Congratulations on creating your corporation or LLC. You've taken the bold first step to running your own business. But before you hang your sign, build your website or officially open your doors to the public, check out some useful next steps that will ensure your business launches smoothly and save you headaches down the road.
LegalZoom's Roadmap to Starting Your Business.
For the first of our six-part series, we will focus on the local, state and federal services and requirements that can help you start your business on the right foot.
Do you need a DBA?
A DBA, or doing business as, is also sometimes referred to as a company's fictitious business name. A DBA is the name a company uses in commerce, in advertising and to open bank accounts. Corporations and LLCs are not required to register as a DBA, yet there are many advantages to doing so. To use a name other than the legal name of the company, a business must file and publicly register the DBA with either a state or local jurisdiction.
Often, the official names of corporations and LLCs are simply the first and last names of the business owners. While this name choice might have been practical when completing the Articles of Incorporation, it isn't necessarily useful when he or she wants to advertise or market the business.
For example, if John Smith owned a company that sells window blinds, instead of being known as John Smith, Inc., the DBA would allow the business to use a more marketable name in its signage and promotional material, such as "World of Blinds." Plus, customers and vendors could make their checks payable to "World of Blinds" rather than "John Smith, Inc." As a marketable name, your DBA establishes recognition for your business in a way that your legal business name may not.
By taking advantage of a DBA, you can develop your business identity, market your company to customers, and identify the company to other businesses in the area.
Typical steps to register your DBA:
1. Make sure the DBA you want is available. Perform a preliminary name check with the appropriate state or county agency.
2. File your DBA. Prepare and file your DBA documents with the state or local agency where the company is formed. Depending on the state in which the business is located, this agency could be the Department of Licensing or the local county or clerk's office. Often, the agency will require a DBA filing fee.
3. Some states require a DBA applicant to publish the DBA name in the local newspaper. In addition, they require applicants to file proof of this publication. This process informs the public of your new business, its legal name, and the owner of the business.
Once your DBA filing is approved by the state or local jurisdiction, you can use it on your marketing materials, including stationery, websites, and advertisements. You can also use your DBA to open a bank account.
Federal and State Identification Numbers
The IRS requires corporations to acquire a nine-digit Employer Identification Number (EIN) for filing and reporting tax information, and to open a business bank account. An EIN is required whether or not your business has employees.
Like a person's social security number, an EIN (also known as a federal identification number) is a unique identifier of a business entity.
To apply for an EIN, a business owner must file IRS Form SS-4. You can apply on-line through the IRS Web site at www.irs.gov. You can also file by calling (800) 829-4933 or by faxing or mailing the completed SS-4 to the proper IRS site in the corporation's state. Please note that corporations operating in the U.S. without a Social Security Number or Individual Taxpayer Identification Number cannot use the on-line process.
If your business has paid employees, you will also need to obtain a state identification number from your state's tax authorities. Some states may also require a state tax ID number for specific types of businesses. To learn about your state's requirements, contact your state's taxation department.
Selling to Customers and Obtaining a Seller's Permit
A seller's permit is exactly what it sounds like. It allows your business to sell or lease taxable personal property in your state. Specifically, a permit allows you to collect sales taxes from your customers, which you in turn pay to the state. Even if your business sells goods that are exempt from your state's sales tax, you need to acquire a seller's permit. However, you will only owe taxes on the taxable portion of your total sales.
There are two types of permits, regular and temporary. If your company's sales are ongoing, you should apply for a regular permit. If your sales are temporary, then a temporary permit will do. For example, fireworks tents doing business during the Fourth of July, Christmas tree sales over the holidays, or flower shops that operate only during Mother's Day will apply for a temporary seller's permit.
Most corporations will have permanent sales and will need a regular permit. In addition, if you have more than one location where sales are made, you will need a separate seller's permit for each location.
Please note that if you are located in a state that does not impose sales tax - Alaska, Delaware, Montana, New Hampshire, and Oregon - you may not be required to get a state sales permit. However, cities and counties in those states may require sellers' permits and charge sales taxes. Contact your state and local agencies for the specifics of your local jurisdiction.
A word of caution: When you ask about a seller's permits at your state or local agency, at first they might not know what you're talking about. Depending on your state, a seller's permit may also be known as a resale permit, certificate of authority, or sales and use tax license. In the end, they all grant the same benefit to your business -- to legally sell taxable items in your state of business.
Obtaining a Business License
Sometimes, a city or county will require a special license from all businesses within its jurisdiction. These business licenses may also be referred to as tax registration certificates. The fees and requirements for business licenses vary depending on where a business is located. Typically, they must be renewed annually.
In addition, jurisdictions require you to display your license at your business location for the public to see. Although a business license is not transferable among owners, it can be transferred if moving locations.
To learn more about requirements specific to your location, visit your state's Web site or the U.S. Small Business Administration's Web site at www.sba.gov
Begin Filing Now
Conducting business without the proper licensing can bring heavy fines and may halt your operation of business. Therefore, it's usually best to file for your DBA, permits, licenses and other requirements right away.
Keep in mind, for many of these registrations you must apply to a government agency overwhelmed with filings and applications. Expect delays. Also, when you are unsure of your state, county or city requirements, consult with an attorney for clarification.
Although filing for these licenses, DBAs and permits for your new business may seem overwhelming, LegalZoom makes it easy. Simply visit LegalZoom.com and fill out our online questionnaire from the comfort of your home or office. Our trained document specialists will review your information for accuracy and completeness and file your documents for you.