Anyone can wake up one day and decide to open a business. You need to offer a service or a product to another individual, and that way, you should generate a profit to officially be “in business.”
When it comes to new entrepreneurs, it would be wise to get a formal business registration with the local government or the state to finish business transactions. Likewise, you can get marketing and legal advantages if you decide to register a business name. If you’re still unsure of whether you should go through this process or not, read the rest of this article.
1. Supplier Arrangements
If your business is registered, you can be qualified to get discounts from trusted suppliers, which you would not usually receive if you have an unregistered company. Most of the time, suppliers tend to reserve wholesale rates for company owners who can provide official paperwork from the state. Moreover, if you’re planning to obtain government contracts for your company, one of the first requirements is that you need to show the business registration documents.
2. Reputation Among Clients
Strengthening the trust of the consumers emphasizes how important it is to register a business. Clients and customers, particularly those you’ve never collaborated with before, want to make sure that your business is legitimate. If your company is not registered properly, chances are your prospective customers may suspect your business as an illegal operation. If a business is on file with the state, your customers can have peace of mind as they decide to support your company and use your products and services.
3. Liability and Taxes
Registered businesses should secure an EIN (Employer Identifying Number) with the state and the IRS to where their business is based. Doing so guarantees the business entity’s legitimacy as a legal operation with tax status. Moreover, it certifies submission to legal standards for accounting and bookkeeping. It also indicates that the business is reporting its income to the government, employees are under the right insurance, and the business is religiously paying the taxes. You can also experience several tax benefits after you register your business.
4. Hiring Employees
With a properly registered business, you can employ full-time workers and pay them a salary based on state laws. Also, you will get a state ID number that enables you to route the state taxes on behalf of the employees.
5. Getting Loans
While you’re applying for small business loans, know that you will need to prove that your business is legitimate and registered. Investors and lenders will request to check your business registration on top of other application requirements before they can ultimately approve your loan. When you apply for a business credit card, some creditors may also request a copy of your business registration paperwork.
6. Creating Bank Accounts for Your Business
If you want to launch a business bank account, you have to prove that your company is a properly registered business. According to the SBA’s guide, a business bank account is vital to small businesses as this enables you to separate your business activities from your personal activities. Plus, it looks more professional to provide your customers with a business name for payment rather than giving your full name.