Can I Run a Business Without Registering It?

You just had your stroke of brilliance, you quit your day job, built your website, started marketing your products or services and more. But you have heard of the licenses and permits required to do business, and that is a process you just don’t feel like going through right now; you’ve got a million and one headaches, you don’t need another one. So, can you start a business without registering it?

That question does not really capture the full scope of the issue at hand. Sure, you can start a business without registering it, but you probably shouldn’t do business for a prolonged period of time without registering it.

A big part of establishing your company is marketing under your official business name. Think of how very “off” it would sound if Microsoft was instead called Bill Gates. A company name is important, and without registering your company, you can’t legally use your company name without potential consequences. That is not to say that you can’t do it. You can. But only under a sole proprietorship. So, in that instance, you would call your version of Microsoft, your version of Bill Gates, and you can operate as you would normally.

Now, in terms of operating a business without registering, it is highly inadvisable. Once your business has reached a certain level of momentum, popularity and income, operating under your own name can become dangerous. A big part of forming a company is creating a corporate veil that separates your personal finances from your company finances.

Without this veil, if you operate as a sole proprietor, any legal actions involving your company will directly involve you. Lawsuits or debt accrued against the company will be accrued against you personally if you maintain a business without registering. Small business insurance can’t help you out; so you stand to lose a lot by not registering.

Now that does not mean you have to register right away. Depending on your business, it’s fine to operate under a sole proprietorship up to a certain point. But once you reach a certain level of somewhat significant revenue, you really should register it.

To register, you must first select your preferred structure of the business. The options include a Limited Liability Company (LLC), a General Partnership, Limited Partnership, a Sole Proprietorship, or a Corporation. Each structure has its own advantages and disadvantages concerning requirements, taxation and liability protection. By selecting your structure and establishing your small business, you also open yourself up to investments, business loans,  business insurance and more. Things that could prove vital as you expand.

Once you have selected your desired business structure, you simply need to register your company name with local and state authorities, as well as the IRS. The only time you will need to register with the federal government is if you are filing for trademark protection or tax-exempt status. Some states allow you to register online, others require paperwork and documentation.

If you intend on or end up doing business outside of your state, you might consider filing a Certificate of Authority with your state, which gives you foreign qualification to do business. When registering with state authorities, the fees generally amount to a few hundred dollars, and the information required is truly simple; business name, structure, location, and ownership varying based on which state you’re in.

So, can you start a business without registering it?

Yes, yes you can. But don’t.

You will make your life insurmountably easier by simply registering your business from the get-go. There are several reasons for doing this: You’ll have legal status as a separate entity from your person, you’ll have a name you can market under which will look more professional, you’ll have a corporate veil to protect your personal assets, and you’ll be able to avoid several legal issues you might otherwise encounter.

But with the laws varying slightly in each state, and with each personal situation carrying its own complexities, it is a good idea to consult with a lawyer before launching your business. A good business lawyer will help you determine which business structure you should choose for your business, help you draft the relevant contracts you might need in the business, can help you file for a Certificate of Authority or any intellectual property protection, and will enable you to best protect yourself, your business, and your assets, both corporate and personal.

The legalities surrounding company establishment and upkeep are often complicated and highly regulated, depending on your industry. Never make the mistake of thinking you understand the system when you don’t. Yes, research is important, but articles can quickly become outdated, article writers may be misinformed. The only surefire way to guarantee the legal protection of you and your company is to hire a small business attorney. Don’t think you’re in the clear until he tells you so.

And once you get that green light from your lawyer, you can put your head down and push through those gates, building your company without the fear of legal or financial backlash.