When you first take the plunge and start your own business, it is a very exciting time filled with new experiences, both good and bad. However, don’t get caught up in all the new changes and forget important steps to take to make sure your business is legal.
Register Your Name
When coming up with a name for your business, it takes more than simply putting it up on a sign. In fact, unless you register your name, the name of your business is your personal name. For example, if Jane Doe starts a marketing firm, the name of the business is Jane Doe. In order to change this, you must file a DBA. A DBA (which stands for “doing business as”) allows you to conduct business under a different name. Other than having the power to name your business, a DBA also prevents other businesses within the same state from using your name and enables you to have a bank account under your chosen name, as most banks will require a DBA before opening a business bank account. While you’re doing research on names, don’t forget to check for available domains that contain your desired business name in full or in part — it’s standard these days for even small companies to have a business website.
To start the process of getting a DBA, pay a visit to your local county clerk’s office. For a small fee, the county clerk’s office will then conduct a name search to ensure the business name you want to use isn’t already taken. Depending on the state you live in, you may be required to publish a public notice of your DBA filing in the local newspaper.
Register for Taxes
Unfortunately, taxes follow you into your new business venture, and as a new business owner, you must get an Employer Identification Number (EIN) from the IRS, which will identify your business for tax purposes. In addition to enabling you to file taxes, the EIN number is often a requirement to open a business bank account and apply for business licenses.
After you receive your EIN, you must determine your state and federal tax obligations. Tax laws vary by state, but the most common tax requirements are income taxes and employment taxes. Your state income tax obligation is determined by the legal structure of your business, and if you have employees, you must pay state employment taxes such as workers’ compensation insurance and unemployment insurance taxes. Once you’ve determined your state taxes, you can’t stop there, as you have federal taxes too. Other than partnerships, all businesses are required to file an annual income tax return, and you must pay the federal income tax as you earn or receive income throughout the year. If you have employees, the income tax is generally withheld from their pay, in addition to other withholdings such as state income tax and social security tax.
When you first start your business, you may only have five or six employees, and it can be tempting to tackle payroll and taxes on your own. However, if you aren’t very knowledgeable about payroll and tax liabilities, you might consider using W-2 software; this tool will take away the uncertainty, ensure that you are using the correct forms, and guarantee that payments are both accurate and on time. Using W-2 software will also make it easier when tax time rolls around, as you will already have all the documents necessary and avoid an unhappy run-in with the IRS. Starting a business is stressful enough without having to answer to the government.
Register for Proper Licenses
Before you officially open your doors for business, you need to make sure that you have all the appropriate licenses and permits, as it is illegal to operate a business without one and could leave you with a fine. Start by applying for a general business license with your city or county government, and then follow up by researching industry-specific licenses and permits that may be required by your city, county, or state. For example, businesses that involve real estate or child-care services are regulated by the state and require additional licenses, while businesses that sell tangible goods must have a sales tax permit. In addition, if you will be building or making any changes to your business location, you will need a building and zoning permit.
Starting your own business is exciting, but don’t forget the important steps to ensure everything runs as smoothly as possible. Don’t forget to register your business name, meet tax obligations, and obtain necessary licenses and permits to avoid unnecessary obstacles in launching your new adventure.
Jason is a personal trainer and caregiver to his elderly mom. He enjoys sharing his fitness knowledge on his website, StrongWell.org.