There are loads of perks that come with becoming your own boss, but there are also plenty of responsibilities. One of the most important tasks you’ll need to take care of is registering your business.
I’ve registered several businesses over the years and have made some mistakes along the way – but now, I know how to get it right. I’m here to share what I’ve learned to help you register your business the right way.
I’ve set down everything you need to know about how to register a business in the USA in 7 easy-to-follow steps. Use this handy guide as you go through the process to ensure you get your registration right the first time.
Do I Need to Register My Business in the US?
Registering a business is not a must in the US, but there are plenty of benefits you may be able to take advantage of if you do.
Registering your business can determine:
- Your tax rates
- The deductions you’re entitled to make
- Who is liable for your business’s obligations
- Your reporting requirements
Generally speaking, there are two main categories of businesses in the US: unincorporated and incorporated. Incorporated businesses are those that are registered, while unincorporated are those that aren’t.
Sole proprietorships and general partnerships are both unincorporated businesses. Entrepreneurs often start out operating these types of businesses because they don’t need to be registered.
Although unincorporated businesses are easier to set up, the business owner or partners are personally liable for all of the business’s obligations (e.g. debts and legal rulings). The owners also have to pay income tax on their earnings, which is usually much higher than corporation tax.
Incorporated businesses, on the other hand, are seen as separate from the business owners and have their own rights. That means the business owner(s) can’t be held liable for the business’s debts or actions. What’s more, it’s far easier to get a business loan if you need it.
While there are plenty of benefits that come with registering your business, it’s important to keep in mind the amount of administrative work that comes with being an incorporated entity. You’ll be required to pay annual filing fees, prepare annual reports, and meet other legal requirements.
Whether you choose to register your business or not will mainly depend on how your business is performing as well as your goals for your entity.
Do I need to Register an Online Business in the US?
In the US, online businesses have to follow the same rules as brick-and-mortar businesses. This means that the decision to register is entirely up to you as the business owner.
As I’ve already mentioned, sole proprietors and general partners don’t need to be registered. Limited liability partnerships, limited liability companies, and corporations, on the other hand, do.
When you’re deciding whether to register your online business, it’s a good idea to think about where you’ll do business. If you’re planning to sell your goods or services on a national or international level, registering your entity can lend it a degree of credibility.
Online shoppers are savvy these days, and many of them will do some research before making a purchase. Having a company suffix attached to your business name (e.g. limited, incorporated, or corporation) can help more potential customers view your business as legitimate.
How to Register Your Business in the USA in 7 Easy Steps
Registering a business is simple when you know what to do. Follow these 7 steps to get your business up and running as quickly as possible.
Step 1: Choose Your Business Structure
The best choice for your business structure depends on the type of business you’re starting and your plans for expansion.
We’ve already mentioned the different types of incorporated and unincorporated businesses that you can choose, but let’s take a closer look at each of these options and how they function.
Keep in mind that you’ll only need to register your business if you choose a structure that requires incorporation.
In this type of unregistered business, there is no separation between you and your business. You’ll be able to keep all the profits, but you’ll have to pay income tax on them. Plus, your personal assets can be used to pay business debts or cover costs that arise because of its actions (e.g. if a customer is injured while using your product or service).
A general partnership is a business that’s owned and operated by two or more people. Similar to a sole proprietorship, the partners are fully liable for the business’s actions and they are personally liable for covering debts and taxes, as well as obligations that arise from legal rulings.
In a limited partnership, there’s at least one general partner who runs the company and is fully liable for any debts or losses. The other partners are known as limited partners and their role is to provide financial investment. They aren’t involved in the day-to-day operations and their liability is limited according to the amount they’ve invested in the business.
Limited Liability Partnership
Called an LLP for short, all of the partners in this type of incorporated business are joint owners of the company. Their liability for the business’s debts and actions is proportional and limited to their initial investment. In other words, they can only lose as much as they’ve invested.
Limited Liability Partnerships may be restricted to particular industries and professions in some places in the US, so it’s important to check local regulations.
Limited Liability Company
Also known as an LLC, the Limited Liability Company creates a legal separation between the business owners and the business itself. When it’s incorporated, an LLC is recognized as a legal entity in its own right.
