Your business is a business once you start making transactions. But if you want it to be official, the next step is to get it registered. Each U.S. state has a business and commerce division (click here for a listing by state).
Not every type of business needs to be registered — for instance, a sole proprietorship doesn’t always require registration in order to stay in operation. But certain types of businesses must be registered to stay compliant — you have to check your state’s specific regulations for the answers. In some cases you may also have to apply for a business license or permit to conduct the type of business you want to start.
There are three reasons why small business registration matters:
1) Regulation. State officials want to know about the businesses operating in their jurisdiction. This is mostly to protect public safety and ensure business integrity – for instance, a food company or restaurant could have a direct effect on the health and well-being of the general public. The same is true for other companies that service people or structures directly, like for construction companies, franchisers, manufacturers and health facilities.
2) Pay taxes. Businesses and business owners, like individual people, must pay taxes on their earnings. This includes both sales tax on retail products and income tax. The state will normally issue you a tax ID to go with a state business registration (you can also get a federal employer identification number – see the resources below). If it’s a sole proprietorship, you can file your taxes using your personal identification numbers. Check with a personal finance expert or tax professional for more guidance on your specific situation.
3) Banking and Other Services. Once things start rolling, most small business owners will want a business checking or savings account. In order to get one you need an official certificate from the state that says you are a registered business. You also need to be a registered business in order to be considered for many business loans and contracts. They want to know you’re a reputable company.
See the resources below for more information on registering a small business.