You’ve got your business plan in place and you’ve chosen the best legal entity for your company, so now it is time to make sure your tax standing is legal and you file all of the necessary licenses and permits. Even if you choose the simplest path of sole proprietorship, you may still need to take special steps to make your business legal.
If you decide to use any name for your business other than your exact birth name, you are required to register this name with your state or provincial government. If you have an already existing corporation, this rule also allows you to file for a new or additional name that you will be doing business under (often referred to as a DBA name). To register your name in the U.S., you can look as close as your county clerk’s office to file the paperwork. In Canada, each province is different, but some offer the ability to file your business name online.
Unless you are a sole proprietor, you will need to register your business with the government and pay special taxes for it. In the U.S., this means filing for a unique tax Employer Identification Number (EIN) for your business with the IRS. Taxes can be a substantial cost for many companies, so your accountant(s) will need to make decisions based around how they will file your company’s taxes and your EIN number will be a part of that. If you are operating your business out of Canada, you will need to file for a Business Number which will function the same way as an EIN, both on the federal and provincial level. Canadian businesses that earn over $30,000 a year are also required to open a GST/HST Account for additional tax purposes, but even small companies should consider this as it offers some tax shelter incentives.
After you have chosen the right legal entity for your business, you will need to obtain an Article of Incorporation which will make this legal designation official in the eyes of the government. If you plan to incorporate your business within the U.S., you will file your designation at the state level. The U.S. Small Business Administration has a great list of state requirements that can walk you through the proper steps. If you are incorporating a business in Canada, you have the option of incorporating at the federal or provincial level. Federal incorporation needs to be filed with Corporations Canada and provincial incorporation needs to be filed with whichever province you are operating in. A list of online application options for each province can be found here.
Depending upon your business and where you are located, you may need to obtain special permits or licenses to legally operate your business. These permits and licenses can apply on the federal, state, provincial, and even local municipality levels, so it is very important to check each source before moving forward. For U.S. businesses, a good place to start is the U.S. Small Business Administration’s tool that helps identify any regional or industry-specific permits you may need to obtain. It is likely that you will need a federal permit or license if you are working in regulated industries or with regulated products, like alcohol or nuclear energy. This also covers some businesses that produce food, handle animals, or work with transportation. If you are operating in Canada, you should use Canada Business Network’s tool to find out what Canadian permits you will need on both the federal and provincial levels.
Figuring out and filing the proper documentation and paperwork for your business can be stressful and confusing, but the end product is well worth the hardship - an official business that is ready to work with customers and start driving revenue. Once you have reached this point, you are ready to take your business to the next level.
All information provided in this article is for educational purposes and should not be used as the sole resource in making a decision. It is important to consult a lawyer and accountant before all major business decisions. Please refer to our Terms of Service for more details.