Small Business Deep-Dive #7: Registering Your Small Business
Starting a small business can feel like running a marathon. You’ve passed the halfway mark, determining your business structure and choosing a name. Now your legs are killing you and the sight of another water station might make you scream.
If you’re considering walking the next mile, eat a protein snack and refocus. It’s time to register your business.
Registering with the proper authorities is the key to staying on state and federal agencies’ good side. You’ll be starting an ongoing relationship with them so getting off on the right foot is crucial. Otherwise, missing important deadlines and paperwork can land your business in serious hot water before you know it.
This week’s deep-dive examines small business registration. Read on to learn everything you need to know for registering your small business to set yourself up for success.
Get to know your Secretary of State!
Have you chosen to structure your business as a sole proprietorship or a general partnership? If you’re operating through these simpler, independent business structures, you are most likely ready to start conducting business.
For everyone else, your local Secretary of State office is about to become your new best friend. That’s because you’ll need to register your business.
Registering with your home state (where you conduct business) is how local agencies know who’s operating there. It allows them to keep tabs on you through annual reports and lets them know to collect any associated fees. Registering with your local business bureau will also be the first step in obtaining licenses and permits.
You can either register online or through the mail depending on how old school your state is. Each state will also have its own fees, although registration is typically under $300.
Get your ducks in a row! In order to register, you’ll need to provide:
- Business Name
- Registered Agent
You’ll also need to produce the appropriate documents for your business structure such as articles of organization or incorporation.
Do you need to tango with the Feds?
Maybe you’ve already encountered federal registration through trademarks. But you’re not done yet. Registering with federal agencies goes beyond name protection for incorporated businesses.
If you want an employer identification number (EIN), you will need to obtain one through the IRS. EINs are often required for paying taxes, paying employees, and opening bank accounts. More on that next week.
You’ll also need to register your business with federal agencies if you want tax statuses like “tax-exempt” or that handy-dandy S corp election. The IRS has plenty of tools to get you going.
Should someone else do the dirty work?
If it’s not obvious by now, LLCs and corporations come with a lot of paperwork in the form of official documents and notices that you can’t afford to miss. As a result, your business is required to have a “registered agent” on file with the state.
What’s a registered agent? They are basically a designated recipient for all things “official.”
Registered agents must reside in the same state as your business. Their name and physical address will appear in public records and they are required to be available during normal business hours. Why? Hopefully it never happens, but if your business is served court documents, you’ll need someone available to receive them.
Business owners can choose to list themselves and their business address as the registered agent.
What if you don’t keep normal business hours? Or you don’t want your personal information listed publicly because you work from home? Luckily, if the thought of keeping up with deadlines and paperwork makes your head spin, you can hire someone to do it for you.
Registered agent services can act as your registered agent, using their own address and name. This is a great option if you have privacy or availability concerns. They can also be a safety net when it comes to receiving important documents that might get lost in the shuffle.
Business without borders?
Conducting business in states other than the one in which you incorporated? You’ve earned yourself some bonus registration requirements!
Foreign qualification is required if you’re conducting business outside of your home state. This can look like:
- A physical storefront
- Employees who work and reside there
- Face-to-face business with clients
Filing for foreign qualification gives states a heads up that you’re operating there. This information is important when it comes to taxes, fees, and annual reports.
You’ll need to file a “Certificate of Authority” with each state through the local Secretary of State office. States may also require a “Certificate of Good Standing” from your home state to prove you’re up to snuff.
What's the deal with Delaware?
Speaking of foreign qualification, it’s possible to incorporate outside of the state where you’ll be conducting the majority of your business.
If you like loopholes, then you’ll love “business friendly states.”
Did you know that Delaware is home to more than 1,000,000 businesses who don’t necessarily have headquarters there? States like Delaware, Wyoming, and Nevada are considered “business friendly” due to lenient or non-existent tax requirements.
These states tend to benefit larger corporations. It may not be worth the paperwork gymnastics for smaller businesses. Not to mention credibility issues (I’m looking at you, Nevada). However, consider it food for thought. It may be worth weighing the pros and cons of taxes and fees depending on your home state.
Ready to Register?
You’re chipping away at the requirements for getting your business started like a champ.
Making sure you’ve filed at all the right levels can feel daunting when there is so much to keep track of. However, many states offer tools to make registration manageable as long as you have a plan. Staying organized will ensure that you aren’t missing out on tax benefits and tools to level up your business.
Curious about next week’s deep-dive? It’s all about: Tax IDs
Not sure if you need to register for foreign qualifications? Don’t risk overlooking crucial paperwork and loopholes. Reach out to KYN Accounting today for accessible and friendly advice on getting your small business registered and in good standing.
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