An LLC is a great option for small business owners. This is because your personal assets can’t be used to satisfy business liabilities and there are some tax benefits as well. It’s also much simpler to register than a full-fledged corporation.
C Corporations are usually large entities with multiple investors and shareholders. Like other incorporated businesses, the C Corporation legally separates the owners’ and business’s assets and liabilities.
There are a variety of responsibilities that come with establishing a C Corporation. Some of these include the duty to hold annual meetings and have a board of directors that’s voted in by shareholders.
Step 2: Register Your Business Name
There are three ways that you can name your business; by registering a legal entity name or a trademark, or by registering a legal name and operating under a different one. Naming rules and regulations differ from state to state, so you’ll need to check the requirements for the state you’d like to register in.
Similar to incorporating your business, the route you choose for naming your business will depend on your entity’s needs and circumstances.
You may want to follow all three routes so that no one else can use your name, but you can also simply choose one of the three options. Although it’s not a requirement, it will probably make sense for you to use the same name for each registration method.
Let’s take a closer look at each of the naming options.
Most states require businesses to register a legal entity name, which is what the state uses to identify the company. Entity names must be unique, so you’re protected from the possibility of another business having the same name as yours.
State naming laws differ slightly from one another. Some have guidelines relating to company suffixes (e.g. incorporated, limited, or corporation), while others require that the name reflects the type of business that’s being registered.
A trademark protects your business name at a national level. Once your name is trademarked, no one else can use that name when they register a business in the US.
If you have an idea for a name, it’s a good idea to search the US official trademark database to make sure it isn’t already trademarked. This is a critical step, because infringing on someone else’s trademark is a criminal offense and could result in legal action.
Doing Business As
You also have the option of registering your business under one ‘official’ name and operating under another. This is known as a Doing Business As (DBA) name. These names are subject to federal trademark laws, but there’s no requirement for a DBA to be unique at state level.
Step 3: Consider Taxes and Other Costs
Each state has its own rules about business registration and taxes. This means that registering in a particular state may bring about some tax and other cost benefits. If you’re planning on doing business in multiple states, you’ll need to ensure that your business qualifies to operate in each one.
To make things easier for you, I’ve pulled together information about the tax liability and other business costs for a few states. This is by no means an extensive list. It’s always best to speak to a business or corporate lawyer to ensure that you know all the ins and outs of operating in a particular state.
Only corporations in Alaska are subject to state taxes. All businesses must file biennial reports, which are used to keep business records up to date.
Businesses registering in California should keep in mind that the state is known for high business taxes and be prepared to pay a range of fees.
Large businesses often incorporate in Delaware because the state serves as a tax shelter. Businesses registered in the state but don’t operate there don’t have to pay corporate tax.
Another tax-friendly state, most businesses in Florida are exempt from taxation. Partners and owners simply pay income tax on their earnings, but there are a variety of other fees that you’ll have to pay when setting up a business here.
Unlike most other states on this list, businesses in Idaho need to pay a state tax.
Most businesses that register in Maryland are exempt from tax. The state has put various regulations in place to keep liability low and encourage entrepreneurship and innovation. The individuals running these businesses are still liable for income tax.
As in Maryland, LLPs and LLCs operating in Montana are exempt from corporation tax. Instead, the business owners are required to pay income tax on the profits that are distributed to them.
New Hampshire charges companies a flat rate business profits tax and business enterprise tax. This applies to corporations, LLCs, partnerships and sole proprietorships.
Corporations in New Jersey pay corporate income tax based on revenues. Other business types aren’t taxed – business owners’ income is taxed instead.
New York State corporations pay a corporate franchise task based on their revenues. Other types of businesses are also subject to filing fees.
Rather than a flat corporate tax, businesses that start operating in Ohio pay a commercial activity tax on a sliding scale according to their gross income. If a company brings in under $150,000 no taxes are owed. This applies to all businesses.
There are plenty of advantages to registering a business in Oregon. The state offers cash-based incentives for setting up an entity. Plus, new businesses can apply for a tax holiday of up to 10 years if they meet certain requirements.
All incorporated businesses setting up shop in Texas must pay a state franchise tax. The rate they pay will be determined by their total revenue. That said, the low tax rates makes the state extremely attractive for entrepreneurs.
