So you’ve chosen to start your own business. It is now time to register it and you must understand how to register your own business. The procedure of establishing a business varies based on the sort of activity you’re beginning, the size of the organization, and the state in which you live. We’ll go over the fundamentals of registering your business below. Register your company to establish it as a separate legal entity. Your business structure and location will determine how and where you must register.
If you follow the processes provided on our website, registering a business is straightforward and affordable, with the first step being to register as a CIPC client. However, whether the firm is trading or not, it has certain duties. You will, for example, be required to file an annual return and pay an annual charge.
Here Are The Following Steps On How To Register Your Own Business :
- Step 1: Come up with a name.
- Step 2: Decide on a business structure
- Step 3: Determine your state of residence.
- Step 4: Register your own business with the IRS
- Step 5: Register your own business with state and local agencies
- Step 6: Register your own business for taxes
- Step 7: Acquire licenses To register your own business
- Should I file a tax return for my new small business?
Step 1: Come up with a name.
Your company’s name is critical to its success. It is your customer’s initial impression of your company and helps pull them in. Top billing in directories is given to names that are higher up the alphabet.
If you can include the word “aardvark” into your company name, it may work in your favor. More significantly, your brand’s name should express your vision and be distinctive in your field.
Consider the following while registering a business name:
- Availability of names: To guarantee that business names are recognizable from one another, each state has its own naming requirements. Before submitting any state papers, you must run a name availability search to confirm that your desired name is not already in use. Many states provide an online search engine that you may use to conduct your search.
- Name rules: States also have industry-specific naming quality requirements. New York, for example, maintains a list of forbidden and restricted terms for business names. Some industries or professions have certain naming criteria. It is your responsibility to check for these limits and select an available name in order to prevent having your application denied.
- A fictional name is required: If your old business name is unavailable while registering in a new state, you may need to register a fictitious or “doing business as” (DBA) name.
Step 2: Decide on a business structure
The initial step is to choose a business structure. The company structure (also known as a business entity) you pick influences how you file taxes, how you run your firm on a daily basis, and how much of your personal assets are at risk if your business fails. Because the business structure you pick has such a large impact on you, it is critical that you do this initially.
Here’s a quick rundown of some of the most prevalent business structures.
- One-person business: This is the most common company structure. If you never choose a business structure but still run your company, you are labeled a sole proprietorship. Your business and personal assets and liabilities are not segregated in a single proprietorship.
- Partnership: A partnership is a commercial form for two or more persons who own a company jointly. Partnerships come in a variety of forms. In a limited partnership (LP), one member (the general partner) is personally liable, while the other partners (the limited partners) have limited responsibility. Limited liability partnerships (LLP) shield all participants from the business’s debt.
- Limited liability company (LLC): This business structure protects the business owner’s personal assets from the liabilities of the business. An LLC’s revenues and losses are usually taxed as personal income or loss to the members.
- C-Corp: This structure separates your company from its owners (the shareholders). That is, the firm can be taxed, generate a profit, and be held legally responsible for its activities independently of the shareholders. As a result, this structure provides the best security for an owner’s personal assets. Because the IRS considers a C-Corp to be a distinct company for tax purposes, it is conceivable to be taxed twice: once when the C-Corp generates a profit and again when dividends are given to shareholders.
The rules and procedures for forming sole proprietorships, limited liability companies (LLCs), corporations, and partnerships differ from state to state. If you’re stuck, a decent place to start is the IRS.
Step 3: Determine your state of residence.
Your home state or state of residence is the place where you first register your business. Your company is a domestic enterprise in your home state.
You are not required to incorporate your company in the state where you are located. Because of its business-friendly legal and regulatory climate, Delaware is a popular location for incorporation. It has a distinct judicial system for dealing with business cases. Because of its low company taxes, Nevada is a popular choice.
However, starting your firm in a separate state adds a layer of complication to your operation. You now have two states to keep track of regulatory filings, fees, taxes, and possible penalties. In general, it makes sense for small enterprises to choose their home state as their state of domicile.
The following criteria can assist you in deciding where to register your company:
- Taxes: Each state levies a unique combination of personal income taxes, corporate income taxes, franchise taxes, and sales taxes. The states with the highest business taxes, according to the Tax Foundation’s 2020 Business Tax Climate Index, are New Jersey, New York, California, and Connecticut. Wyoming, South Dakota, Alaska, and Florida topped the list of states with the best corporate tax climates.
- Regulatory burden: Some states are more business-friendly in terms of their legal systems, regulatory requirements, or both. As previously said, Delaware is a solid example of the former. Executives rate Texas, Florida, Tennessee, and North Carolina as the most business-friendly states.
Step 4: Register your own business with the IRS
Following that, you must register your firm with the IRS in order to obtain your Employer Identification Number (EIN). Your EIN is similar to a Social Security number for your business and is required for tax filing. You may sign up for one online by clicking here. Again, there may be times when you do not require one. The IRS provides a simple survey you may complete out to discover whether you do.
