When starting a new business, you must meet several legal requirements first before officially launching your venture. In many cases, this includes registering your business at the federal, state, and local levels.
Here's how to register your new startup, from identifying your business structure to the registration requirements for each government agency.
Defining your business structure
Different business types have different registration requirements, so it's crucial that you follow the correct process for the structure best suited to your business goals. Your business structure also determines which income tax return forms you will file.
Here are some of the most common business structures.
Sole proprietorship
A sole proprietor is the only owner of an unincorporated business. A sole proprietorship is considered the default business structure. In a sole proprietorship, the proprietor's business and personal assets and liabilities are not separated. Note that a sole proprietorship is different than being the sole member of a limited liability corporation.
Partnership
If two or more individuals will co-own a business, they are forming a partnership. There are multiple types of partnerships, but the most common are limited partnerships (LPs) and limited liability partnerships (LLPs). In an LP, one partner is exposed to personal liability, while the other partners have limited liability. In an LLP, all partners are personally protected from any business debt.
Limited liability corporation
A limited liability corporation (LLC) protects a business owner's personal assets from their business liabilities. An LLC's profits and losses are taxed as personal income or losses. Note that even if someone is the sole member of an LLC and their business is functioning as a corporation, they are not considered a sole proprietor.
Corporation
In this structure, a business operates as a separate legal entity from its owners, offering the most protection for personal assets. The default corporation status is a C corporation, which is a separate taxable entity that files a corporate tax return. An S corporation, on the other hand, has taxes "passed through" to the business and is reported on an owner's personal tax return.
[Read more: 5 Types of Organizational Structures for Small Business]
Consider registering your domain name and any trademarks, which can provide further legal protection for your brand.
How to register your business
Once you've decided what your business structure will be, take the following steps to register your business.
Register your business name
Registering your business name is typically required for separate entities, such as LLCs or corporations. However, if you are starting a sole proprietorship or partnership under a name that is different from your own, you'll need to file a "doing business as" or DBA name.
First, ensure that your chosen business name is eligible for use. In addition to checking your intended name against the U.S. Patent and Trademark Office's (USPTO) official trademark database, you should also check with your state's secretary of state office.
Consider registering your domain name and any trademarks, which can provide further legal protection for your brand.
Apply for an EIN
For businesses that are required to (or may otherwise opt to) register at the federal level, the next step is registering with the IRS for a federal employer identification number (FEIN). A FEIN — sometimes called a federal tax ID or simply an EIN — identifies your business for tax purposes.
The application process is free and can be completed online, by mail, by fax, or by phone. To apply for an EIN, you must complete Form SS-4 and possess a valid taxpayer identification number, such as a Social Security number. Applying online takes approximately 15 minutes, and you'll receive your EIN immediately after, assuming your information is validated. For all other methods, the process can take up to four weeks before you receive your EIN.
Register with the appropriate agencies
After registering your business name and receiving your EIN, next you must register with federal, state, and local agencies. Depending on your business type and geographic location, you may also need to apply with taxing and licensing authorities.
While specific requirements vary based on the state in which your business is registered and the business structure, you'll want to keep pertinent business documentation handy. This may include documents detailing your business name, where you'll be operating, and the business's ownership or management structure.
[Read more: Doing Business As: What It Means to Register a DBA]
Agencies to register with and registration requirements
Depending on other factors, you may be required to register your business with the following entities.
Federal agencies
Effective January 1, 2024, many U.S.-based businesses must submit information about their beneficial owners (i.e., those who own and/or control the company). Newly created or registered companies have 90 days to file their initial reports with the Financial Crimes Enforcement Network.
Most businesses are also required to register with the federal government by obtaining a FEIN. Even if you aren't required to, you might opt for an EIN to establish yourself as an independent contractor and to reduce the risk of identity theft.
Other registration requirements vary based on your business. These include the following:
- To trademark your business's intellectual property (such as a brand or product name), file with the USPTO.
- Certain corporations (such as nonprofits) can receive tax-exempt status by registering as a tax-exempt entity with the IRS.
- S corporations must file Form 2553 (Election by a Small Business Corporation) with the IRS.
- If your business plans to bid on government contracts, you must register with the federal government's System for Award Management (SAM). On SAM, you'll obtain a unique entity identifier that you'll use to submit bids.
[Read more: How to File a Beneficial Ownership Information Report for Your Business]
State agencies
Most business structures — including sole proprietors operating under a DBA (in some cases) — require you to register with the secretary of state or a business bureau. While the exact process depends on your location, registering with the state typically requires you to file business-related paperwork, including your partnership agreements or articles of incorporation.
You'll need a registered agent located in the state your business operates in to collect documentation on behalf of your business. While you can be your own agent (so long as you meet state requirements), many business owners outsource this to a registered agent service.
In addition to your federal tax ID or FEIN, some states require businesses to obtain a state tax ID number. Though this functions similarly to an EIN, it is a distinct number that allows you to pay state taxes. It's best to confirm the requirements with your state government office.
Local agencies
In most cases, you won't have to register with local governments when forming your business. However, you may need to file for permits or licenses from the county or city depending on your location or what your chosen industry requires. Certain counties and municipalities may also require you to register your DBA name (if you have one). Visit your local government websites for more information.
Taxing and licensing agencies
You may be required to secure federal, state, or local licenses and permits depending on your business activities and geographic location. The exact requirements and licensing fees vary by the issuing agency.
Some examples of federally regulated business activities include the following:
- Agriculture. (Licenses are issued by the U.S. Department of Agriculture.)
- Radio and television broadcasting. (Licenses are issued by the U.S. Federal Communications Commission.)
- Transportation and logistics. (Licenses are issued by the U.S. Department of Transportation.)
Many business activities are regulated at the local level for certain industries including but not limited to construction, plumbing, restaurants, and retail.
Because industry requirements vary by state, county, and city, check with your local government entities for more information.
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