Starting a business, whether a commercial or industrial firm in the US requires one to follow certain legal procedures before it is up and running. The first steps of opening a business are personal such as you need to a have business plan which you had initially written before starting your business and it will help you run the business. You need to have looked for a suitable business location and how you are going to get financial back-up to help you run the business. Once you are through, then the next step is the administrative or legal side of registering your business.
The following are the steps to follow in ensuring that you have completed the legal procedures before opening up your business:
Determine The Legal Structure Of Your Business
You need to determine your business ownership that is a Sole Proprietorship, Limited Liability Company (LLC), S Corporation, Cooperative or Nonprofit. Depending on your business, each will have various legal, tax and financial considerations. The legal structure is based on various things such as the level of control that you have in the business and business vulnerability to financial needs and lawsuits and whichever structure you chose will determine if there are additional registration requirements. You will need to fill registration forms within your local government or state. However, your first choice of business is not permanent hence you may change and register as another structure once you have expanded.
The name that you have picked for your business should not be infringing on the rights of an already existing business so you should first do a search online. An attorney can help you check for all business that has been registered by the Secretary of State and this will tell you if you can go ahead and use the name or not. Do also a comprehensive search in all states and local databases so that you know that you are not infringing on someone’s trademark.
If the name is available, then register your business under a factious name, i.e. “Doing Business As” (DBA) and this is because you are registering the business which doesn’t match your personal name. You will register as a DBA if you are a sole proprietor or partnerships or existing corporations or LLCs and depending on the location of your business, registration is done either with your county clerk’s office or state government. Costs for registration of DBA vary with location.
Get A Federal Tax ID Number
Also known as Employer Identification Number (EIN), every employer should have one and it is acquired from the US Internal Revenue Service (IRS). The number is similar to your personal social security number and it enables the IRS to track your company’s transactions. This service is free and you can apply for it a number of ways, including online, phone, email.
File For State Tax
You need to pay taxes if you will be selling any products so you need to acquire a vendor’s license or sales tax permit at then state or local government.
You will also need to pay state and local taxes and it is determined by which state that you are in. There are several types of tax obligation for small business including:
Income tax– this is a levy placed on business or corporation income tax and the legal structure of your business determines your tax obligation. For example, a sole owner files their personal and business income tax in the same form while for an LLC, the taxes are filed differently from the owners.
Employment tax– this is for business owners with employees and they are supposed to pay the appropriate taxes required by the state and also other federal employment taxes. All states require that there is a payment of compensation insurance and unemployment insurance taxes for all state workers.
Tax permit– you need to register with a state tax agency and also pay for the relevant tax permits. Most states will require businesses to pay for a state sales tax permit so that they are able to pick taxes from customers.
Acquire The Necessary Licenses And Business Permits
You need a license or a business permit to operate and these can be got from the state, local, or federal level depending on the type of business and location. Some of the licenses you may also need include environmental permit, basic operating license, sales tax license, occupational or professional license, or health department permit. If your business will be controlled or supervised by a federal agency then you need to acquire a federal license.
As a business owner, it is important to understand the licensing rules where your business is because if you go against this then it will result in costly fines and it may place your business at serious risk of closure. The application fee for obtaining a license ranges between $50 to $ 1,000 and this depends on the type of business and kind and amount of inventory. Many business and occupational licenses require renewal at different times so as to keep the ongoing of the business.
The DBA name that you earlier on registered doesn’t give you common law rights and fully own the name so in order to claim the first use of the name, you need to make it trademarkable and in use. You will register it at the U.S Patent and Trademark Office and this gives you the mandate to use the name anywhere. You can use it as a strong protection against your business, sue anyone in a court of law for its wrongful use and also makes it easier to claim your property just in case something wrong happens. The fee for registering your trademark starts at $119 + Federal filing fees which is nonrefundable.
Most of the above procedures can be done by you as the business owner because involving a lawyer may cost you a lot of money.