Step 4: Register and Acquire Licenses and Permits
The process you follow to incorporate your business is defined by the local authority where you plan on registering. Although regulations vary from state to state, there are a few universal requirements.
First, you’ll need to obtain an Employer Identification Number (EIN). This is a tax identification number that ensures your business is set up to pay taxes, benefit from any deductibles, hire employees, and run other operations. You’ll also need a few key pieces of information and documentation, including:
- Articles of formation or incorporation
- An official business name
- An official business address
- Identifying information about the company owner(s)
The paperwork you need to submit to your local authority will depend on the type of business you plan to register.
Like registration, the licenses and permits you need will depend on the type of business you’re starting as well as industry and the local laws where you’re registering. The process you follow to obtain this documentation will also vary depending on the state where you choose to register.
It’s important to research the laws in your specific industry. This will make it easier for you to make sure you complete the process to obtain all of the licenses and permits that you need for your business to operate legally.
Step 5: Open a Bank Account for Your Business
As soon as you have your EIN, you can open a business bank account.
Laws regulating LLPs, LLCs, and corporations make opening a business bank account a requirement. Sole proprietors and unincorporated partnerships, on the other hand, aren’t obliged to have separate personal and business bank accounts.
Opening a business account is as simple as going to your local bank and filling out the required paperwork. Of course, it’s a good idea to shop around and compare the rates and perks different banks are offering before you settle on a particular provider.
Even if you’re operating as a sole proprietor or unincorporated partnership, it’s a good idea to have a designated company bank account to keep your personal finances separate from those of your business. If you decide to incorporate your business later on, this will save you the hassle down the line.
Step 6: Protect Your Intellectual Property
Depending on the type of company you’re starting, you may have some valuable intellectual property (IP) that you’ll want to protect.
For example, most businesses want to ensure that their name and logo can’t be copied and used by other entities. Depending on whether your business sells goods or offers a service, you may want to safeguard the design of your products or the works (e.g. writing, designs, or music) that you create.
There are several ways that you can do this and it’s helpful to get these applications started as soon as possible so that your IP can’t be used by anyone else.
A trademark is a word, phrase, symbol, sign, or insignia that’s used to differentiate a product or service from other similar products or services. Think of Nike’s Swoosh or McDonald’s’ “I’m lovin’ it.”
Trademarks must be registered to be recognised. The process generally takes around four to six months to complete. Once your trademark is registered, it’s protected throughout the USA and you can institute legal action against anyone who uses it without your consent.
Original written works, software, web content, films, sound recordings, images, and other works are protected by copyright law. Only the creator of the works is permitted to distribute, reproduce, create derivative works from, or sell the intellectual property.
Copyright is automatically granted when you create a new work. The rights can also be transferred to another owner by sale, gift, or another agreement.
If you invent a new product or piece of machinery, you’ll definitely want to patent it. A patent gives the holder exclusive rights over an item and prevents anyone else from making, selling, or importing the patented item for a specified period of time.
The patent process is complex and can take up to five years to complete, so it’s best to get an early start if you have a unique invention that you’d like to protect.
Step 7: Set Up Your Payment Infrastructure
To ensure that your business is ready to start serving customers as soon as it’s registered, you’ll want to ensure that you have an easy, hassle-free way to accept payments.
Pay.com is a full-service payment infrastructure that offers no-code solutions alongside developer-friendly APIs. The system is flexible and easy to set up and customize to meet your business goals.
Pay.com allows you to accept a wide variety of payment methods, including credit and debit cards, ACH transfers, digital wallets like Apple Pay and Google Pay, and many more. Wherever you choose to register your company and sell your goods or services, you can let your customers pay with their favorite methods via our secure platform.
Click here to get started with Pay.com now!
The Bottom Line: Registering a Business in the US Can Be Simple
The process of registering a business in the US may seem daunting, especially when filling out paperwork could make or break your operation.
Knowing exactly what needs to be done and following the simple process I’ve set out above will go a long way to reduce your stress and get your registration right the first time.
Using a simple, efficient payment infrastructure is a great way to save yourself some hassle while setting up your new entity. With Pay.com, you can easily accept payments from within the US and from all over the world. The best part is that the system couldn’t be easier to set up.
Don’t wait till the last minute – click here to set up your Pay.com account now.