Chapter 7

Registering a business and other admin tasks

After all the excitement of deciding to start a business, you’ll have some paperwork to do.

Person puts up a sign for their business called Sticks and Thrones.

How to register a business with the government

There are a few reasons why you might need to register your business with government bodies:

  • Business licenses and permits: Your city, county or state may require you to get a license if you have a physical location, sell taxable goods or services, or serve food and beverages. Certain service providers must also get a license. Your local chamber of commerce should be able to tell you what you need. If you’re in a rural area, then your local librarian can point you in the right direction.
  • Income tax: Sole proprietors don’t have to do anything with the IRS until tax time, unless they hire someone. All other types of businesses are expected to at least apply for a federal tax identification number when they start out. Corporations have the most to do. The IRS has a handy guide for all types of businesses.
  • Sales tax: Most goods and some services carry a sales tax. You’re expected to add that tax to your price and collect the money for the government. Sales taxes are managed by state governments. Search for your local state tax agency to find out your obligations. Online businesses used not to have to worry about sales tax but it’s becoming more common for them to have to collect it. The sales tax rate changes depending on the state where your customer resides.
  • Retail licenses and manufacturing permits: If customers physically come to your business, you may need a retail license. If you make things, you could need manufacturing permits. This can be a catch for home-based businesses as local zoning laws sometimes don’t allow certain business activities in residential areas. To check on the sorts of licenses and permits required by your local government, talk to the local chamber of commerce (or librarian).

If you’re going to employ people, ask the IRS for an employer identification number (EIN).

Extra steps to set up an LLC or LLP

If you’re setting up as an LLC or LLP, you’ll also need to register as a legal entity. This is handled by authorities in the state where your business is based. As part of the process, you’ll also need to file documents identifying key decision makers in your business, and outlining some of your internal processes. In most states, you’re also required to register a business name.

Registering a business name

Most states require companies and corporations to register a business name. The same applies to sole proprietorships or partnerships that trade under a name other than that of the owner/s. This is called a doing-business-as (DBA) registration, and the SBA (Small Business Administration) website is the best place to get started.

Getting a trademark

You can also legally protect your business name and logo to prevent others from mimicking your identity. This is different from a DBA registration and can be a valuable step for businesses that plan to invest a lot in making their brand widely known.

This area of the law can get complicated – especially if you expand into overseas markets and find there’s a business there with a similar name. Ask for advice from a legal professional with experience in this area.

At the very least, use trademark registries (and search engines) to check that no one already has your business name. It’s an easy way to save yourself a lot of hassle.

Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.

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