Registering Your Small Business with State Agencies
What you need to know about registering your business's name and type
If you are restructuring or renaming your business or are breaking into the world of small-business ownership for the first time, it is important to carefully complete all applicable registration steps with your state. Depending on your business's makeup and location, this procedure may comprise many steps or none at all. Fortunately, online tools and information put in place by your state government add a significant level of convenience to the process and will help you determine which steps are necessary.
Do not let the ease of online registration disguise its importance, however. Registration is not just busywork; it is a process that builds the foundation of your business.
"Too often, new business owners regard registration as just another bureaucratic ticket to punch, and they fail to focus on important related steps like claiming a business name, choosing a structure and securing all of the requisite permits," says Kermit Pattison, New York Times Small Business Guide contributor.
Businesses that need to be registered with state agencies include nonprofits, corporations, and limited liability companies or partnerships. In order to determine what is required in your state, visit this directory put together by the U.S. Small Business Administration.
It is possible to change your business type as the needs of your business change. Many owners of small businesses that start as sole proprietorships change the business type when the business expands, to protect themselves from the increasing personal liability that goes hand in hand with business growth. A business owner can protect personal assets by converting the business to an LLC.
The process of restructuring a business requires filing new documents at the state level and could also involve obtaining new business licenses, depending on the state. Information regarding the process that the IRS has set for changing a business structure can be found here.
Your business's name is the key component of registration. The legal name of your business is important, as it is required for all government applications, such as for your employer tax IDs, permits, licenses and many other forms.
If your business is a sole proprietorship, it will not need to be registered with the state, provided that you brand it using your own name with no additions. The law dictates that when a business is first started, the default name is that of the owner, whether a person or other entity.
Because the name of a business is an important part of its brand, many business owners choose names other than their own to convey a specific image. If this is the case with your business, you will likely be required to formally file this name as your Doing Business As (DBA) name with state agencies. It is also known as a trade name or fictitious name. This is true even if the owner's name is part of the name of the business. The SBA gives the example that John Smith would even need to register the name John Smith Painting.
State laws weigh heavily on what will be required of you during the naming process and on the agency that will handle the registration. The procedure will most likely take place through the county clerk's office or through your state government. Although registering a DBA name is required by most states, there are some exceptions.
Kermit Pattison, New York Times Small Business Guide contributor, warns that rushing the process of registering your business can result in the registration's needing to be changed at a later date.
"This can be costly: You may have to throw out product, packaging, signs, stationery, business cards, and all of your branding and marketing efforts," Pattison says. "Or you may become embroiled in costly litigation and have to pay damages."
Part of avoiding potential litigation is ensuring that your intended business name is not too similar to that of another area business and that it does not infringe upon a trademark. There are many resources available for accomplishing this. You can start by checking with the secretary of state, the state department of revenue and your county clerk's office. Checking available domain names is another step that can help you rule out or decide upon a choice for your business name.
Next, search through trade association directories and the state databases of limited liability companies and corporations. It is also wise to conduct a trademark search on the United States Patent and Trademark Office's website at http://www.uspto.gov/.
According to Pattison, this process is lengthy but usually can be accomplished by the typical business owner, particularly with the help of a university librarian. Some business owners may wish to hire a lawyer, however, if they feel significant risk is involved.