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Why Register a Business?
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Why Register a Business?
If yo;re thinking about starting a business, or run a part-time business that brings in sporadic earnings, you may be asking yourself-Why go through the legal hassles of registering-. Depending on your stat's business and tax laws, you may not even be required to register. However, regardless of your profit or size, there are big advantages to register as a business' including liability protection, tax deductions, and financial assistance.
It sounds obvious, but legally registering your business legitimizes it. It shows potential customers, lenders, and vendors that you are serious about your work and your responsibilities as a business owner.
- Tax Deductions
One of the more appealing reasons for registering as business, as opposed to simply reporting your additional income, is extra money in your pocket. Businesses can receive tax deductions for business-related expenses, including use of your car, a home office or a rented storefront, insurance, and more. For a clear and complete explanation of business expense deductions, refer to Business Expenses (IRS Publication 535).
- Business Name Protection
Registering your business name protects it from being used by other businesses. When you register as a business, you will a file a business name with your state and local governments. If you want to run your business under a name other than your full legal name or the legal name of your partners, you will file a fictitious name registration, also known as DBA (Doing Business As) with your local government. Once your name is registered, you can also opt for more protection by registering a trade name or trademark. Other new businesses will have to check if your business name has been registered with the state before they can legally use it.
- Liability Protection
When you register your business, you will declare a business structure (LLC, non profit, S-Corporation, etc). Your business structure determines the amount of regulatory paperwork you have to file, the taxes you have to pay, and your personal liability regarding investments into your business. Certain business structures, like LLCs and corporations, provide personal liability protection for business decisions or actions of the LLC. This means that if the LLC incurs debt or is sued, its members are not required to satisfy the claims with their personal assets.
- Business Loans
There are hundreds of government loans available for small businesses. In addition, state and local economic development agencies and numerous non-profit organizations provide low-interest loans to small business owners who may not qualify for traditional commercial loans. Each loan program has unique application and eligibility requirements, however, most lenders ask for the same information for you. Before you apply for a loan, you should get some basic documentation together that will go into just about any loan package.
- Planning for Success/Growth
Why limit your success? Your business activity may be slow now, but a sudden uptick could leave you needing to hire more employees, vary your customer payment options, or expand to new locations
Increase your staff: The shift in role from being your own boss to being someone's boss can be dramatic and challenging. You will also face a host of federal and state government regulatory requirements, tax laws, and compensation demands when hiring your first employee. If you already have a small staff, but need to bring on additional help, you may consider hiring more employees or outsourcing tasks to independent contractors. In legal terms, the line between an independent contractor and an employee is not always clear. Learn more about hiring and managing employees and independent contractors at Business.gov.
Expand your payment options: Registering as a business will allow you apply for a merchant account, which you will need to accept credit or debit cards. While you may operate as cash-only today, future success could result in an influx of customers that rely on multiple payment options. If you're just starting up, or don't have a sales history, you may need to work with an independent sales organization (ISO) that acts a reseller, or middleman, between your business and the merchant account provider. You can read more about merchant accounts and accepting credit and debit cards at Business.gov.
Branch out: Perhaps yo're expanding from a home-based online business to a storefront, or' vice versa' by adding an e-commerce component to your brick-and-mortar business. You could open a second location, or eventually a franchise. There could even be an international market for your goods and service. You may not see these opportunities right now, but ther's no telling what can happen down the road.
For more information on registering your business, read these brief articles: