Deciding to start a business is such an exciting time.
As a business owner, you run the show. There’s a certain magic in being your own boss, setting your own hours and building relationships with your own clients.
But before you can start taking clients and open shop, there are a few things you need to do to officially start your business.
We’ve compiled all of the resources you need to start a business in the U.S. before you open your doors.
Decide What Type of Business You’re Opening
There are many different types of business you could open.
From a corporation to a sole proprietorship, each structure has different benefits and systems in place under the government.
However, most service-based small businesses are sole proprietorships, which is a simple, straightforward business structure that indicates that you alone own your business. You don’t have any partners in a sole proprietorship and “there is no distinction between the business and you.”
Be sure to review the different types of businesses you can open by reading more about each structure here before making a decision.
Choose and Register a Business Name
This is the fun part of starting your business!
Choosing a business name can be challenging but very rewarding when you make your decision.
If you are opening a sole proprietorship, you have two options:
- Use your own name as your business name (in which case, you would not have to register your business name)
- Register a Doing-Business-As name (DBA).
If you choose not to register under a DBA name, your state will require you to do business under our own name.
If you do choose to use a DBA name, be sure to check for trademarks when choosing your business name.
If you’ve decided to register a DBA name and find the perfect name for your business, you can register it through your state’s government or the county-clerk’s office, depending on where your business will be located.
Federal Business Tax ID
Before opening your doors to business, you may need a Federal Business Tax ID.
Also known as an Employer Identification Number, you only need a Federal Business Tax ID if you:
- Have (or will have) employees
- Operate your business as a corporation or a partnership (not if you’re a sole proprietor)
- File Employment, Excise, or Alcohol, Tobacco and Firearms tax returns
- If you withhold taxes on income, other than wages, “paid to a non-resident alien”
- Have a Keogh plan
- Or are involved with specific types of organizations such as plan administrators and non-profit organizations.
Most service-based businesses won’t fall into these categories at first unless you plan on having employees right away.
If you do, you need to file for a Federal Business Tax ID. You can do so here:
Business taxes depend on your state, because each state has it’s own tax regulations.
In most states, you need to register your business for taxes, and this is separate from the Federal Business Tax ID or the Employer Identification Number, which is federal.
You can find a link to each state’s tax laws to find out more about your obligations as a new small business owner for Unemployment Insurance Tax, Worker’s Compensation Insurance tax, and other state-specific taxes here:
Get a Business License and Permit
There are two different types of licenses and permits: state and federal.
Not all businesses require a federal license or permit. Most service-based businesses in the Relational Economy won’t, but it’s important to check for yourself to ensure that you’re covered. Click here for the list of businesses that require a federal permit.
Your state may require you to have a state license or permit to operate your business. The U.S. Small Business Administration has a great tool that you can use to find out what type of license or permit you need to operate in your state.
Once you have these licenses, permits, and numbers in place, you will be on your way to starting your business, being your own boss, and building a recession proof career for yourself.