Small Business Registration | How To Register A Small Business

Having a business idea is a great first step to eventually creating what may become a full-fledged business. But in order to get there, you must first take the steps to ensure you abide by all the legal concerns.

In this blog post, we will teach you how to register a small business and we will go over the information and the concerns that are noteworthy in your decisions to set up your business.

1. Determine What Type of Business You Want to Register As

Sole proprietor: A sole proprietorship is a business that is owned and operated by an individual. This is the simplest form of business entity. The business and yourself are one. This is the simplest and the most common type of business out there. The sole proprietor is responsible for everything the business does. You do business under your own name, with no separation of assets and liabilities. This means that you’ll be held personally liable for any debts that the business incurs, any legal implications, and you are only taxed once for revenues.
Partnership: A partnership is a relationship between two or more people who join to do business. Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. Partnerships comprise two or more people and any profits, debts, and decisions related to the business are shared. This does not always mean a 50/50 share in the business.
Corporation: A corporation is a business organization that has a separate legal personality from its owners. Ownership in a corporation is represented by shares of stock. Think of the big companies like Intel, Pepsi, and Google. The owners, or stockholders, enjoy limited liability but have limited involvement in the company's operations and decision power is based on what proportion of stock you own.
Limited Liability Company (LLC): Hybrid forms of business that have characteristics of both a corporation and a partnership. Nonetheless, the owners enjoy limited liability like in a corporation. An LLC may elect to be taxed as a sole proprietorship, a partnership, or a corporation. An LLC is not incorporated; hence, it is not considered a corporation. Starting an LLC also gives you the perk of pass-through taxes, limited liability (obviously), and legal protection for your personal assets. Those who have an LLC need not be U.S. citizens or permanent residents.

2. Make Sure You’re Legally Permitted to Use Your Business’s Name

Before you start printing out business cards and buying domain names, make sure the name you chose for your business isn’t infringing on the rights of an already existing business. In most cases, you don't need an attorney for this task, as you can perform a free search online that looks at business names registered with the Secretary of State. Considering you can still infringe on someone else’s trademark even if they’ve never formally registered it with the U.S. Patent and Trademark Office, you should also do a comprehensive search into all state and local databases (look for an affordable online service to help you with this).

3. Register a Fictitious Business Name/DBA

Part of knowing how to register a small business is knowing what name you want your business to be called. Remember, your business can operate under a different name than your company name. DBA (Doing Business As) must be filed whenever your company does business under a different name. If you’ve got a sole proprietorship or general partnership, a DBA is needed if your company name is different from your own name. For an LLC or corporation, a DBA must be filed to do business using a name that’s different from the official Corporation or LLC name you filed. For example, if a company is officially incorporated as AMI Goods, Inc., we need to file DBAs for the variations AMIGoods.com and AMI Goods. These are typically filed at the state and/or county level. Visit https://www.azsos.gov/business/trade-names-and-trademarks to file DBAs in Arizona.

4. Get a Federal Tax ID Number

To distinguish your business as a separate legal entity, you'll need to get a Federal Tax Identification Number, also called an Employer Identification Number (EIN). Think of this as a social security number for your business. It allows the IRS to track your company's transactions. If you’re a sole proprietor, you are required to get a Tax ID number, but it’s still a good idea to get one so you won’t have to provide your social security number for your business matters.

Note: If you're using an online legal service or a business registration advisor to set up your legal business, don’t pay them to get your EIN. Instead, apply online at the IRS website here. You'll have your EIN in minutes without paying their fee.

5. Learn About Employee Laws (Skip if you don’t have employees)

Your legal obligations as an employer grow when you have employees. You should spend time researching and/or with an employment law professional to fully understand your obligations. Some of your obligations are as follows: federal and state payroll and withholding taxes, self-employment taxes, anti-discrimination laws, OSHA regulations, unemployment insurance, workers' compensation rules, and wage and hour requirements.

6. Obtain the Necessary Business Permits and Licenses

One of the more difficult steps on how to register a small business is the legal hurdles known as permits and licenses. Depending on your business type and physical location, you may be required to have one or more business licenses or permits from the state, local, or even federal level. Such licenses include a general business operation license, zoning and land use permits, sales tax licenses, health department permits, and occupational or professional licenses.

7. File for Trademark Protection

You're not actually required by law to register a trademark. Using a name instantly gives you common law rights as an owner, even without formal registration. However, as expected, trademark law is complex and simply registering a DBA in your state doesn’t automatically give you common-law rights. Registering a trademark makes it exponentially easier to recover your properties, like if someone happens to use your company name. Having the right documentation means you have the legal right to that handle.

8. Open a Bank Account to Start Building Business Credit

When you rely on your personal credit to fund your business, your personal mortgage, auto loan, and personal credit cards all affect your ability to qualify for a business loan. Using business credit separates your personal activities from that of the business. To begin building your business credit, you should open a bank account in the name of your company, and the account should show a cash flow capable of taking on a business loan.

With these 8 steps, you now know how to register a small business and the actions required to get there. With this knowledge in mind, your business can officially be recognized and you can continue your journey of finding success in your very own business. To help you on this path specifically with your financial statements, click here to learn more about what an income statement is and how it can aid you.

Arizona Microcredit Initiative (AMI) has consulting and microloan support for you and your business. If you have any more questions, you can schedule an appointment today at https://www.azmicrocredit.org/schedule-a-consultation-1 or reach out to us at info@azmicrocredit.org.