Pick your business location
Your business location determines the taxes, zoning laws, and regulations your business will be subject to. You’ll need to make a strategic decision about which state, city, and neighborhood you choose to start your business in.
- Research the best place to locate your business
Research the best place to locate your business
You’ll need to register your business, pay taxes, and get licenses and permits in the place you choose to locate your business.
Where you locate your business depends in part on the location of your target market, business partners, and your personal preferences. In addition, you should consider the costs, benefits, and restrictions of different government agencies.
Region-specific business expenses
When you calculate your startup costs, take into account the way different expenses might cost more or less depending on your location.
Costs that can vary significantly by location include standard salaries, minimum wage laws, property values, rental rates, business insurance rates, utilities, and government licenses and fees.
Choose a business structure
The business structure you choose influences everything from day-to-day operations, to taxes, to how much of your personal assets are at risk. You should choose a business structure that gives you the right balance of legal protections and benefits.
- Review common business structures
- Combine different business structures
- Compare business structures
Your business structure affects how much you pay in taxes, your ability to raise money, the paperwork you need to file, and your personal liability.
You’ll need to choose a business structure before you register your business with the state. Most businesses will also need to get a tax ID number and file for the appropriate licenses and permits.
Choose carefully. While you may convert to a different business structure in the future, there may be restrictions based on your location. This could also result in tax consequences and unintended dissolution, among other complications.
Consulting with business counselors, attorneys, and accountants can prove helpful.
Review common business structures
A sole proprietorship is easy to form and gives you complete control of your business. You’re automatically considered to be a sole proprietorship if you do business activities but don’t register as any other kind of business.
Sole proprietorships do not produce a separate business entity. This means your business assets and liabilities are not separate from your personal assets and liabilities. You can be held personally liable for the debts and obligations of the business. Sole proprietors are still able to get a trade name. It can also be hard to raise money because you can’t sell stock, and banks are hesitant to lend to sole proprietorships.
Sole proprietorships can be a good choice for low-risk businesses and owners who want to test their business idea before forming a more formal business.
Partnerships are the simplest structure for two or more people to own a business together. There are two common kinds of partnerships: limited partnerships (LP) and limited liability partnerships (LLP).
Limited partnerships have only one general partner with unlimited liability, and all other partners have limited liability. The partners with limited liability also tend to have limited control over the company, which is documented in a partnership agreement. Profits are passed through to personal tax returns, and the general partner — the partner without limited liability — must also pay self-employment taxes.
Limited liability partnerships are similar to limited partnerships, but give limited liability to every owner. An LLP protects each partner from debts against the partnership, they won’t be responsible for the actions of other partners.
Partnerships can be a good choice for businesses with multiple owners, professional groups (like attorneys), and groups who want to test their business idea before forming a more formal business.
Limited liability company (LLC)
A Limited Liability Company is a legal entity that’s separate from its owners. They can make a profit, be taxed, and can be held legally liable.
Limited Liability Companies offer the strongest protection to its owners from personal liability, but the cost to form a corporation is higher than other structures. Limited Liability Companies also require more extensive record-keeping, operational processes, and reporting.
Unlike sole proprietors, partnerships, limited liability companies pay income tax on their profits. In some cases, corporate profits are taxed twice — first, when the company makes a profit, and again when dividends are paid to shareholders on their personal tax returns.
Limited Liability Companies have a completely independent life separate from its shareholders. If a shareholder leaves the company or sells his or her shares, the limited liability companies can continue doing business relatively undisturbed.
These companies have an advantage when it comes to raising capital because they can raise funds through the sale of stock, which can also be a benefit in attracting employees.
Limited Liability Companies can be a good choice for medium- or higher-risk businesses, businesses that need to raise money, and businesses that plan to “go public” or eventually be sold.
Nonprofit corporations are organized to do charity, education, religious, literary, or scientific work. Because their work benefits the public, nonprofits can receive tax-exempt status, meaning they don’t pay state or federal taxes income taxes on any profits it makes.
Nonprofits must file with the IRS to get tax exemption, a different process from registering with their state.
Nonprofit corporations need to follow organizational rules very similar to a regular companies. They also need to follow special rules about what they do with any profits they earn. For example, they can’t distribute profits to members or political campaigns.
