DBA: Doing Business As also known as sole proprietor. This is the easiest way to start a business and how most people start.
Incorporate: To form a legal organization, more involved that forming a DBA but separates you from the business. Instead of you and the business being one in the same, you become an officer or employee of the corporation.
EIN: Employer Identification Number assigned by the federal government and used to track your business activity when paying employees.
LLC: Limited Liability Company is similar to a corporation.
State ID: Number assigned by your state to keep track of business activity with employees and sales tax.
There are a few different ways to register a business. The most common way is called a DBA which stands for Doing Business As. The registration takes place at your local county clerk’s office in most areas and looks like this Your Name DBA your business name. The fee ranges from $15-$50 per certificate and it’s usually issued right away. Once you have your certificate you can then open a business bank account.
You do not need a federal tax ID (also known as EIN Employer identification Number) when you register a DBA, you can use your social security number. The government has to have a way to track your business so every business has some type of ID number. If it’s not your social security number it would be a federal number (EIN) and some states use a state ID as well.
If you form an LLC or incorporate you will need a federal ID number issued by the IRS. You can apply for it online. Many states require commercial cleaning services to collect and submit sales tax on their services. This is billed to the client, set aside and submitted to the state monthly, quarterly or annually.
When you register a DBA the name is protected within your county or area, but someone else with an LLC or corporation could use it in your area as well. An LLC or corporation name is registered with your state, if you register ABC cleaning LLC no one else could have an LLC with the exact same name. They could, however, register ABC cleaning Inc in most states. Confused yet? Don’t worry if you pick a unique name that no one else is using you should be ok.
There are many reasons to form an LLC or corporation. There are too many to list them all but here is the basic concept: It separates you personally from the business which removes your personal assets and protects you. As your business grows it’s probably best for you to take that step and form one. Today’s action step is to do more research by talking with a trusted attorney or CPA. You can also visit www.legalzoom.com to learn more. We usually suggest registering a DBA right away since it’s quick, forming an LLC or corporation can take 1-3 months.
The IRS has put together some great resources: