Even though it’s not technically difficult to officially register your business with the US and state government, it can be quite intimidating.
When my wife and I first started our ecommerce store, we were scared of screwing everything up.
What if we got audited? What if we forgot to obtain a permit or fill out some crucial paperwork? The good news is that it’s not that complicated to fill out the forms. The bad news is that all of the information can not be easily found in one centralized location.
For example, when you file with your state, they’ll have no clue about the requirements for your city or town. Similarly, your city tax office will have no clue about the state or federal requirements.
Because all of the necessary information is all over the place, I sometimes wonder how people ever manage to get all of the paperwork and requirements correct the first time around.
In any case, this guide will outline the steps you need to take to officially register your business with the government.
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Where Do I Begin?
Assuming that you’ve already chosen a corporate structure and filed all of the necessary paperwork properly, you are now ready to register your business.
Making your business official consists of 5 main steps which are enumerated below.
- Obtain a federal employer identification number(FEIN)
- Register your ‘Doing Business As’ or your ‘Ficticious Business Name” if you plan on doing business under a different name
- Obtain a business license from your city or locality
- Obtain your state’s sellers permit
- Obtain any other necessary permits depending on the nature of your business
What Is A Federal Employer Identification Number Or FEIN?
FEIN stands for Federal Employer Identification Number and it’s a 9 digit number assigned by the IRS to uniquely identify businesses operating in the United States.
Applying for this number is free and can be obtained usually within 1 business day on the IRS website. Every business should only have a single FEIN which will be used when filing your taxes and opening your business bank accounts.
Note: A FEIN and an EIN are essentially the same thing.
How To Get Your Federal Employer Identification Number
Technically if you are a sole proprietorship, you don’t need to obtain a federal employer identification number or FEIN. But my advice is to get one no matter what for your small business in order to fully separate your business from your personal affairs.
The FEIN is used by the government to identify your small business much like a social security number. For example, this number will be used to open bank accounts, to file your taxes and to register for your business license.
Getting a FEIN is easy and there are multiple ways to do it
Applying online is the fastest and easiest way to get your FEIN.
Apply By Fax
Very few people use fax machines anymore, but you can also apply for a FEIN via a physical paper form.
- Fax it to (855) 641-6935 – If your business is located within the 50 states.
- Fax it to (855) 215-1627 – If you don’t reside in the United States.
Usually, you’ll get an answer from the IRS within 5 business days.
Apply By Mail
This is by far the slowest way to apply. But you can mail your Form SS-4 to the following address
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
What Is A Fictitious Business Name Or DBA?
If you plan on using a name for your business that doesn’t contain your real name or the legal name of your business entity, you need to file for a ficititious business name or DBA.
DBA, or doing business as, is a legal term that is used when your business is operating under a fictitious business name instead of the owner’s name. For example, “The Gap” is a fictitious business name because the name of the business does not include the names of the store owners.
Because it is impossible to know who is actually responsible for the business from a fictitious business name, the government requires you to file a DBA statement in the interests of consumer protection.
How To Register Your Fictitious Business Name
Registering your fictitious business name or DBA is different in every state, but in the state of California, not only do you have to file a statement with the county, but you also have to publish your fictitious business name in a local newspaper for a set period of time as well.
Why does California force you to do this? It’s because publishing your DBA in the newspaper cements your name and your business name together in the public record. If you were to ever commit fraud, law enforcement could easily look up your business and track you down.
Remember, you only need to file a fictitious business name if you plan on using a business name that does not contain your own name. For example, if I wanted to start Steve Chou’s House of Linens, I wouldn’t have to register an FBN.
Why Get A Fictitious Business Name Or DBA?
Besides the fact that its illegal to operate your business without one in most states, a DBA also offers you the following benefits.
- Other people will not be able to steal your business name.
- You will be able to open a bank account under your business name.
- You will be able to accept checks written out to your business
How Do I Get A Fictitious Business Name Or DBA?
First of all, you don’t need a DBA if you are running the business under your own name. If you’re not, you need to follow these steps. Keep in mind that it’s different in every state so make sure you do your own homework where you live.
- Visit your county clerk’s office to obtain the necessary forms, requirements and fees.
- Check to see if your business name is already taken
- Publish your association with your business name in a local paper for the amount of time required by your state
If all of this seems a bit overwhelming, there are plenty of online services that do everything for you albeit at an additional cost. For our online store, we used Corpnet.com and we highly recommend them.
Obtain A Business License From Your City
Everyone is out to get a piece of your profits and your local city government is no exception. Most cities will charge you an annual fee to run your business in addition to a small percentage of your profits.
Unfortunately, every city is different even within the same state so I can’t really help you out much here with the specifics in how to file for a local business license.
