
Selecting the appropriate location is essential when registering a company in the United States. State laws, tax laws, and the distance between suppliers and consumers are all important considerations. The following actions will assist you in choosing a location for your business:
Examine state laws and taxes: Every state has its own laws, license requirements, and tax laws. Look into the various states to see which one provides advantageous tax circumstances and supports your kind of company. Usually, a local Chamber of Commerce or the state’s official website provide this information.
Think about being close to suppliers and customers: Your company’s location has a direct impact on both customer reach and operating expenses. Determine how far your target clients and important suppliers are from your possible site.
By reducing shipping and transportation expenses, this step may increase the profitability of your company.
Examine the local labor market: Skilled workers are essential to a successful company. To draw in talent for your business, look for regions with a robust and varied labor market. For further details on labor rates and demographics in various regions, speak with state employment offices or local workforce development organizations.
Examine your real estate alternatives. The size and nature of your company will determine whether you need office space, retail locations, or manufacturing facilities. Examine real estate prices in various areas and account for your company’s prospective expansion. For advice, speak with a commercial real estate professional or an attorney since lease agreements and purchase clauses might differ.
Verify local zoning laws: Before settling on a site, be sure that your kind of company is allowed to operate there. For details on limits and approved uses, speak with the local zoning or planning offices.
Obtain the licenses and permissions you need: After deciding on a site, make sure you have all the licenses, permits, and inspections needed in accordance with local and state laws. Fines or legal issues may arise from noncompliance.
Step 5: Apply for licenses and also permissions for your company
Understanding and acquiring the required federal, state, and municipal permissions when establishing a company in the US guarantees that your firm will be legal and able to run without hiccups.
Depending on where your business is located and what it does, you may need to secure the licenses and permits you need to run it legally. Certain permissions are needed at several levels of government, including municipal, state, and federal. The prerequisites for each level are briefly explained in this section.
Step 6: Create bank accounts for your company
It helps you keep your personal and business money separate, makes tax planning and accounting easier, and makes your firm seem better.
When choosing the best bank and account type, you should consider the fees, transaction restrictions, and any extra services that other banks provide. Think about what kind of account would be appropriate for your business, such a business credit, savings, or checking account.
Disclaimer: This article is for informational purposes only and does not constitute legal, tax, or business advice. Please consult with a qualified professional or the appropriate government agencies to address your specific needs and circumstances.