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So when is the best time to register a business?

Typically, the best time for a business owner to registering their business is before they start operating as a business. So, if you are not registering as a corporation or LLC today, January is often the next best option. Just as the new year is a great time to start fresh in our personal lives, it's also a great time to start fresh in business.

Why in January?

Whether you're already operating a business or simply launching a new venture, there are a few key benefits to officially starting your company in January. In addition to the legal protection that registering as an LLC or corporation provides, filing in January can help to simplify your taxes for the coming year. For example, if you register in the middle of the calendar year but do business as a sole proprietorship before your effective date, you'll likely have to make two separate tax filings for the fiscal year: one for your sole proprietorship and the other for your freshly registered entity.

If you can set your start date set for January 1, you'll get to make a clean switch over to the new year. When businesses do not want to wait, or the start of the year has passed, the sooner a business is registered in a year, the sooner it can reap the benefits. When it nears the end of the year, many businesses choose a delayed effective-date of January 1 to get that clean switch over.

What is delayed-effective filing?

Delayed-effective filing lets you select a date for the filing to take effect. Note that delaying your effective date also means that you'll be delaying the benefits of registration until that date, so you'll have to decide if the risk outweighs the reward. If you're unsure about what's right for you, ask a lawyer.

What are the benefits of a delayed effective-date for January?

In addition to streamlining your tax preparation for the year, waiting until January can also help you avoid paying an extra year of your state's annual franchise tax. Some states impose this annual tax on corporations, and if you file your registration at the end of the year, you may end up paying the tax even though you've only done business for a small portion of the year. Delaying your filing date to January 1st means that you do not have to pay this tax for the partial year, if it would be required.

Filing early also can also help get your registration paperwork processed more quickly. January is the busiest time of year for Secretary of State offices, so if you want your effective date to be in January, it makes sense to file at the end of the prior year with a delayed effective date. In general, the earlier you file, the faster you'll get your paperwork processed. If you wait until January to file, it might take longer for the Secretary of State to process the paperwork, and you may not get the effective date you want.

If you are still thinking about registering your business, get started on your filing today. Getting started as early as possible gives you the time to make key decisions about your new business entity, including defining your operating procedures with an LLC Operating Agreement or Corporate Bylaws. The sooner you register, the sooner you and your business can benefit from the protections.

If you have more questions about registering your corporation or LLC, reach out to a Rocket Lawyer network attorney for affordable legal advice.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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