A cooperative is a business or organization owned by and operated for the benefit of those using its services. Profits and earnings generated by the cooperative are distributed among the members, also known as user-owners. Typically, an elected board of directors and officers run the cooperative while regular members have voting power to control the direction of the cooperative. Members can become part of the cooperative by purchasing shares, though the amount of shares they hold does not affect the weight of their vote.
Choose your business name
You can find the right business name with creativity and market research. Once you’ve picked your name, you should protect it by registering it with the right agencies.
- Register your business name to protect it
- 4 different ways to register your business name
Register your business name to protect it
You’ll want to choose a business name that reflects your brand identity and doesn’t clash with the types of goods and services you offer.
Once you settle on a name you like, you need to protect it. There are four different ways to register your business name. Each way of registering your name serves a different purpose, and some may be legally required depending on your business structure and location.
- Entity name protects you at state level
- Trademark protects you at a federal level
- Doing Business As (DBA) doesn’t give legal protection, but might be legally required
- Domain name protects your business website address
Each of these name registrations are legally independent. Most small businesses try to use the same name for each kind of registration, but you’re not normally required to.
- Entity name
- Domain name
4 different ways to register your business name
An entity name can protect the name of your business at a state level. Depending on your business structure and location, the state may require you to register a legal entity name.
Your entity name is how the state identifies your business. Each state may have different rules about what your entity name can be and usage of company suffixes. Most states don’t allow you to register a name that’s already been registered by someone else, and some states require your entity name to reflect the kind of business it represents.
In most cases, your entity name registration protects your business and prevents anyone else in the state from operating under the same entity name. However, there are exceptions pertaining to state and business structure.
Check with your state for rules about how to register your business name.
A trademark can protect the name of your business, goods, and services at a national level. Trademarks prevent others in the same (or similar) industry in the world from using your trademarked names.
For example, if you were an electronics company and wanted to call your business Springfield Electronic Accessories and one of your products Screen Cover 5000, trademarking those names would prevent other electronics businesses or similar products from using those same names.
Businesses in every country are subject to trademark infringement lawsuits, which can prove costly. That’s why you should check your prospective business, product, and service names against the official trademark database, maintained by the United States Patent and Trademark Office.
Doing Business As (DBA) name
You might need to register your DBA — also known as a trade name, fictitious name, or assumed name — with the state, county, or city your business is located in. Registering your DBA name doesn’t provide legal protection by itself, but most states require you to register your DBA if you use one. Some business structures require you to use a DBA.
Even if you’re not required to register a DBA, you might want to anyway. A DBA lets you conduct business under a different identity from your own personal name or your formal business entity name. As an added bonus, getting a DBA and federal tax ID number (EIN) allows you to open a business bank account.
Multiple businesses can go by the same DBA in one state, so you’re less restricted in what you can choose. There’s also more leeway in the clarity of business function. For example, a small business owner could use Springfield Electronic Accessories for their entity name but use TechBuddy for their DBA. Just remember that trademark infringement laws will still apply.
Determine your DBA requirements based on your specific location. Requirements vary by business structure as well as by state, county, and municipality, so check with local government offices and websites.
If you want an online presence for your business, start by registering a domain name — also known as your website address, or URL.
Once you register your domain name, no one else can use it for as long as you continue to own it. It’s a good way to protect your brand presence online.
If someone else has already registered the domain you wanted to use, that’s okay. Your domain name doesn’t actually need to be the same as your legal business name, trademark, or DBA. For example, Springfield Electronic Accessories could register the domain name techbuddyspringfield.com.
You’ll register your domain name through a registrar service. Consult a directory of accredited registrars to determine which ones are safe to use, and then pick one that offers you the best combination of price and customer service. You’ll need to renew your domain registration on a regular basis.
Register your business
Register your business to make it a distinct legal entity. How and where you need to register depends on your business structure and business location.
- Register with Registrar General
Register with RGD
The Registrar General’s Department is the constitutionally mandated body to register new businesses.
If your business is an LLC, corporation, partnership, sole proprietorship or nonprofit, you’ll need to register with the registrar general’s office closer to where you conduct business activities as well as with the local district assembly.
Typically, you’re considered to be conducting business activities in a district when:
- Your business has a physical presence in the district
- You often have in-person meetings with clients in the district
- A significant portion of your company’s revenue comes from the district
- Any of your employees work in the district