Step 2: Registration and Creation of Your Business

  • Registering your business with the state
    • For your business to be considered a “real” business, you need to have it established as an entity and registered with the state.
    • The name of your entity does not necessary have to be what the name of your company will be. You can always file with a “DBA” or “Doing Business As”, if you are entering into a franchise or this one company will just be part of a larger organization. The rules for naming and ensuring no one else is using the name still apply with a DBA.
    • There are many ways to form your business, each having their own Pros and Cons
Type of Business PROS CONS
Sole Proprietorship *Only required to file one tax return (personal) *No liability protection
*Required to pay employment tax (15.3%)

Limited Liability Company (LLC)

*Liability protection *Flexible Tax Filing to best suit your needs *Very few downsides for the detailing profession

Limited Liability Partnership (LLP)

*Almost no positives for the detailing profession

*No liability protection
*Also liable for the actions and debts of partners

S-Corporation *Pass through taxation *Closer IRS scrutiny
C-Corporation *High degree of liability protection *High corporate tax rate
*Double taxation on income

**This is for information purposes only, and is not financial or legal advice. Please consult with a lawyer or accountant about your individual needs.

  • For more information on how to register your business with the state you are in, please find your state, and visit their site.
Alabama Hawaii Massachusetts New Mexico South Dakota
Alaska Idaho Michigan New York Tennessee
Arizona Illinois Minnesota North Carolina Texas
Arkansas Indiana Mississippi North Dakota Utah
California Iowa Missouri Ohio Vermont
Colorado Kansas Montana Oklahoma Virginia
Connecticut Kentucky Nebraska Oregon Washington
Delaware Louisiana Nevada Pennsylvania West Virginia
Florida Maine New Hampshire Rhode Island Wisconsin
Georgia Maryland New Jersey South Carolina Wyoming

 

  • Registering with the Federal Government and the IRS
    • A Federal Employer Identification Number (EIN) or Tax ID number is essentially a Social Security Number for your business. It is how you will be asked to identify yourself as a business for banking, credit, or tax purposes. o Applying for an EIN is very easy and free on the IRS website. DO NOT pay another site for this service, it is simple, free, and can be done in minutes online.
    • Having this number is a requirement if your business is set up in any of the following ways; LLC, LLP, S-Corp, or C-Corp. If you established your business with the state as any of these types, you need to have an EIN.
    • If you are set up as a Sole Proprietorship, it is not required because all income you collect goes onto your personal tax return, and does not require a separate filling with the IRS. But, if you want to open a Business Banking account with your local bank, they will require an EIN to establish that account. Also, if you have, or plan to have, employees other than yourself, you will need to apply for one. It will be required for payroll purposes.

Once you have registered with the State and Federal Government, you are established as far as they are concerned. You will be required to maintain those registrations every year, and stay in good standing by paying your taxes, but you are now officially a business.

This is for information purposes only, and is not financial or legal advice. Please consult with a lawyer or accountant about your individual needs.