Key Takeaways

  • Choosing the right business name, structure, and address is essential for legitimacy.
  • Register your business and obtain necessary licenses, permits, and an EIN.
  • Establish financial credibility with a business bank account, credit card, and credit history.
  • Build trust through an online presence including a professional website and verified social media.
  • Verify business legitimacy with government databases, the Better Business Bureau (BBB), and online reviews.
  • Protect yourself by checking business registration status, researching ownership, and confirming tax compliance.
  • Understand key red flags that may indicate a business is not legitimate.

Do you know how to make your business legit? When starting a business, it is essential to understand the processes involved in giving your business a legitimate status under the law.

The following are vital steps you should take to make your business legitimate.

Choose a Business Name

Your business name is a vital part of your enterprise and must be given careful consideration. It has to be unique, memorable, and legally available. While it is legally permissible to use a name similar to that of other businesses, be sure that you are not infringing on any trademarks. Using a business name that is similar to that of another enterprise in your area can confuse customers. Double check social media profiles and domain names, Google your potential business name, and perform trademarks searches before choosing a particular business name to avoid potential trademark infringement lawsuits.

Choose a Business Address

You can use your home address for your business, but you can also list another address if you do not want your home address to become public information. Whatever you do, make sure to choose an address where you can send and receive official correspondences, such as tax returns.

Get a Business Phone Number

Your business needs an official telephone line through which clients and suppliers can reach you during working hours. You can hire an answering service, sign up for a virtual business telephone service, or use Google Voice assistant.

Choose a Business Structure

While a sole proprietorship is flexible and gives you total control of your enterprise, the risk is also higher. Entities such as an LLC or S corporation provide tax benefits and make raising capital easier.

Register Your Business

Most states require new businesses to register with the Secretary of State. The process requires listing a registered agent who will act as an intermediary between your company and the state.

Licenses and Permits

The license and permits you need depend on the purpose of your business and the location. If you are offering professional services, you need to obtain licenses and permits from the relevant regulatory agencies.

You may also require a sales tax license and health department inspection depending on your business. If you are sure about the requirements, consult your local Small Business Development Center (SBDC), or ask your accountant or lawyer for advice. Relevant information about permits may also be available on the website of your state of incorporation's secretary of state.

Apply for Employer Identification Number (EIN) from the IRS

An EIN, also called Federal Employer Identification Number is the business equivalent of the Social Security Number. The IRS requires businesses to obtain an EIN before they can become a legal entity. You can apply for EIN via the following methods:

  • IRS website.
  • Phone.
  • Mail.

Open a Business Bank Account

For tax reasons and personal liability, it is advisable to separate your personal income from business income if your enterprise is incorporated. Open a dedicated business account for business transactions. Note that you will need an EIN to open a business bank account.

Business Credit Card

You may want to get a business credit card for business purchases. Getting a business credit card makes it easier to identify business purchases for tax calculations.

Business Books

Prepare your financials and start recording business income and expenses. If you do not have any experience in this area, you can hire an accountant or bookkeeper. You can also learn basic bookkeeping online or at your SBDC.

Obtain a D-U-N-S Number

Your D-U-N-S number is your business identity in the Dun & Bradstreet commercial credit database. Obtaining this number is free.

Establish Business Credit

You can establish a business credit history by obtaining credit under your business name. To do this, open accounts with businesses that allow you to buy items on a net-30 basis and report the payments to credit agencies such as Dun & Bradstreet, Experian, and other agencies that report business credits. You build a good business credit score this way by making business purchases and completing payment within 30 days.

Create a Website

It is essential to have at least a basic website to display your business and contact details to prospective clients. You may need a more comprehensive and sophisticated site if you operate an online business.

Register With Online Services

To give your business an online presence, you should consider opening social media accounts and Google accounts as well as registering with relevant review sites such as Yelp and Yellowpages.

Check Government Business Registries

To know if a business is legit, always check whether it is registered with the appropriate state or federal agencies. Most states allow you to search for business entities through the Secretary of State’s website. This search will typically provide details such as:

  • The business's legal name
  • Its registration or entity number
  • The registered agent’s name and address
  • Status of the business (active, inactive, dissolved, etc.)

For corporations and LLCs, registration with the Secretary of State is often mandatory. For sole proprietorships or partnerships, local city or county records may provide registration confirmation.

Verify With the Better Business Bureau (BBB)

The Better Business Bureau (BBB) is a trusted resource for checking a company's reputation. You can use the BBB website to:

  • Search for a business by name or location
  • View any consumer complaints or reviews
  • Check the BBB rating of the business
  • Confirm accreditation status (if applicable)

While not every legitimate business is listed on the BBB, a lack of listing combined with other red flags could be a warning sign.

Review Business Licenses and Tax Compliance

Legitimate businesses must comply with local, state, and federal licensing requirements. To confirm this:

  • Ask the business for a copy of its licenses or permits
  • Verify licensing through state licensing boards or local municipal offices
  • Confirm if the business has a valid sales tax permit (if applicable)

For federal tax compliance, verify the Employer Identification Number (EIN) through IRS tools or by requesting documentation directly from the business.

Research Business Ownership and Management

Knowing who owns or operates the business helps ensure accountability. You can:

  • Request information about the business owners and key management
  • Check public records or state business databases for ownership details
  • Look for consistency between the listed owners and those communicating with you

Be cautious if the ownership details are unclear, missing, or inconsistent with official filings.

Look for Online Reviews and Reputation

Online reviews on platforms like Google, Yelp, and Trustpilot offer insights into a company’s legitimacy and customer service history. To evaluate a business’s reputation:

  • Look for a pattern of positive or negative reviews
  • Notice how the business responds to complaints
  • Be wary of companies with no online presence or only glowing, suspiciously perfect reviews

Additionally, check industry-specific forums, LinkedIn profiles, and social media channels for further confirmation.

Recognize Red Flags That May Signal a Scam

When asking how do you know a business is legit, understanding the warning signs is just as important as verifying credentials. Common red flags include:

  • No physical address or only a P.O. Box
  • Lack of a professional website or email address (e.g., using Gmail instead of a domain-based email)
  • Pressure tactics or urgency to make payments quickly
  • Refusal to provide verifiable business documents
  • Requests for payment via untraceable methods (like gift cards or cryptocurrency)

If you encounter these signs, conduct additional due diligence before moving forward.

Frequently Asked Questions

  1. How do you know a business is legit?
    You can confirm legitimacy by checking business registration with the Secretary of State, verifying licenses and permits, reviewing online reviews, and confirming tax compliance. Using the BBB and government databases also helps ensure a business is genuine.
  2. What is the fastest way to check if a company is legitimate?
    The quickest method is to search for the company in your state’s business entity database. For added assurance, check with the Better Business Bureau (BBB) and look at the company’s online reputation.
  3. Does having a business license mean a business is legit?
    While a license is a key indicator, it doesn’t guarantee ethical business practices. Combine license verification with other steps like checking registration status, ownership information, and customer reviews.
  4. How can I spot a fake or scam business?
    Watch for red flags like lack of contact information, urgency to pay, missing or unverifiable licensing, inconsistent ownership details, and poor or suspicious online reviews.
  5. Why is verifying a business's EIN important?
    An EIN confirms that the business is recognized by the IRS for tax purposes. Legitimate businesses should be able to provide their EIN when requested, especially if you are entering into financial transactions with them.

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