What You Need to Know About Registering Your Small Business

In order for your startup business to be a distinct legal entity, you need to go through a business registration process.  Where, when and how you must register your company is determined by the location of your business and its respective location.  Because the business registration procedure can be baffling and complicated, we have compiled a post that will give you insight into the steps you need to take for a seamless business registration process.  Here are the logical steps of registration that you must navigate:

  • Do You Need to Register Your Business?  federal agencies
  • Federal Agencies Registration
  • State Agencies Registration
  • Obtaining a Registered Agent
  • Foreign Qualification Filing
  • State Documents & Fees Filing
  • Local Agencies Registration
  • Keeping Your Registration Requirements Current

Do You Need to Register Your Business?

Two factors need to be determined before you start the business registration process: business location and business structure.  Once these two factors are decided, the registration process can begin; and you’d actually be surprised at how straightforward that process can be when done correctly.  In fact, in some cases, your business will not have to be registered at all!  That truism would occur if you are conducting business activities under your legal name.  But, let’s assume that you are a small business which is required to file registration papers with the proper authorities.  Typically, the act of business registration is simply presenting and filing your company name with local and state government agencies.  

Please note that registration, besides it being required by the law for the most part, has benefits.  Without proper registration, you could be overlooked for opportunities surrounding tax benefits, legal benefits, and even personal liability protection.  The initial step you will want to take to determine whether or not you must register your business is to contact you’re respective local and state authorities and understand what they require.  

Federal Agencies Registration  

register-your-businessThe necessity to register with the United States federal government, in order to become a bona-fide legal entity, is quite rare.  Really, all most businesses are asking for with their federal government interaction is a federal tax ID.  Certain small businesses might also petition the federal government for tax-exempt status or trademark protection.  Should you want tax-exempt status for a non-profit organization, you will be directed to contact the IRS for registration as a tax-exempt entity.  Should you want trademark protection for your product names, brand or business, you will be directed to file with the United States Patent and Trademark Office after your company formation.  If your company wants be be formed as an S corp, the IRS is also involved and you will need to file a form 2553 with the IRS.

State Agencies Registration

Registration with any state in which your business conducts activities is generally needed for LLCs, partnerships, corporations and nonprofit organizations.  Determining the answer to the question of whether or not you are conducting business in a certain state can be confusing.  We suggest you ask yourself if your business meets the following criteria:

  • Physical presence in the state
  • Employees working in the state
  • Considerable revenue generated in the state
  • Frequent in-person client meetings in the state

It has become the norm that states mandate additional registration with a business agency, business bureau or even the Secretary of State’s office.  In some cases, the traditional method of filing paper documents is done via mail, but recently some states have enabled online registration.

Obtaining a Registered Agent

Registered agents are often retained, for the registration process in a state if you operate a nonprofit business, partnership or LLC.  Because your registered agent can act on the behalf of your business and is a means by which you can receive legal documents or other official papers, many business owners would rather have their agent complete these tasks.  

Foreign Qualification Filing

Foreign qualification filing is often needed for LLCs, partnerships, corporations and nonprofits if your business operates in more than one state.  For the purposes of foreign qualification filing, the state where you have formed your business is considered “domestic.”  Any other state is considered “foreign.”  If your business is foreign qualified, be prepared to pay annual report fees and taxes in those foreign states, not just your domestic state.

For the logistics and proper steps to take to foreign qualify, you will usually be directed to file a Certificate of Authority in the foreign state.  Sometimes, your domestic state may have to produce a Certificate of Good Standing.  All filing fees among states are different and primarily depend on your business structure.  

State Documents & Fees Filing

In terms of state registration costs, your business is probably looking at a dollar figure between $300 and $400.  When you are preparing to register, make sure you are able to produce the following:

  • Business name
  • Business location
  • Ownership, management structure or directors
  • Registered agent information
  • Number and value of shares (if you’re a corporation)

As appears to be the pattern, the paperwork, certificates and other documents you need will largely vary based on your business structure and state.  Please note that, although not very common, some states will ask you to register a DBA (trade name/fictitious name) company.

Local Agencies Registration

County, city and town governments do not normally ask for a business to be registered, even if it is in their domain.  Again, DBAs may be asked to register.  

In contrast, it is a possibility that your business may need to file for certain permits and licenses if you operate an LLC, partnership, corporation or nonprofit in the domain of a town, city and county.

Keeping Your Registration Requirements Current

Some states may ask that your business produce reports almost immediately after your registration is complete.  This requirement will depend on your business structure.  In some instances, state franchise boards or state tax boards may get involved and require that your business file additional credentials.  Franchise boards could ask you for documents called “Initial Reports” or tax board registration; between 30 and 90 days is the typical timeframe for producing and submitting this additional paperwork.  

Conclusion

Although seemingly clear-cut, the business registration process can be quite detailed and cumbersome.  As a San Diego business owner, you want to be focusing on running your business; administrative tasks like registration can also be time-consuming and take you away from the revenue generating portion of your company.  For these reasons, it is wise to employ the services of an accounting and legal professional for the duration of your registration process.  Thomas Huckabee, CPA of San Diego is a full-service startup accounting firm– helping your company properly register is just one of the many specialties we have.  Please contact us for a consultation.  

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