Starting your own small business can be an exciting prospect. Perhaps you’ve discovered the newest product that’s sure to take the world by storm, or maybe a life-long hobby has suddenly blossomed into a potential gold mine. Regardless of how it came about, if you are able to turn a profit from it, then by definition you are running a business.
Many folks are already aware of the numerous tax write-offs they can claim from business related expenses. Although many of these can be enjoyed without the added step of registering your company with your state, there are additional benefits to consider, especially if you plan on keeping your business for a while.
1. Supplier Discounts
If you have a business that sells a product, many times you have the ability to receive your merchandise at a discounted price reserved especially for businesses. However, in order to get these savings, you will need to provide proof of your state registration in order to qualify.
Depending on how you structure it, taking the extra step to register with your state can help protect your personal assets. For example, creating an LLC (Limited Liability Company) in most cases protects the members (even if it’s one person, LLC owners are called “members”) from losing their personal property in case of lawsuits or debt. Without this kind of arrangement, there is no distinction made between assets.
If your company expands and you need to take on a few employees, registering your business will allow you to receive an EIN (Employer Identification Number) from the IRS. This is a one-time number that never expires and enables you to pay withholding taxes on your employees. EINs are also useful for opening certain special accounts like brokerage accounts.
4. Business Loans
The day may come where you need some extra money to take your up-start to the next level. In order to qualify for a business loan, you will need to provide proof that you are in fact a business. The same is true for other financial business perks such as business bank accounts and credit cards.
When courting prospective clients, it is important to put your best foot forward. Having a registered business lends an air of legitimacy and gives the impression of permanence. Without it, these same people may consider entering into business with you to be too great a risk.
6. Locking Down a Name
One of the steps during registration is to pick a name for your company. Depending on the state and how you register, you should have access to a database containing the names of all business registered in that state. Once you have chosen a name, you must check it against this database to make sure it is available. A name can only be used once per state. If your business takes off, its name may start to carry some weight and you don’t want someone else swooping in and snatching it for themselves.
Also, if you plan on doing business in more than one state, you may want to check into registering in both states to see if the name you desire is available for the sake of continuity.
For those unregistered people running successful businesses out of their homes, the company’s existence is limited by the owner’s …well, existence. In the unfortunate (and hopefully unlikely) event that the owner dies, the business can die with them.
Establishing your business through registration causes it to become a separate entity that can be manipulated, passed on, etc. This is a good way to ensure that your hard work will not have been in vain and your baby will live on long after you’re gone.
Regardless of if you decide to register or not, be sure to pay the proper taxes and be careful when using an unprofitable business as a tax shelter. If done too regularly this has the potential to draw an audit, an event for which you definitely would want to be registered. For more information on how to register your small business, check your state’s filing requirements and procedures.
Amazon Price: $24.95 $12.90 Buy Now
(price as of Feb 27, 2014)