Why do we have to register a business?
Well, first of all, because it is a legal requirement, secondly you are now in business and thirdly, suppliers that you deal with will require evidence that you are legally entitled to trade.
Yes, even if you "only" have an online business.
You'll find that even when you open a bank account for your business or apply for a credit card or loan, the bank will require supporting documentation proving that you are a legal entity.
They may even ask you for your business plan, cash flow projections etc.
You may be able to delay the inevitable during the set up stage, but as soon as you start trading, you'll need to have all the legal requirements taken care of.
When you register a business it involves choosing a business structure and legal name under which you will operate.
Once this has been decided, you'll need to apply for the relevant licenses, permits and/or tax file numbers.
This will depend on the country you live in, state, territory and/or province as they all have different requirements.
Please note: Depending on the license and/or permit, you may be required to renew one or more annually.
The information in this article is to be used as a guide only. Please seek advice from your accountant or lawyer before proceeding.
There are severeal different business structures to choose from. Each option has different legal implications.Sole Trader: This type of structure relates to a business that is registered to one person only. All the profits go to you, the owner.
This structure is inexpensive to set up, the owner has full control over any business decisions made but is also solely responsible for all debts incurred ie you could lose everything if you get into debt as your personal assets are not protected.
The tax liability may also be very high if your profits are high.Partnership: A partnership agreement is entered into when two or more people are in business together.
The agreement specifies the profit sharing arrangements and the allocation of roles and responsibilites.
There are also tax benefits for families.
Company: This is a much more complex structure and involves the registration of a company.
A company structure protects individual directors and their personal property ie they are not liable for debts incurred or owed by other partners or the company.
Having said that, setting up a company is costly and the reporting requirements are complex and costly.
Trust: In a Trust the trustee holds the property and earns and distributes the income to the beneficiaries.
This structure protects the beneficiaries' personal assets and has flexibility in relation to income distribution. It can, however, be expensive to set up and losses cannot be offset.
If you don't choose a business name, your own name will become your business name by default.
It is always better to choose a different business name to your own name as it is more professional, gives your business more credibility and if you sell your business at a later stage, the owner would probably prefer a name other than your own.
Depending on the country you're operating in, you may also be required to collect sales tax if you intend selling products. You'll need a license to do this and in some States a vendor's license.
All you need is a good adviser. Have a chat with your accountant or lawyer. Get them to do it for you. You'll be glad you did.