To find out your city’s requirements, you need to contact your local city tax collector or search for the “county clerk” for your city online.
What Is A Sellers Permit?
Anyone who sells physical goods must obtain a seller’s permit from their state. In California, you have to apply for a permit from the California Board of Equalization.
Mainly, this permit exists so you can collect sales tax from your customers and pay the state government in a timely manner.
Sales tax is only collected if you sell goods to someone that resides in a state where you have a physical presence. Unfortunately, even if all of your customers are out of state, you still have to get a seller’s permit.
Sometimes, it can be very vague as to what constitutes a physical good. For example, if you sell software to the public via electronic methods only, it’s somewhat ambiguous whether your software is considered tangible.
However, if you ship CDs containing your software, you definitely have to obtain a seller’s permit. In any case, you’ll need to check with your state to make sure.
Bottom line, a sellers permit allows the state to enforce the collecting, reporting, and paying of sales tax in that state and you can think of it like a trust fund.
Collecting sales tax does not inherently cost your business anything. You are merely passing money from your consumers to the state government.
Note: A sellers permit can also be referred to as any of the following names depending on your state.
- Resale Permit
- Resell Permit
- Permit License
- Reseller Permit
- Reseller Number
- Resale ID
- State Tax ID Number
- Reseller License Permit
- Certificate Of Authority
How To Get A State Sellers Permit
First off, every state has different requirements for getting a sellers permit so the following criteria may differ depending on where you live.
For example Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge sales tax so you don’t need to get a sellers permit in those states. But for every state where you have nexus or a physical presence, you will need to apply for a permit.
Fortunately, most states allow you to file your application online and all you have to do is go to your State Department of Revenue’s website to find the online link.
For example, here’s the link to California’s website where you can apply for a sellers permit online.
Before you apply however, you will need to be prepared. In addition to having your FEIN ready to go, you’ll also want to have answers to the following questions handy.
- Your business name and DBA – Make sure you get a DBA before you apply. If you plan on forming an LLC or a corporation, you should do so before applying as well.
- Revenue distribution – Is your business seasonal and is the revenue unevenly distributed throughout the year?
- Tax collection start date – The starting date for collecting sales tax in your state
- The type of products or services to be sold – You may be asked for your NAICS classification.
- The estimated amount of sales tax you will collect – Don’t exaggerate your potential earnings because you’ll have to file more often if you cross a certain threshold.
- If you have nexus in multiple states – You may be asked if you plan on filing consolidated tax returns
Depending on the state, you may also need to present the following
- A photocopy of your driver license or passport
- The name and location of your business bank
- The names of your suppliers
- Date of birth
- Personal references
- Social security number
For example, I run my ecommerce business out of California and when I applied for my sellers permit, I had to state my projected monthly taxable sales and the type of products sold.
Note: Depending on the state, some products may not be taxable so you should double check before you enter in your taxable revenue projections.
How To Get Other Permits That Are Specific To Your Business
Many businesses are subject to additional regulations that are not covered by the standard set of permits described above. Usually if your business has the potential to affect the public or the environment, you’ll usually have to obtain additional permits.
This is usually the most complicated part of starting a business since there are literally hundreds of agencies that regulate businesses at both the state and federal level.
You’ll also need to check with the zoning requirements for your business as well if you use any sort of hazardous chemicals etc….
Some states have websites that you can log on to find out all of the necessary permit requirements for your business. For California, I used the CalGOLD website(www.calgold.ca.gov) to check up on our wedding linens business.
Unfortunately, this site is specific to California but by entering in the parameters for your business, CalGOLD will tell you upfront which permits you might need. Your state may have a similar website you can consult.
If you’re feeling overwhelmed at this point, then you are not alone. My wife and I got dizzy reading over all of the required regulations and forms to run our wedding linens business.
Locating and filing for the basic selling permits is fairly straightforward but what you really have to watch out for are all of the special permits you might need to obtain.
For example, at one point my wife and I wanted to sell baby clothes and other baby related items online. Turns out that there are requirements that all baby goods need to get tested for chemicals at an independent testing site before you can sell them.
This testing is very expensive and must be done on a per item basis.
Use A Service To Help You
In any case, my wife and I went through all of these things more or less manually but if we were to do it all over again, we would use a service like CorpNet to take care of everything for us.
Inevitably, you will have lots of questions and the reason I like CorpNet.com is because you can easily reach someone knowledgeable live over the phone.
For example, you can get a free 20 minute consult right off the bat where you can ask questions to a real lawyer WITHOUT GETTING CHARGED. As a result, I use them to file trademarks and answer both my legal and tax questions.
Seriously, your time should be spent building up your business and not on minute details like looking up rules and regulations. If you feel that you are spending way too much time wading through the red tape, it makes sense to pay an expert to do the work for you.
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