Every business involved in sales needs to be registered or licensed in your local area. Whether you sell a product or service you will need to become a registered business. It is recommended you do so not only to comply with government taxes, but to establish your business in the public eye.

In addition, if you do not register your business there could be government penalties, fines and other negative actions taken against you. The only exception to this rule is a single person who operates a self-employed, non-incorporated business under their own name without any type of extension to it (ex. Jane Doe).  However, we recommend you seek advice from your business consultant before proceeding without registering.

In order to register your business you need to visit your local city and state municipal buildings. You should do this prior to starting your business. There are several types of certificates you may be required to obtain and generally the information is available on their official websites.

DBA (Doing Business As), this certificate is required for any individual, company or organization that wants to conduct business under a other than the proprietor’s own name (in a sole proprietorship). Commonly referred to as fictitious business name, assumed business name or trade name, all of these refer to DBA.  A DBA is typically obtained at the time of registering your business.

In general, filing a DBA enables you, as a business owner, to use your business name in contracts and to open bank accounts. Regardless that a DBA is required, it’s also a great tool in helping to prevent other businesses from using your business name or one that is extremely similar in your industry.

An LLC (Limited Liability Company) provides “limited liability” protection for business owners. Simply stated, an owner is not personally responsible for debts and liabilities of their business.  This basically means that creditors cannot pursue your personal assets, such as your home or car, to repay your business debts. This is vastly different from Sole Proprietorship or a General Partnership in which both are considered legally the same and your personal assets can be pursued to satisfy business debts.

Becoming an LLC means that taxes are not paid at a business level. The owner reports all business income and losses on their personal income tax returns and any due taxes is paid on an individual level. When you form an LLC this may aide you in establishing credibility with customers, employees, partners, and vendors.

Incorporating is forming a corporation, a giant step for any business owner. Owners within a corporation now become shareholders. There are benefits that come with corporations that are not typically available to Sole Proprietors or General Partnerships.

Formation of a corporation provides you with limited liability protection and more. As with LLC creditors cannot pursue your personal assets to pay business debts. This also comes with certain tax advantages. Deductibility of health insurance premiums paid for an owner-employee and savings on self-employment taxes, because your corporations’ income is not subject to social security. Workers compensation, Medicare taxes and other expenses come with forming a corporation.

The life of a corporation is unlimited. If an owner passes away or simply wishes to sell their interest, a corporation can continue to do business and exist in a normal manner. You easily have the ability to transfer ownership if you wish; however, take note that with an S corporation there may be restrictions on ownership.

Establishing a corporation also allows you to raise capital through selling stock and may provide you additional credibility with banks when seeking a loan. Lastly, retirement funds and plans may be more easily established with a corporation.  It’s wise to seek counsel with an accountant and business attorney to discuss the different types of business forms and their respective advantages and disadvantages.