Make Sure Your Business Isn’t Committing Fraud
by Danny Brown on February 20th, 2008
There are many sides to running a successful small business, including marketing, sales, strong management and more. However, in the rush to set up your business, you may have overlooked one key area, and one that could be the difference between your company being legal, and committing fraud - registering your business. And with the consequences being a heavy fine, or even imprisonment and disbanding of your company, it’s important that you haven’t overlooked this small yet crucial factor.
Do You Need to Register?
Depending on the size of your business, you may be able to trade without registering your details. However, this is only if you’re trading with your own name - so, a sole proprietor named John Smith could set up a company called John Smith and he’d be fine. It’s when you start describing your business that the rules change.
For example, if the business was a delivery company and it was called John Smith Couriers, then you’d need to register your business details. This is to make sure that you’re properly rated when it comes to taxes, whether they’re federal, state or otherwise. Failing to register properly can cost you up to $25,000 in fines for a company, and $2,000 for individuals.
Use a Unique Name
Another way that businesses and individuals commit fraud (even if they’re unaware of it) is by trading on someone else’s name, and again this is where registration comes into its own. You can normally register your name (as well as find out whether it’s unique or not) at your local department of commerce website. Failing to do so and trading on some other business’s name can land you with a hefty fine.
One particularly useful method of registering your business name is via your local tax office - not only will this save you time, you can also find out the information relating to your business tax and any payroll deductions, etc, that you need to put in place.
Do You Need to be Incorporated?
Depending on your business, you may need to take additional steps to make sure you’re following the law. Although you might think that you’re small enough to not worry about being a limited liability company, or LLC, you might need to do so according to your local or state laws. The same goes for incorporation - although it only really affects businesses making more than $120,000 per year, again your local federal requirements might state that you need this function.
Business Numbers or Tax Numbers
If you’re starting a business, one of the things you’re going to have to do when registering it is to make sure you’re covered for the relevant taxes. After all, you don’t want to overpay due to being in the wrong tax bracket, and you don’t want to face a hefty back tax either. Therefore, you need a Business Number or Tax ID. The good news is that it only applies to the following four areas:
- Payroll deductions
- Import/export trade
- Corporate income tax
- Federal and state tax
Although it might seem a lot of work, especially if you’re running a relatively small business, ignoring proper registration of your business and all that entails could cost you a lot more in the long run.