Welcome to one of the more painful parts of being an entrepreneur -- the paperwork involved in registering a home business. I will be honest, this probably won’t be the highlight of your set-up. But, once you've establish your business identity, it is essential you register a home business properly because there may be legal consequences for not doing so.
Some of the best resources available to assist you in this process are the U.S. Small Business Association and your state’s official government website. Many states have a fully automated online system which can guide you through the entire registration process required for any business structure and any business type. If you are lucky enough to be a citizen in one of those states, your business registration and licensing process is a one stop shop. If not, this article should provide you with the resources necessary to get your business off and running with a solid paper trail.
How To Register Your Business:If your business is an LLC, Parternship or a Corporation you should contact your Secretary of State's office. They will advise you in the various paperwork necessary to register your business and assist you with any federal filings that may be required based off your business type.
As a sole proprietor, you may not need to register with the state, but I suggest starting there. At the minimum, they will offer you guidance and point you in the direction you should go (which will probably be your city or county government offices).
The Small Business Association’s website has a great resource which will connect you with your particular state’s business registration requirements.
How To Register Your Business Name:You will use the legal name of your business on all government forms and applications. Typically, once you have gone through the state registration process as an LLC, Partnership or Corporation, you also registered your business name.
As a sole proprietor, your business will be registered as your given name (i.e. John Smith). If you want to open up shop or sell your products under a different name, you may have to file a "fictitious name" or DBA (doing-business-as) registration form with your government agency. For example, if John Smith was a sole proprietor carpenter and advertised his business as “Honey-Do Carpentry”, he would need to file a DBA form.
Here is a handy chart provided by the Small Business Association to identify your state’s requirements for DBA filing.
How To Register Your Business With the IRS(Getting a Tax ID Number - FEIN):
Uncle Sam wants a piece of your new business action too. All businesses are required to pay federal, state, and local taxes. To help the government find your new enterprise, you must register your business with the U.S. Internal Revenue Service (IRS) and state and local revenue agencies and receive a tax ID number (Federal Employer Identification Number or FEIN). If you are a sole proprietor, you may not need to acquire an FEIN number because your social security number will suffice.
Because the IRS issues these numbers for free, I suggest going with an FEIN number as an alternative to your social security number for security reasons. It also adds some legitimacy when applying for a business bank account.
Another great resource provided by the Small Business Association: Guide to the Employer Identification Number.
How to Register Your Business With Your Local Zoning Agency:Make sure you have a basic understanding of local zoning ordinances. Zoning laws are determined by your city or county government. Zoning laws will not affect a large percentage of home businesses, but here are a few you should be aware of:
- Physical Changes/Visibility - Does your business require modifications for your home?
- Traffic – Do you have customers or employees coming and going often?
- External Effects – Are you annoying or a nuisance (i.e. collecting scrap cars on your front lawn)?
- Business Activities – Are you raising a hog farm in the suburbs?
My recommendation is to head on down to your city/county government offices and check with the zoning department to determine if you need to apply for any special permits.
How to Obtain Required Business Licenses and Permits:Beyond a basic operating license, you may need specific permits issued on the local, state or even federal level. Again, your state, city or county offices will be able to point you in the right direction. Here are some common permits that may be required for home businesses:
- General Licenses & Tax Permits
- Health Permit (required if your business will handle food)
- Occupational Permit
- Zoning Permit
This article is part of a 10-Step Guide on How to Start a Home Business.
Image (c) nuttakit / FreeDigitalPhotos.net
