So, you’ve decided to register your business. Congrats. However, now that you’ve taken the plunge and started tackling this task head-on, you might find yourself thinking about choosing a legal service to help you register your business or do it yourself. If that sounds familiar, don’t worry.
Whether you’re a freelancer, small business owner, or an entrepreneur with big dreams for the future, there is a lot to know when registering your business which I will discuss in this guide.
Choose A Legal Service or Do It Yourself
You have two options when it comes to registering your business: choose a legal service or do it yourself. Each approach has its own pros and cons, so let’s take a look at each option in more detail.
Choose a Legal Service
It is tempting to take the DIY approach. But if you don’t know what you’re doing, it could end up costing you more money in the long run.
Get professional help from a legal service with lawyers who will guide you through the business registration process and make sure your business is set up properly. The extra cost of hiring a professional will be worth it in the long run.
Before choosing a service, consider what type of legal assistance you need and how much time and money you want to spend on the process.
Registering your own business
If you decide to register your business yourself, then there are only two things that you need: some basic knowledge of what needs to be done and gathering the documents needed to register your business:
Choose the Right Name for Your Business
Once you’ve decided on a legal service, they’ll help you choose a name for your business. While this may seem like an easy task, it’s important to choose wisely since your company name will be used on all types of documents and marketing materials.
For example, if you choose “Lil’ mum” as your company name and later decide that “Lil’ Mum” is too informal or doesn’t fit with your brand image, then changing it could be costly and time-consuming.
Understand What Type of Business You Want to Form
When you’re ready to register your business, there are several things you’ll need to consider. First and foremost, among them is the type of entity you want your business to be. Do you want it to be an LLC, a corporation, or a partnership?
That decision will impact many decisions later on, including what kind of tax structure you’ll use and how much liability protection each entity provides.
A sole proprietorship
A sole proprietorship is owned by one individual who has unlimited liability for all debts incurred by the company. In other words, if your business goes bankrupt, creditors can come after your personal assets to recover their losses.
However, if you’re successful with your business venture, sole proprietorships provide some tax advantages over other types of entities because they are not taxed separately.
Partnership Business
Partnerships are similar to sole proprietorships but involve two or more people working together on a project or business venture. Partnerships share profits and losses among all partners equally; however, each partner also has unlimited personal liability for debts and lawsuits against the partnership.
An LLC or Limited Liability Company
The most common business type is the LLC (Limited Liability Company), which has become the default choice for many entrepreneurs.
An LLC combines the most attractive features of a partnership and a corporation into one business structure. It provides limited liability protection to its owners while also allowing them to have more control over their company’s management than they would in a corporation.
Corporations
A corporation is a type of business entity that’s separate from its owners. It’s a legal person, which means it can own property, enter into contracts, and pay taxes in its own name. There are two types of corporations: C corporations and S corporations.
Smaller businesses usually choose S corporations because they offer more tax advantages than C corporations.
State of Formation
Next, you’ll need to decide where your business will be registered. There are three basic options: registering in your home state, registering in another state or registering in multiple states. Each option has its own benefits and costs.
Home State
Registering your business in the same state offers several advantages over registering in another state. For one thing, it will save time and money since you won’t need to travel back and forth between different states for meetings or filings with government agencies.
Another State
Registering in another state can be useful if you’re trying to expand into a new market or want access to certain tax incentives that aren’t available in your home state. But this option also comes with added costs like registration fees and travel expenses.
Multiple States
Deciding to register in multiple states is a great way for entrepreneurs who want flexibility without paying too much upfront cost. You can register yourself as a foreign entity with each individual state instead of having one main headquarters where all the legal paperwork will be handled.
Gather the Necessary Paperwork
Once you’ve made those decisions, it’s time to start gathering the necessary paperwork, i.e., articles of incorporation, bylaws, or operating agreements, before filing any paperwork with state agencies or local offices.
