If you are a new business owner or entrepreneur, chances are you have wondered if you need to register your business. The answer is a definite yes. Registering your business as a legal entity provides several benefits such as the ability to apply for business loans, opening banking accounts and garnering a better reputation. The Women’s Business Center at CBP explains how you can register your business and the pitfalls of not doing so.
Registering with federal agencies
Instead of registering with federal agencies, most small to medium businesses file and receive a federal tax ID. As a business owner, if you want to trademark aspects of your business such as product names or the brand, you can do so by filing this with the United States Patent and Trademarks office.
Another federal agency that nonprofits need to register with in order to attain a tax-exempt status is the Internal Revenue Service (IRS).
Most jurisdictions now offer online registration, an easy way to get it done!
Registering with state agencies
If you are an LLC, non-profit, partnership or corporation, you will need to register with the official state agency where you reside or carry out business activities. These business activities include:
- Your business having a physical presence in the particular state
- Conducting one-on-one meetings with clients and customers in the state
- Receiving significant revenue from the state
- Hiring employees who work physically in the state
If your business activities extend to several states, you will need to register in the primary state and then file for foreign qualification for the other states as well.
Pitfalls of not registering the business
Even though you can conduct business without registering, there are several pitfalls that can encumber your operations:
- Lawsuits: In several states, unregistered businesses may not be eligible to file lawsuits. Even though courts may provide an unregistered business the time to file for registration, it is completely up to them whether to provide this leeway or not.
- Delays: If you are looking to register your business in a state where you have been conducting business already (prior to registration), this process can be delayed by up to 6 months. This can adversely affect the business, especially if you are looking to receive financing or licensing.
- Penalties: Several states impose penalties, back taxes and fees as well as interest on this amount from the time prior to registration.
- You may be precluded from applying for certain loans, grants and benefits (such as recent CARES Act funding) if your business is not registered.
For more information on how to register your business and the advantages of it, contact The Women’s Business CBP today!