Step 5: Register your own business with state and local agencies
After you have completed all federal registrations, you will most likely need to register your business with one or more state or local government organizations, such as revenue offices. If you want to operate payroll, you may also be required to register with your state agency in order to file payroll taxes.
Step 6: Register your own business for taxes
In general, you must register your own business for taxes in states where you have a tax nexus, which is a presence sufficient to generate tax responsibilities. This often means owning commercial property, conducting business, operating facilities, recruiting workers, or making major sales in the state.
To owe sales tax, you do not need to have a POS system or an active sales force in the state. Tax nexus can exist with or without a physical presence.
Depending on the nature of your business, you may be required to register for a combination of employment, sales and use, corporate income, and franchise taxes.
Generally, this entails applying for a federal employment identification number or other tax identification number with the state revenue agency and then completing periodic files to pay taxes owed.
When registering your own business for taxes, keep the following in mind:
- Income and franchise taxes levied by the state: State income taxes are levied in 44 states. For the privilege of doing business, several states levy a flat franchise tax. In California, for example, any LLC or corporation conducting business in the state must pay a minimum yearly franchise tax of $800.
- Sales and use tax: If you have taxable sales in any state, you must investigate and maybe register for sales and use tax. If you make considerable sales in outlying areas, you may be required to register and submit sales taxes in those states as well. Wholesale wholesalers may be required to get a reseller’s certificate. Check the websites of state revenue departments for thresholds and criteria.
- Employment taxes: If you have workers, you must register for state payroll taxes in the states where you do business. Additionally, you may be required to register with the state labor department for workers’ compensation and unemployment insurance.
- Local taxes: In addition to state taxes, your company may be required to register with the county and local governments.
Step 7: Acquire licenses To register your own business
General business licenses are available in several states, including Alaska and Nevada. Others just demand licenses for specific occupations or activities. In certain states, business licenses are required before registering a business, whilst in others, the sequence is inverted.
That’s why it’s critical to double-check license requirements before submitting registration papers.
Consider the following procedures to guarantee that your company is appropriately licensed:
- Begin with state business centers: Most state websites display company license and registration information side by side, making it simple to study requirements and collect the necessary documents.
- Examine the following for prerequisites: Licensing and registration are sometimes intertwined, so be sure you complete the requirements in the correct sequence.
- Read the small print: Before beginning your task, you must file each form and read all of the instructions. Some needs aren’t obvious from the forms, but they’re generally clearly out someplace on the site. It’s also worth looking over frequently asked questions.
Not all businesses must register with the state. Sole proprietors and company partners can establish and run a firm for years without creating a legal corporation.
They can create a website, recruit personnel, and continue doing business as usual, absorbing the gains from their businesses as personal income. There is no formal company entity under this arrangement. The company is inextricably linked to its proprietors.
This is the most basic and popular type of company organization. However, when a firm grows, it makes sense to form a business entity by registering with the state. The primary benefit of registering is that it protects owners from any legal and financial responsibilities of the firm. It can also assist your company in obtaining loans and operational cash to boost sales and explore new markets.
It takes some study and paperwork to register your own business, but it is something you can handle on your own. Depending on the complexity of your business, your operational footprint, your sales methods, and the sorts of products or services you provide, you may require the assistance of tax and legal consultants at various stages of your transition from solopreneur to fully registered corporate organization. If you register your own business you will definitely get some advantage.
How long does it take to set up a business?
A name reservation takes between seven and 21 days, according to the Online PTY Registration. A business certificate can be registered within three to five days, depending on whether you filed your paperwork on time and the registrar’s office’s workload.
Is it legal for me to form a corporation without a name?
Yes. According to the CIPC, a business may be registered with or without a company name under the Companies Act, 2008. A business that is registered without a reserved name will nevertheless get a registration number, which will become the firm’s name automatically.
The name will still receive a registration number, which will become the company’s name immediately.
According to CIPC, the corporation can transact under a trade (business) name or subsequently request to add a reserved name. In this instance, the corporation must first reserve a name before applying for a name change.
What is the procedure for reserving a name?
The procedure: If your first name reservation application is denied, you must apply for new names, according to the CIPC. You may apply for up to four names per application throughout each application procedure.
The price is: Each application for a name reservation costs R50. The cost of registering a corporation might range from R125 and R475 (R125 for a private company, R475 for a non-profit company registered without members).
Should I file a tax return for my new small business?
Every new business must register with your local SARS office in order to get an income tax reference number. Within 60 days of beginning operations, you must register by completing an IT77 form, which is accessible at your local SARS office or on the SARS website.
Small firms with a yearly turnover of up to R1 million will now be allowed to pay certain taxes (turnover tax, VAT, and workers’ tax) twice rather than once, making the procedure more effective for qualified small company owners.
Turnover tax is a simplified tax system designed to help small firms comply with their tax obligations. Turnover tax is calculated by applying a tax rate to a microbusiness’s taxable turnover. Depending on other parameters like turnover, payroll amounts, if you engage in imports and exports, and so on, you may be required to register for additional taxes, charges, levies, and payments such as VAT, PAYE (Pay-as-you-earn), and UIF contributions (unemployment insurance contributions).