When one decides to get into the field of business and chalks out the necessary plan, the next step that remains is of registering the entity. There are many advantages of registering a business like, safeguarding your entity’s name, legal liability protection and continuity (in case of one’s death the business can pass on to other or be sold).
But prior to registering, one must decide as to what kind of entity that business will be. Will it be a Sole Proprietorship, a Partnership, a Corporation, an S Corporation, a Limited Liability Company, a Nonprofit or a Cooperative? The paperwork needed to be done will depend on the choice of entity. The laws and paperwork varies from state to state and in some cases even cities. Hence, one should check with their local authority for more details.
If the entity is a sole proprietorship, there is not much paperwork to take care of and the entity does not have to register with the state government. But in majority of the states proprietors have to use their own name for business name and have to register with the state government if they choose to use a different trade name or a fictitious name.
Corporations, S corporations, limited liability companies, limited partnerships and non-profits have to register with the respective state government where the company is incorporated and there are significant details and paperwork involved in the process.
Some of the common formalities that you have to meet are as follows.
- Registering the name of the business entity with the Secretary of State
Sole Proprietorship and Partnerships have to register their ‘fictitious name’; Corporations have to file ‘Articles of Incorporation’, LLC’s have to file ‘Articles of Organization’ and in some states like Missouri S Corporations have to file an extra IRS Form 2553.
- Obtaining local permits
One also has to obtain license/permit from the local authority to function as a business in that city or locality. This can be obtained generally from the city or county clerk.
- Registering with the IRS and obtain an Employer ID number
Every business has to register with the IRS and get the Employer ID Number also known as EIN. One can apply by phone or online and receive the EIN immediately.
- Registering for sales tax number
Additionally, one may need to register for a sales tax number if the entity will be in retail sales.
These are the preliminary requisites for registering a business entity. Also, going through the Secretary of State’s website for the state that the entity will be formed in will help simplify the process. It is advisable that one hires a good attorney as well as an accountant to work through many of the details of incorporating a business.
