Finally! You have mustered up enough courage to tell your boss what he can do with his overworked, high-stress and low-wage job. Why? Because, after testing the waters with your side venture, you have learned that there is enough demand for customisable pork pie hats to officially open up Blue Verve Incorporation. This private venture will leave you with enough earnings to pay the rent, put groceries on the table and satisfy your appetite for old jazz records.
Now that you have decided to focus all your efforts and apply all your resources to entrepreneurship, one of the first steps of starting a business is going through the business registration process – be sure to have a hefty inventory of paracetamol. Knowing how to register a company is no easy feat, and it requires a lot of paperwork, tax preparation and research. Thankfully, it has never been easier to register a company because a lot of it can be done online.
So, how do you go about ensuring your limited company is identified by the government and will not receive a visit from the taxman or bureaucrats?
Let’s explore the fun world of company registration with these eight steps.
1. Determine If You Need to Register Your Company
Believe it or not, you may or may not need to register your business, depending on several crucial factors. If that is the case, then you can eliminate this headache right away and just concentrate on making a lot of money on your once-in-a-lifetime concept.
Ultimately, if you conduct your business as yourself using your own legal name, then registration is unnecessary. That said, should you choose to forego registration, then you might not receive the myriad of benefits. For instance, if your online store is sued because your shirts caused an allergic reaction, then you might not receive certain legal protections. Or if you run into financial trouble, then the limited company would be responsible for debts or damages, not you. Then there are the various tax benefits that you could not take advantage of.
This is true in the US and the UK. The only difference is that in the UK you are referred to as the sole trader.
2. Register with Federal, State or Local Agencies
It should be noted that most companies are not required to register with the federal government in order to become an incorporation. Aside from applying for a federal tax identification number (see below), most businesses will work with their state or local agencies. The only other times that you will contact the federal government are:
- if you want to trademark your business, product name or brand with the patent office, or
- if you are applying for tax-exempt status for a non-profit corporation.
The next question is: how do you differentiate between registering with the state or local body?
All companies that have been designated as a partnership, non-profit corporation, LLC or corporation, then you will register with the state or province where you conduct your business affairs. For more local activities, you will need to visit your local government for licensing, permits and trade names.
3. Identify Your Legal Company Name
Your company’s name is what will define you. For a lot of potential clients, a lot can be ascertained by knowing the name of your company. That said, identifying a name is one thing, but to register a business name is a whole other affair. Who knew there could be so many complications to getting a name for your private firm?
There are three things to know about this step:
- the legal name is your full name if you are the sole proprietor or sole trader
- if your business is a partnership, then the legal name is the last name of your partners or the name given in your partnership confirmation
- should you have formed a limited liability corporation (LLC), then the company’s legal name is the one provided to the government.
But before you get gung-ho about the name, it is important to determine that it has not been taken by anyone else; otherwise, you could face legal ramifications. It’s also important to hire an attorney to find out if your business logo does not violate a copyright or patent.
4. Acquire Your Federal Tax ID
In the US, registered businesses are mandated to apply for federal tax IDs. In the UK, this is referred to as a tax identification number (TIN). Most jurisdictions issue these identification numbers to determine who the businesses are, assist in tax-related matters and ensure proper collection of taxes.
Moreover, by having one of these tax IDs, it helps you to:
- pay employees
- operate as a corporation or partnership
- file tax returns for employment
- withhold taxes on income
- offer a pension plan to the workforce.
Does this mean you do not need to apply for a state tax ID number? Well, yes and no.
No, if you are required to pay state taxes. Yes, if you wish to utilise state functions, such as protecting your company against identity theft.
5. Find a Registered Agent
As a business registered as a corporation, partnership or non-profit, you are mandated to obtain the services of a registered agent prior to filing your information. This is an important part of the process because registered agents receive official papers, handle legal documents and take care of hiccups.
Concentrating on business-related matters, many owners prefer to use a registered agent instead of dealing with the paperwork themselves.
6. Submit Documents and Fees
First, the fees. In the US, you can expect to pay as much as $300 in registration fees. In the UK, you can pay as little as £12 to as much as £150. The fees, whether they’re in the US or the UK, really depend on what you need done, the type of business you are and a jurisdiction’s requirements.
Second, the documents. The information you’ll need to typically provide are the following:
- business name
- business location
- ownership structure (management, directors, etc)
- registered agent information
- the number of shares and their value (only applicable if you’re a corporation).
But it is important to stress that the documents you must provide vary on the type of business you are. For example, a corporation of any kind must extend its bylaws, which are the internal governance documents of a business. Or if you are a limited partnership, then a limited partnership agreement is requested – this is an internally binding document between all partners that divide duties, powers and responsibilities.
7. Get Your Licences and Permits
When you get to the licensing and permitting step of setting up a company, you will start feeling a little bit of pain in your head. Why? Paperwork, paperwork, paperwork.
But it’s not just paperwork. It’s having the 2A pink form align with the 3C yellow form, but only if you checkmark section four of the 5B green sheet. That’s all you will be thinking of until your application has been granted.
Depending on what your business is, a licence or permit is necessary. When you’re unsure if you need one, you can always perform a licence finder search online.
8. Learn about Employing People
If you are hiring workers, then you must register a company.
So, first and foremost, you must establish a contract with your employees that outlines employment conditions, rights, responsibilities and duties. This is critical for a registered business.
Moreover, you must adhere to the following:
- pay someone the national or state minimum wage
- determine if that individual has a legal right to work in the US or UK (as applicable)
- extend employment insurance (employers’ liability insurance is common)
- inform either the Internal Revenue Service (IRS) in the US or HM Revenue and Customs in the UK
Also, if you wish to sponsor temporary workers or bring workers to the US or the UK, then not only is corporate registration is necessary, but you also need to go through the legal hoops.
It might take a few days or several weeks for your business registration to finally be approved. It does vary from jurisdiction to jurisdiction, which can make you feel on edge because you want to get down to business and start making a lot of money off your baby. Keep your cool, make plans for the future and get ready for the corporate world – it will make you prosperous, or it will eat you alive.
Do you have anything you’d like to add? Join the conversation below.