Registering a business for the first time can seem daunting, but it doesn’t have to be. There are only six steps you need to go through, and depending on the business structure you choose and the type of business you’re starting, you may be able to skip a few of the more complicating steps as well. For example, while setting up a corporation with a physical office and warehouse can be complex, expensive, and time-consuming. But the process of setting up an online business under an LLC or sole proprietorship can be fast and straightforward.
There are 33 million small businesses in the US in 2023. If you’re looking to register your own small business, follow the six easy steps outlined below.
Before we continue, download the 12 best tax hacks for business owners.
Step 1: Choose a business structure
When registering a business in the US, it’s important to understand the different business structures available. The first step in starting your business is deciding the business structure you’ll operate under. The four most common structures are Sole Proprietorship, Partnerships, Corporations, and Limited Liability Company (LLC). Each structure has its own legal implications, tax requirements, and levels of personal liability. If you’re wondering which structure will save you the most on taxes, read this guide.
1 – Sole proprietorship
A sole proprietorship is the simplest and most common structure for small businesses. In this structure, a single individual owns and operates the business, making all decisions. The owner is personally liable for all business debts and obligations. A sole proprietorship is the simplest to start because you don’t even have to formally set it up. If you don’t set up any business structure and start doing business, you’ll automatically be considered a sole proprietorship in the eyes of the IRS.
- Easy to set up and maintain
- No need to file separate business taxes
- Personal liability for business debts
- Difficulty in raising capital
2 – Partnerships
Partnerships are formed when two or more individuals come together to create a business. There are two types of partnerships: general partnerships and limited partnerships.
General Partnership: All partners have equal management rights and are personally liable for business debts.
Limited Partnership: One or more general partners manage the business, while limited partners contribute capital but have limited liability.
- Shared knowledge and resources
- Simplified tax filing compared to corporations
- Personal liability for general partners
- Potential conflicts between partners
3 – Corporations
Corporations are separate legal entities owned by shareholders. This structure provides limited liability protection for its owners, as the corporation is responsible for its own debts and obligations. There are two main types of corporations: C corporations and S corporations.
C Corporation: Profits are taxed at the corporate level, then again on dividends paid to shareholders.
S Corporation: Profits and losses pass through to shareholders’ personal tax returns, avoiding double taxation.
- Limited liability for shareholders
- Easier to raise capital
- Complex setup and ongoing filings
- Potential double taxation for C corporations
4 – Limited Liability Company (LLC)
An LLC is a hybrid structure that combines the limited liability protection of a corporation with the simpler tax filing requirements of a partnership. Owners, known as members, can be individuals, other LLCs, or corporations.
- Limited liability for members
- Pass-through taxation — owners report income and losses on their personal tax returns.
- More complex than sole proprietorships and partnerships
- Some states require annual fees or additional filings
Step 2: Register your business name
Creating a unique business name
A distinct business name sets your business apart from competitors, making it easier for customers to remember. Start by brainstorming relevant keywords and phrases. Combine them into a name that reflects your brand identity, target market, and industry. Once you have a list of suitable names, check the availability using your state’s business registry database and the US Patent and Trademark Office (USPTO) website.
If you need help with coming up with a name for your business, check out our library of name ideas.
Doing Business As (DBA) name
A DBA name, also known as a “fictitious name” or “trade name,” allows a business to operate under a different name from the legal entity name. Before using a DBA, ensure you follow the state or county’s registration process. Some businesses, such as sole proprietorships and partnerships, may require a DBA if they operate under a name other than the owner’s legal name. Keep in mind that a DBA does not offer legal protection or prevent others from using a similar name.
This step is optional, but protecting your business name with a trademark can ensure that others do not use it without your consent. To register a trademark for your business name, start by verifying that it is available and unique. Conduct a comprehensive search utilizing the USPTO’s Trademark Electronic Search System (TESS) to avoid potential conflicts. Once confirmed, submit your trademark application given the proper documentation, along with required fees, to the USPTO. Remember that the registration process can take several months, but trademark protection offers long-term value for your brand.
Step 3: Get an Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses operating in the United States. It’s used for tax reporting and identification purposes and is essentially like a Social Security number for your business so that the IRS can distinctively identify it. To register a business in the US, obtaining an EIN is a crucial step. There are two primary methods for applying for an EIN: online and by mail. Getting an EIN online is usually instant, while mail applications can take up to 4 weeks.
The fastest and most convenient method for obtaining an EIN is by applying online through the IRS website. To apply online, follow these steps:
- Visit the IRS EIN Assistant at www.irs.gov/ein.
- Click on Apply for an EIN Online.
- Click on Begin Application and follow the on-screen instructions.
The online application process is available for businesses located within the United States or its territories. Upon completion, you will receive your EIN instantly.
