So you've started your business and it's going well, and now you're ready to register your business!
Yes, that's right you can start and run your business without it being registered, and depending on where you are it is perfectly legal!
Now you're ready for the next step, registration, and we will give you all the information that you need to get there.
Let's talk about the different ways to register your business.
So when your business is not registered, it is considered to be a sole proprietorship, a legal structure that requires you to use your Social Security Number (SSN) depending on where you are in the place of an Employer Identification Number (EIN) and your legal name as the name of your company.
The registration of your company is used for tax purposes so you are allowed to operate a sole proprietorship without registering, but you are required to register with your local government to collect and file taxes.
let's dig into the different registration categories there are.
This is the basic level of business registration and means, that in the running and operation of the business you are in charge of it all. It's just you. No partners, no incorporation, it's just a sole individual owning, managing, and operating the company. The great thing about sole proprietorship companies is that the registration process is quite simple. Depending on where you are in the world, different jurisdictions will deal with the registration of companies.
You need to
Find out what the government jurisdiction is that deals with business registration in your country or state, and fill out whatever papers are necessary, using your company name as the doing business as name (DBA).
You will receive a document that will state the business name and you as the owner. In most cases, a Tax Id number will be issued to you at the same time, however, that all depends on how your country or state operates.
The thing that you should be careful about with the sole proprietorship registration is that with this business type you are liable and financially responsible for anything that may go wrong with the business. Your name is going to be responsible for any financial damages that someone may file against your business. This is something to strongly consider when thinking about registering your company as this kind of business. Think about whether this kind of business registration is a good fit for you.
I suggest that for many businesses it may be a good place to start while your business is still small and not dealing in high amounts of money and risk. Once your business grows and the potential for liability becomes stronger I suggest upgrading your registration to the next registration level.
This is the next level of business registration categories. A partnership is a business organization with two or more persons as owners.
Each partner shares in the organization's profits and will also have to share in the business losses.
For tax purposes, the partners are taxed, and the business does not accrue taxes on its own. There are two kinds of Partnership Businesses a Limited partnership, which has both general partners and limited partners, and a Limited Liability Partnership which allows all partners to be shielded from liability for normal partnership activities.
is closely related to a sole proprietorship however instead of one owner there are two. The company itself still accepts no liability for damages or taxes, the responsibility is on the owners unless you chose to register as a limited liability partnership. However, depending on where you are in the world the process to set up a Partnership may not be as simple as a Sole proprietorship. Some countries require a lawyer to set up a Partnership business, however, a lawyer is never required to set up a Sole proprietorship. If you need more information about registering a Partnership business, contact your local government offices.
Limited Liability Company (LLC)
This is the next level of company registration. A limited liability company or (LLC).
An LLC is a business structure where the owners are not personally liable for the company's debts or liabilities, unlike Sole Proprietorship and General Partnerships.
An LLC is a more formal partnership arrangement that requires articles of organization to be filed on behalf of the company. An LLC is much easier to set up than a corporation, but not as easy to set up as a Sole Proprietorship or Partnership business, and it also provides more flexibility and protection.
Limited liability companies are relatively easy to form. Contrary to other forms of business registration, LLCs are not required to assign formal officer roles, hold annual meetings, or record company minutes and resolutions, this makes them easier to maintain, and there isn't much paperwork for their formation.
LLC's have two categories Single-member LLC or Multi-member LLC. Single-member LLCs are owned and run by one person, multi-member LLCs are run by two or more people. A multi-member LLC can be managed by its members and is referred to as a member-managed LLC. A multi-member LLC can be managed by a manager that is appointed by its members, referred to as a manager-managed LLC. Depending on where you live setting up an LLC can be a different process, in some jurisdictions, a lawyer is required and in others, they are not.
I hope this information helps you better understand which registration best suits your business!
The ones that I have highlighted are best suited for small businesses. I have not covered Corporations, because they are more suited for large businesses, and can be researched once your business is ready to take that step.
Setting up a corporation can be a very tedious and complicated process, make sure you do as much research as you can before you consider that step.
As always, VM.Co will be here for all your business growth needs, we want to see your small business succeed. Get in touch with us when your ready to see the business growth that you've been desiring.
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