Business registration is something that could drive you nuts if you lack CLEAR direction.
You’re passionate about your new enterprise but you’re drowning in the administrative details.
Let me take a wild guess that you wouldn’t mind a little hand holding…
Yeah, I thought so!
I’ll walk you through the whole process.
When starting a business, you will need to consider registration with various government authorities. In many cases, registration is compulsory and multiple registrations may be required.
Get Started by making a list of all you may need to register:
- your business name
- if you are not going to operate as a sole trader, then your new corporate entity, such as a company
- business numbers and depending on size or location, sales tax or GST/VAT
- if you employ people, registration for employment taxation and workers compensation insurance schemes. In some countries, health care insurance is also provided as standard to employees. Many countries require that employers made contributions to schemes that provide for employee’s retirement or pension savings. These go by different names in different countries, such as superannuation or a 401(k) plan.
We’ll look at what you need to do if you are based either in Australia or the United States
Australian Business Registrations
Your Business name
You will need to register your business name if you intend to use a name that is different to your given and family name. Companies are entitled to use their legal name as their business name. If you wish to use a different name, you will need to register that name.
The Australian Securities and Investments Commission has more information about registering business names here.
Company incorporation and registration
Small Pty Limited companies can be formed by lodging a form 201 with the Australian Securities and Investment Commission and paying an applicable fee. You can register a company online using the Australian Government Business Registration Service. You can also lodge a paper form 201 with ASIC directly. You have to mail in paper forms to lodge them this way. You may consider obtaining legal advice about how you should best structure the ownership of your proposed company before lodging your form 201.
Australian Business Number (ABN)
Australian law requires that all enterprises (which includes all businesses) need to either register to obtain an Australian Business Number or otherwise have other enterprises withhold nearly 50% of the value of payments (ouch!). Registration is free. If you exceed the GST threshold of $75,000 of sales or other taxable supplies, you must generally obtain an ABN. Higher thresholds apply to not for profit organisations. To apply for an ABN, you can use the Business Registration Service. You can find out more details at the Australian Business Register website. The Australian Tax Office processes these applications and they generally want the tax file numbers of all directors of a company. This includes any foreign non resident directors. If this applies to you, prepare to apply for tax file numbers for these people.
GST and PAYG Withholding
You can register for GST and Pay as You Go withholding (PAYG) at the same time as applying for an ABN. This is done through the Business Registration Service, which is the same service as online ABN and company registrations. If you employ people, you will need to register for PAYG withholding in order to pay tax to the Australian Tax Office (ATO) for tax taken from wages and salaries. You also use the PAYG system to pay the near 50% that you withhold from other payments to enterprises that themselves do not have ABNs. You will need to forward tax withheld from salaries monthly for most small businesses. Larger businesses have more frequent payment obligations.
The PAYG system is also used for you to pay PAYG instalments. These installments are a prepayment of of your expected business income taxobligations. When you start a business, you do not need to pay income tax until you have profits (although you generally always need to lodge tax returns). The Australian Tax Office will assess when you need to start paying instalments towards future income tax through the PAYG system.
Not sure which registrations you need? Use the Help me decide tool to help you work it out.
State Workers Compensation Registrations
Australian states and territories require that you register for workers compensation insurance if you employ other people and pay wages and salaries above quite low thresholds. This also applies if you employ yourself in a company. You will need to make estimations of your expected remuneration. This and your industry type will be used for the calculation of your premium.
Contact options for workers compensation insurance registration in your state or territory:
- http://www.comcare.gov.au/ for the Australian federal government
- https://www.worksafe.vic.gov.au/ for Victorian employers
- https://www.worksafe.qld.gov.au/ for Queensland employers
- http://www.sira.nsw.gov.au/ for New South Wales employers
- https://www.accesscanberra.act.gov.au/app/home/workhealthandsafety for Australian Capital Territory employers
- http://www.rtwsa.com/ for South Australian employers
- http://www.worksafe.nt.gov.au/Pages/default.aspx for Northern Territory employers
- https://www.worksafe.tas.gov.au/ for Tasmanian employers
- https://www.workcover.wa.gov.au/ for Western Australian employers
States also tax your business’ employee remuneration via payroll taxes. These generally do not apply to smaller companies. Once your taxable remuneration crosses a threshold of around $500,000, you will need to register. This threshold varies by state/territory so if you are expecting to be anywhere near close to this threshold, then seek advice.
United States Business Registrations
Business names that are different from your legal name are known as trade names, fictitious names or assumed names. You may need to register these at state, county or city level based on where you operate. You do this by registering your “Doing Business As name” (DBA). Your DBA registration will meet part of the requirements for you to open a business bank account. A DBA registration does not protect your name from trademark infringement. You may wish to consider registering your name as a trademark for nationwide protection.
In the United States, companies are registered at a state level. You will need to decide the type of company (LLC vs S-Corp vs C-Corp). You can read more about that choice here. You may need to register in more than one state. This is based on whether you have, in that state:
- a physical presence
- often have in-person meetings
- obtain a significant part of your revenue
- have employees working there
Where you operate in two or more states, you will have a “domestic” state in your primary state, and a “foreign qualification” in other states. Taxes and annual filing fees may apply in both your domestic state and your foreign qualification states.
You can obtain more information at the Small Business Administration web site.
Employment and Contractors
Whenever you employ or engage people in your business, you will need to consider your obligations to the Internal Revenue Service and state Tax Service Centers. Your obligations will vary based on your state and the state your employee is based in. You will need to consider carefully whether people you employ or engage are employees that you will need to administer as W-2 Employees or if they are Form 1099-MISC contractors. A number of factors are used to determine the nature of the engagement, but the more you direct the person and the less freedom they have to do the work when and where they want or to subcontract, the more likely they are to be a W-2 employee. If a person is a W-2 employee, you will be subject to withholding obligations where you need to withhold part of their wage or salary for tax purposes.
Note that in addition to income taxes, payroll taxes may apply at the state, county or city level.
- The IRS page on employees. This specifically covers W-2 type employees
- The IRS page on Form 1099-Misc reporting
Each state provides workers compensation arrangements under their labor codes (see California example). https://www.dir.ca.gov/dwc/dwc_home_page.htm Persons who are employees under these codes need to have a compensation scheme effective. Some states partner with private organizations to provide these schemes.