Requirements for Applying Online:
- The applicant must have a valid Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).
- The business must be located in the United States or its territories.
- Online applications are limited to one EIN per responsible party per day.
Applying by mail
If you prefer applying for an EIN by mail or are unable to apply online, you can complete Form SS-4 (Application for Employer Identification Number) and mail it to the IRS. To apply by mail, follow these steps:
Processing Time: It may take up to four weeks to receive your EIN by mail.
Remember to consult with a tax professional or legal advisor if you need assistance in the EIN application process or have any questions about registering your business in the US.
Step 4: Set up your business location
When registering a business in the US, choosing the right location is crucial. It’s essential to consider factors like state regulations, tax policies, and proximity to suppliers and customers. Here are some steps to help you establish your business location:
- Research state regulations and taxes: Each state has unique regulations, licensing requirements, and tax policies. Research the different states to find one that supports your type of business and offers favorable tax conditions. This information can usually be found on the state’s official website or through a local Chamber of Commerce.
- Consider proximity to suppliers and customers: The location of your business can directly affect operational costs and customer reach. Evaluate the distance between your potential location and key suppliers and target customers. This step can help minimize shipping and transportation costs, making your business more profitable.
- Analyze the local labor market: A vital aspect of a successful business lies in skilled employees. Look for areas with a strong, diverse labor market to attract talent for your company. Consult local workforce development agencies or state employment departments for more information on demographics and labor rates in different areas.
- Evaluate real estate options: Depending on the type and size of your business, you may need office space, retail sites, or manufacturing facilities. Analyze real estate costs in different locations, and factor in the potential growth of your business. Lease agreements and purchasing terms can vary, so consult a commercial real estate agent or an attorney for guidance.
- Check zoning regulations: Before committing to a location, ensure that local zoning laws permit your type of business to operate in the area. Consult local planning or zoning departments for information on permitted use and restrictions.
- Secure necessary permits and licenses: Once you have chosen a location, obtain the required permits, licenses, and inspections as per state and local regulations. Failure to comply can result in fines or legal complications.
Step 5: File for business permits and licenses
When registering a business in the US, understanding and obtaining the necessary federal, state, and local permits ensures your startup complies with the law and can operate smoothly.
Depending on your business industry and location, you may be required to obtain necessary permits and licenses to operate legally. Different government levels require specific permits, such as federal, state, and local. This section briefly explains the requirements at each level.
Federal permits are required for businesses operating in specific industries, listed in this table.
|Business activity||Description||Issuing agency|
|Agriculture||If you import or transport animals, animal products, biologics, biotechnology or plants across state line.||U.S. Department of Agriculture|
|Alcoholic beverages||If you manufacture, wholesale, import, or sell alcoholic beverages at a retail location.||Alcohol and Tobacco Tax and Trade BureauLocal Alcohol Beverage Control Board|
|Aviation||If your business involves operating aircraft, transporting goods or people via air, or aircraft maintenance.||Federal Aviation Administration|
|Firearms, ammunition, and explosives||If your business manufactures, deals, or imports firearms, ammunitions, and explosives.||Bureau of Alcohol, Tobacco, Firearms and Explosives|
|Fish and wildlife||If your business engages in any wildlife related activity, including the import or export of wildlife and derivative products.||U.S. Fish and Wildlife Service|
|Commercial fisheries||If your business engages in commercial fishing of any kind.||National Oceanic and Atmospheric Administration Fisheries Service|
|Maritime transportation||If you provide ocean transportation or facilitate the shipment of cargo by sea.||Federal Maritime Commission|
|Mining and drilling||If your business is involved in drilling for natural gas, oil, or other mineral resources on federal lands.||Bureau of Safety and Environmental Enforcement|
|Nuclear energy||If your business produces commercial nuclear energy, is a fuel cycle facility, or is involved in distribution and disposal of nuclear materials.||U.S. Nuclear Regulatory Commission|
|Radio and television broadcasting||If your business broadcasts information by radio, television, wire, satellite, or cable.||Federal Communications Commission|
|Transportation and logistics||If your business operates an oversize or overweight vehicle. Permits for oversize and overweight vehicles are issued by your state government, but the U.S. Department of Transportation can direct you to the correct state office.||U.S. Department of Transportation|
To find out if your business needs a federal permit, check the U.S. Small Business Administration (SBA) website for a comprehensive list of industries and their permit requirements.
