Why Do I Register My Business?The short answer is you register your business to be recognized as a legal entity. Now this can vary from state to state or by your business services, but many of these steps are just good business common sense to follow. You will want to be registered with federal, and state agencies each for a different reason. We will go into those below:
Federal Registration: For your pet care services, you simply need to file with the federal government to register for a federal tax ID. This is often called your Employer Identification Number or (EIN). This allows you to do the following things necessary for your business:
- Open a bank account
- Pay employees
- Pay state and federal taxes
- Apply for business licenses or permits
- Establish accounts with business direct companies
You will specifically need an EIN to operate as the following types of business entities; all corporations, all Limited Liability Companies (LLC) with more than one member, and any business that hires employees including a sole proprietorship.
- State Registration: Remember that you will need to register as a business within any state that you are conducting active business. That goes above and beyond having a physical location – it includes where your business’ revenue is coming from.Most states require your business to register with either the Secretary of State’s office, a Business Bureau, or a Business Agency. We have linked a helpful tool, to find your state’s website and requirements in just one click.
Registration with a state requires the following information before you can get started:
- Business Name
- Business Location / Mailing Address
- Ownership, Management, or Directors Structure
- Register Agent Information
- Number and Value of Shares (for Corporations)
How Do I Determine The Right Business Structure?Choosing the right structure for your business is actually really important! This changes how you do things on a day to day operations level, it affects how to file your taxes, and your level of personal risk. So let’s walk you through what we find are the most common structures for your pet business.
Sole ProprietorshipThis will be the most common type of business for many pet service based businesses. If you do not not register as any other type of business, but perform business activities, this is the assumption and structure assigned to you. Here, you have complete control over your business. This can be a good choice for a low risk service or for those wanting to test if their business will be successful before accruing additional start up costs. However, there are risks with sole proprietorship. Your business assets and liabilities are not separated from your personal assets. If you are held liable for a business claim, your personal assets can be at risk for repayment of that claim. Documents Needed: None
PartnershipMany of our dog walkers and pet sitters start their business as a partnership. It’s a great way to dive into business with someone who shares your same passions! A partnership is one of the more simple structures for two or more people to own a business together. Now comes the choice between creating a Limited Partnership (LP) and Limited Liability Partnership (LLP). Here again, we talk specifically about risk and liability. In an LP, one general partner can be designated with “unlimited liability”. Other partners within this structure have limited liability – and thus have a limited control over the company. This will be outlined and documented in a partnership agreement. Profits are paid through personal tax returns, except the general partner who must also pay self-employment taxes. In a LLP, all partners are given limited liability coverage. This will protect each partner from debts against the partnership, meaning you won’t be responsible for the actions of your other partners. Documents Needed: Certificate of Limited Partnership and Limited Partnership Agreement OR Certificate of Limited Liability Partnership and Limited Liability Partnership Agreement.
Limited Liability CompanyThis is many people’s ideal choice for structuring their new business. A registered LLC provides you protection for your personal assets – separating you from your business. This means your vehicle, home, and savings accounts won’t be at risk in the event of your business facing a lawsuit or bankruptcy; because they are seen as two separate entities. Profits and losses can be handled through your personal income without facing corporate taxes. However, members of an LLC are considered self-employed and must pay taxes towards Medicare and Social Security. States vary on rules for the life of an LLC or how to handle a member of an LLC leaving. Check with your local state to stay up to date on these rules and regulations. Documents Needed: Articles of Organization and Operating Agreement
CorporationLastly, a corporation is a legal entity that stands separate from its owners. A corporation provides the strongest legal protection to its owners from personal liability because it can make a profit, be taxed, and be held legally liable on it’s own. There is a cost to this level of protection. There are greater costs to form this type of business. It also requires more records, operational procedures, and reporting to maintain a legal corporation. Corporations also are required to pay income tax on their profits. There are many different types of corporations, which we won’t get into today. But if you are interested in becoming a larger corporation, continue to do your research. Documents Needed: Articles of Incorporation or Bylaws or Resolutions
How to Register a Business NameNo matter which business structure you are going to start with, you will need to think of a creative, original name. The name you want may already exist or be taken by another company, so keep an open mind when you are selecting a name. You’ll want to make sure that your business name is memorable and relevant to the services you will be providing. Perhaps you’re starting a pet sitting business—consider using the words “pet sitting” in your business name.
The SBA states that there are four different ways to register your business name. Each way serves a different purpose, and is not required by each location or business structure. They are as listed:
- Entity Name: protects you at a state level
- Trademark: protects you at a federal level
- Domain Name: protects your business website address
- DBA: doesn’t give legal protection, but may be legally required