Register Your Business with the State, Federal, and Local Governments

Starting a small business is continually on the mind of many people. We all want to make more money and produce residual income. However, most people don't know where to start with their small business. Once you have a business plan and are ready to get started, your first step will be to register the business with the various governments (state, federal, and local).

Your first stop should be at your state department of commerce. Here you will register your business entity and give your business a name. You can not apply for registration with the IRS, a business license or even get a bank account without first registering you business with the state.

During your registration with the state you will declar what that name of your business is, what type of company you are forming (i.e. corporation, limited liability company, S-corp, sole proprietorship, partnership, etc.), the name that customers will know your business by (called your doing business as name if different than your registered business name), and you will also declare many things about the nature of your business (i.e. are you in retail, are you a utility service, what are you selling).

Once you complete the registration with the state you will be assigned an entity number with the state as well as a sales tax number for paying your taxes. You will probably be assigned a federal tax ID number (also known as the employment identification number) from the IRS as well though not all states will register this for you, in which case you would apply on the IRS website once your registration with the state is completed. The federal tax ID number is essentially the social security number of your business. Both the federal tax ID number and the sales tax number are essential to start particularly because the first will be required by everyone you work with on your business (including banks, suppliers, government entities, etc.), and the latter is required by suppliers. The sales tax number is also known as your reseller certificate number which permits you to buy goods from suppliers without paying sales tax.

After you have registered with the state and have your federal tax ID number, sales tax number, and business entity number (your registration number with the state) your next stop will be with your local city. The city you live in will also require that you register your business with them and comply with their rules. This registration with your city is called your business license. You cannot operate a business without having the registration of the entity with the state (entity number), registration with the IRS (Employer identification number), and registration with the city (business license number). The city is your last step in the process because they will require your entity number, DBA (doing business as name), employer identification number, sales tax license number, and if applicable your workers compensation number (not discussed here).

Registering your business has gotten much easier with the advent of the internet, but it is unfortunately still a rather time consuming and expensive step ($200 to $1000+ depending on the state you live in) for the small individual getting started on their first business, but plan it into your budget and do not plan on starting a small business at this time if this expense is something you can't afford, because once registered, there will be recurring fees and regular filings each year going forward.


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