Some
home business owners fall into the trap of ignoring business regulations
thinking that their business, being a micro enterprise, may pass under the
government’s radar screen. While avoiding regulatory details will not
necessarily send you to jail, it could be a hindrance in the growth of your
business.
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But a greater number of entrepreneurs simply do not know how to start the process of
legitimizing their business. They don’t know what requirements to comply
with, where to go, and how difficult or easy the process is. In fact, the
question of how to go about making sure that the business is legal is one of
the most common queries we receive from our readers.
We compiled below some of the common questions asked by readers on
organizing a business start-up:
How do I register my business?
How do I get a license
for my business?
What is a fictitious business
name?
Do I need to
get an Employer Identification Number?
Do I need to get a Sales Tax
Number?
How do I register my business?
Businesses, even the smallest home-based operations, are required to
register with either their city or county. Check with your city or county
office the procedures in filing for business registration.
Some cities make it easy for entrepreneurs to register their businesses,
while others have lengthier requirements. Business registration in Fairfax
County in Virginia, for example, is fast, simple and takes only about 15
minutes.
In Albuquerque, New Mexico, business registration costs $35 and is filed
with the City Treasury. This city requires applicants to bring their state
gross receipts tax number and the City Health Environmental Health
department clearance, if applicable.
British Columbia in Canada has made it simple to register businesses with
their One Stop Business Registration site at http://www.onestopbc.ca)
where start-up businesses can complete up to nine government forms with one
entry.
Note that sole proprietorships generally do not have to file any special
forms or pay hefty fees. Declaring the business to be a sole
proprietorship while filing the application is good enough.
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How do I get a license for my business?
To operate legally, you need to get a license for your business.
Particularly if you are selling tangible personal property or taxable
service, you are required to file for a business license to ensure the
collection and remittance of taxes. Even sole proprietorships or general
partnerships, while requiring no legal entry formality, need to comply with
state and local licensing and taxation requirements.
Some businesses, such as a food service business, liquor store,
construction, wholesale or retail trader, etc., are almost always required to get
a license before they can start their operations. Even a business that
operates pin ball machines or billiard tables need to secure the requisite
license in some states.
To know the type of license required for your business, check with the
city office (if your business is located in a city) or the county office (if
outside the city limits). In North Dakota, for example, some business
licenses are issued by the Attorney General (e.g. amusement games, tobacco,
etc.) while other licenses are issued by the Secretary of State.
Some countries, states, cities or counties have Web sites that contains all the
information an entrepreneur needs in terms of starting a business in that
particular area.
For example, HongKong's Inland Revenue Department runs a site at http://www.info.gov.hk/brief_br.htm
where entrepreneurs can apply, renew or cancel their business registrations.
Maryland runs a site called the Maryland
Business License Information System at http://www.blis.state.md.us
that
lists everything and anything an entrepreneur needs to know when starting or
operating a business in the state.
The state of North Dakota runs a site at http://www.state.nd.us/businessreg/index.htm
called North Dakota New
Business Registration.
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What is a fictitious business name?
A fictitious business name is the name of your business, if different
from your own. If you are operating the business as XYZ Desktop Publishing,
for example, you are required to register the fictitious or assumed business
name at your city or county clerk’s office.
Registering your fictitious business name is important for a number of
reasons. Banks look for proof that you have properly registered the name
when opening a business account. An even more important consideration is
that you won't be able to enforce any contract that you sign under an
unregistered name.
An unregistered business name also leaves that name open for use by other
businesses, even your competitors, which may jeopardize your business.
Some states require that the fictitious business name be registered with
the Secretary of State or other state agency. Procedures vary, but the
process is fairly easy. In most states, you'll register it at the county
level. Be sure to call your county clerk’s office to find out its
procedures, requirements and fees. Filing fee ranges from $10 to $50.
Los Angeles county, for example, requires that the fictitious name be
announced in a newspaper publication ad and that the applicant submit proof of
publication, resulting in a longer processing time of about three weeks. On
the other hand, Fairfax County in Virginia checks your fictitious name when
you register your business and completes the process in less than 30
minutes. Maryland requires businesses to call the Department of Assessments
and Taxation to reserve a business entity name prior to submitting the
appropriate organization documents or forms..
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Do I need to get an Employer Identification Number?
Generally, businesses need an Employer Identification Number (EIN) or
federal tax identification number. The EIN is used to identify a business entity such as a corporation, LLC, or
partnership. Sole proprietorships that need to pay federal excise of employment
taxes are required to get an EIN.
On the other hand, sole proprietors with no employees are not required to get an EIN, and can
instead use their Social Security numbers.
The Internal Revenue Service (IRS) web site at
http://www.irs.ustreas.gov/businesses/small/article/0,,id=98350,00.html
contains all the information you need about EIN and how
to apply for an EIN electronically.
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Do I need to get a Sales Tax Number?
A business that sells any tangible item is required to get a sales and
use tax license. Sales and use tax that applies to the retail purchase,
retail site, rental, storage, use or consumption of tangible personal
property and certain services vary between states. Check with your state
Comptroller office for the requirements and procedures in getting a sales
tax number.
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