While starting and growing your small business is exciting, it also involves several steps that may be new or confusing – including small business registration. Depending on your type of business and where it’s located, “small business registration” can mean different things. It can include anything from establishing a sole proprietorship in your county to getting licenses and insurances to legally do business.
In this overview, you’ll learn the key steps to get you on the right track. Given the legal, tax, and financial implications, it’s a good idea to speak with an attorney and an accountant before you finalize the steps of business registration.
What is small business registration?
Registering your business involves legally establishing it in a municipality, county, and/or state. When you first launch your business, you can open business bank accounts, get sales tax numbers, and apply for licenses and insurance that may be needed before you can open. As your business grows, you may also need to register in additional states.
What are the benefits of business registration?
Registering your business is one of the first steps to creating a viable and legally compliant enterprise. While registering gives you new responsibilities, small business registration can also offer advantages:
- Liability protection: Certain legal structures, including limited liability companies (LLCs) and corporations, can give you personal liability protection. This means that your personal assets, such as your home, are protected if your business experiences debt or legal issues. Registering your business also allows you to purchase business insurance with additional liability protection if your business is sued.
- Tax advantages: With small business registration, you can benefit from tax deductions and other advantages that can lower your taxable income.
- Legal compliance: Operating as a business without legally registering as a business can open you up to significant penalties and even legal repercussions.
- Brand protection: Registering your business name can protect your brand identity and reduce the risk that others will use or profit from your business name. However, it’s important to know that different types of business entities and registrations offer different levels of protection, and you may still want to trademark your business name is possible.
For example, in New York State (NYS), a sole proprietorship that’s registered with a county only has business-name protection within that county, while businesses registered with the NYS Department of State have statewide protection.
What does “doing business” mean?
Generally speaking, you’ll register your business in the city, county, and/or state where you’re located and doing business. For example, a home-based ecommerce store could be registered as a sole proprietorship within the county where the home is located. If you’re launching a restaurant as an LLC, you’ll likely register where your in-person business is located.
“Doing business” can mean different things to different types of businesses. Here are some examples that show how you might meet the definition:
- A business that maintains a small office with regular employees who handle significant business operations qualifies as “doing business” and will need to register the business accordingly.
- An occasional or casual presence, like advertising without substantial activity, does not qualify as “doing business.”
- Conducting research and employee training doesn’t typically meet the threshold, unless the organization’s primary purpose is research and training.
- A manufacturing business based in and registered in one state expands to have significant operations in another state. It’s then required to register as a “foreign” business, meaning that it maintains its headquarters in a different state.
When determining where you do business, consider:
- Whether your business’s activities could experience city, county, or state licensing, compliance, and/or insurance requirements. For example, if you have employees, would they need to comply with your state’s workers’ compensation or disability insurance requirements? If so, then you likely need to register your business there.
- If your business’s activities could face state or local taxes – collection and payment – then you likely need to register at those levels too.
- If the activities performed in a state are vital to your business, registration is usually needed.
How to register your business in NY, PA, NJ, CT
In this overview, you’ll learn the basic steps to registering a business in New York State as an example, with additional resources for New Jersey, Pennsylvania, and Connecticut. While the requirements are similar, there are still differences. Be sure to check with your attorney and accountant to ensure that your business meets all of them.
1. Choose your business’s legal structure: For small businesses, your options typically include sole proprietorship, partnership, S-corporation or C-corporation, LLC, and limited liability partnership (LLP) – each has different implications for liability, taxes, and management. Be sure to review your business and plans with your attorney and accountant before making a decision.
2. Check the availability of your business’s name: If your business will be a sole proprietorship or simple partnership registered only in your county, you only need to ensure that the name isn’t taken in that county. However, if you choose another legal-entity type and are registering with NYS’s Department of State, check that the name you want isn’t already in use. If it is, you’ll need to create another name, but if it’s not, you can reserve the name for a fee and a set period of time. It’s also a good idea to see if you can get a domain name with the same name.
3. Register your business: Depending on your legal structure, here are the next steps you should follow:
Sole proprietorship or partnership:
- Certificate of assumed name: If you’re operating under a name different from your legal name, file a “Certificate of Assumed Name” with the county clerk’s office in the county where your business is located. This is what’s known as “doing business as” or d/b/a.
Corporation or LLC:
- With the help of your attorney and/or accountant, file articles of organization (LLC) or certificate of incorporation (Corporation) and submit them to the New York Department of State, Division of Corporations.
- Publication requirement: If you’re a new LLC you must publish notices in two newspapers for six consecutive weeks and submit an Affidavit of Publication to the New York Department of State.
4. Get an Employer Identification Number (EIN) from the IRS: This is required for tax purposes and hiring employees. The only exception is if you’re a sole proprietor and you’re the only employee. In this case, you can use your social security number instead of an EIN. However, using an EIN can give you better protection from identity theft. There’s no fee for getting an EIN and it should only take a few minutes.
5. Register for state taxes: Register with the NYS Department of Taxation and Finance for state taxes. If your business will sell goods or services that will face state and local sales tax, you’ll need to apply for a NYS Sales Tax Certificate of Authority. There’s no fee and this step typically takes just a few minutes.
6. Get permits and licenses: Some businesses need to be licensed through their state or local authorities. This tends to be location-specific, so check with your city, county, and state to find the lists of business types that need special licenses.
7. Open a business bank account: Always keep your business finances and personal finances separate by opening a business bank account as soon as you register your business.
8. Understand your employer responsibilities: This is one of the most challenging aspects of running a business. When registering your business, be sure that you get workers’ compensation insurance and register for unemployment insurance with the NYS Department of Labor.
9. Stay in compliance: Work with your accountant and attorney to ensure compliance with all local, state, and federal requirements. This includes filing annual or biennial reports with the New York Department of State and timely filing of local, state, and federal income and sales tax.
Small business registration resources by state
There are similarities between small business registration requirements across states, but there are still some key differences. When researching business registration, these state-by-state resources are a good starting point:
- New York State:
- Empire State Development created this online guide for small businesses including registration and more
- New York State’s guide to starting a business
- Management.org’s guide to New York State business registration
- Pennsylvania:
- State of Pennsylvania’s one-stop guide to business registration
- Pennsylvania’s Department of Community & Economic Development published this online guide
- Management.org’s guide to business registration in Pennsylvania
- New Jersey:
- State of New Jersey’s online guide to business registration
- Management.org’s guide to business registration in New Jersey
- Connecticut:
- State of Connecticut’s business registration guide
- Management.org’s guide to business registration in Connecticut
Pursuit has resources to help
Small business registration is one key step to a strong launch and healthy growth – another is securing the financing you need to build the business of your dreams. Pursuit’s a leading small business lender throughout New York, New Jersey, Pennsylvania, Connecticut, Illinois, Nevada, and Washington, and our loans and line of credit can help you achieve your goals. Take a look at all we have to offer, then contact us to learn more.
