How to Legalize a Business

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There are many types of legal business structures. A sole proprietorship is a business owned and run by an individual and a partnership is made up of two or more individuals. There are various types of corporations, which are legal entities authorized to do business, and the hybrid limited liability company, which is a business structure that shares facets of partnerships and corporations. In order for a business to operate legally, it must satisfy requirements set by the state in which the business operates as well as federal tax requirements.

Choose a business structure. The structure you choose will impact how you are taxed and the liability you bear. For instance, sole proprietors typically have lower tax implications than corporations, but you and your assets are liable for all aspects of the business. Factors that may influence the business structure you choose include how your business operates, assets you may need to protect and the number of employees you have, among many other considerations. If you need advice, contact the SCORE small business counseling association in your area or via the Internet.

Register the business. Your business should be registered with the corporations division of the state where your business operates. Before filing the necessary paperwork required by the state, perform a business name check, which can be done on the website of the corporations division. You will be required to pay a fee to the state corporations division to register your business. The fee varies by state and business type.

Apply for an Employer Identification Number. Whether or not you have employees, an EIN is used by the IRS for federal tax purposes. You can apply for an EIN on the IRS website, by calling the Business & Specialty Tax Line or by completing and mailing form SS-4 to the IRS.

Obtain necessary business licenses or permits. Some businesses require permits and licenses to operate. For instance, restaurants require food establishment and alcohol beverage licenses before they can legally sell any of those items. Use the Small Business Association's "Permit Me" tool to determine which licenses are applicable for your business.

Pay your taxes. Keep detailed records of your business expenses and sales throughout the year. These will be necessary to file business taxes for a 12-month period of operation. Failure to pay your business taxes may result in fines and jeopardize the ability of your business to operate. Consult the IRS website for the necessary forms to use based on your business structure or work with a licensed business accountant.