State permits usually apply to businesses in areas such as:
- Retail and wholesale
- Health care and related professions
Each state’s requirements vary, so it is essential to check with your state’s business licensing and permit office to determine your specific needs. Some common state permits include:
- Sales tax permits
- Professional and occupational licenses
- Health department permits
Local permits are generally issued at the city or county level, covering areas such as:
- Zoning and land use
- Building and construction
- Occupational and trade licenses
To find out local permit requirements, visit your city or county government’s website or contact the local business office. Examples of local permits include:
- Building permits
- Signage permits
- Health and safety permits
Understanding state-specific requirements
Each state in the US has its own set of rules and regulations for registering a business. It’s important for entrepreneurs to be aware of these requirements before initiating the registration process. Some common state-specific requirements include obtaining necessary licenses and permits, selecting a registered agent, and paying state fees.
Licenses and permits: Depending on the type of business and where it operates, entrepreneurs may need to acquire various licenses and permits. These can include general business licenses, professional licenses, sales tax permits, health permits, and zoning permits.
Registered agent: A registered agent is a designated person or entity that receives legal documents on behalf of the business. This individual or company must have a physical address in the state where the business is registered. In most states, it’s a mandatory requirement to appoint a registered agent prior to registering a business.
State fees: During the registration process, businesses may be required to pay various state fees. The cost and type of fees will vary depending on the state and nature of the business. Common fees include incorporation fees, franchise taxes, and annual report fees.
Step 6: Open business bank accounts
Opening a business bank account is an essential step for any new business in the US. It helps separate personal and business finances, makes accounting and tax preparation easier, and enhances the credibility of your business. Here are the steps to open a business bank account:
- Choose the right bank and type of account: Research different banks and their account offerings, keeping an eye on fees, transaction limits, and any additional services provided. Consider the type of account that best suits your business needs such as a business checking account, savings account, or credit account.
- Prepare necessary documentation: Before visiting the bank, gather the required paperwork. This typically includes your Employer Identification Number (EIN), business address, Social Security Number (for sole proprietors), and other relevant documents such as the Articles of Incorporation, Certificate of Authority, or Certificate of Assumed Name.
- Visit the bank in person: It’s typically best to visit the bank in person to open a business bank account. This allows you to ask any questions, ensure you have all required documentation, and provide necessary signatures in person.
- Make the initial deposit: Most banks require an initial deposit to open a business bank account. The amount varies depending on the financial institution, so be prepared with the necessary funds.
- Understand account features and fees: Familiarize yourself with the features of your chosen account, such as online banking and mobile access, as well as any transaction fees, monthly fees, or additional charges for your account type.
Remember to review and update your business banking needs as your company grows, and consider opening additional accounts as needed, such as dedicated payroll or merchant accounts.
Frequently Asked Questions
What is the process for registering a business in the US?
The process for registering a business in the US varies depending on the state and the specific type of business entity. Generally, the steps include:
- Choose a business entity type (e.g., sole proprietorship, partnership, LLC, or corporation)
- Select a suitable business name and check its availability
- Apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS)
- Set up your business location
- File for business permits and licenses
- Set up your business bank account
How do I check the availability of a business name?
Checking the availability of a business name can be done through the respective state’s Secretary of State website or business registry database. Many states offer an online search tool, where you can easily check if a business name is already in use or available for registration.
When choosing a business name, don’t just check trademarks. It’s also important to consider the following:
- Is the domain name available? Ideally, you want to choose a business name where you can also register a short, easy-to-remember domain name.
- When you search for the name on Google, are the results already dominated by another brand or company? In this case, it may be best to move onto a different name so your customers don’t search for your name and land on another brand’s website.
- Do the same thing with social profiles. Are short, easy-to-remember handles available for all the social media channels you want to use? Is it dominated by another brand?
What are the costs involved in registering a business?
The costs associated with registering a business depend on the state and the type of business structure. For example, forming an LLC typically involves state filing fees and annual report fees. Additional costs may include applying for necessary permits, licenses, and obtaining legal or financial advice. On the other hand, starting a sole proprietorship has no upfront costs for setting up the structure, and there are no annual reporting requirements.
Do I need to register an online business?
Yes, online businesses must follow the same registration requirements as traditional businesses. This includes selecting an appropriate business structure, registering the business with the relevant state agency, obtaining necessary permits and licenses, and applying for an EIN from the IRS.
Can foreigners register businesses in the US?
Yes, foreigners can register businesses in the US. However, they must comply with specific requirements, which may include obtaining an Individual Taxpayer Identification Number (ITIN) from the IRS, appointing a registered agent with a physical U.S. address, and complying with any additional state registration requirements.
To learn more about setting up a business in the US as a foreigner, check out our article on the O-1 visa.
What documents are required for proof of business registration?
Proof of business registration typically includes a Certificate of Formation or Articles of Incorporation for corporations, a Certificate of Organization for LLCs, or a Partnership Agreement for partnerships. Additionally, a business registration number or EIN confirmation letter may also serve as proof of registration. These documents vary by state and type of business entity.