This article is part of a larger series on Starting a Business.
Before your business can begin operating, it needs to be registered with state and local agencies. Before registering your business, you’ll have to choose a business name and obtain an employee identification number (EIN) from your state. While this process will register your business as a legal entity, there are other benefits as well, such as your company getting business approval from local agencies and ensuring the security of your intellectual property.
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We have a one-page checklist with the basic steps to register your business, although some may not be required depending on the regulations of the state where you operate. Check your local regulations for specific state-by-state instructions.
Download our free How to Register a Business checklist.
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Step 1: Prepare To Register Your Business
When starting a business, you should first register your business. The first steps involve choosing a business name, setting up an address to receive important documents, and obtaining an EIN.
Here’s the process you should follow to prepare to register your business:
- Choose a business name: If you plan on operating as a sole proprietor, your business name might just be your full name. Otherwise, you’ll have to file a doing business as (DBA) with the state. If you plan to incorporate your company, you should choose a name that properly describes your business. Consider web domain availability when picking a name.
- Select a location to receive important documents: You’ll need an address to receive essential registration documents from local and state government agencies. You’ll also need an address before opening bank accounts or applying for loans.
- Obtain an EIN: You can get an EIN through the IRS, which will be used in all your financial transactions. It’s free and can be obtained in minutes online or by fax or mail.
Step 2: Choose Your Business Legal Entity & Open a Business Bank Account
We recommend all businesses register as a legal entity, such as a limited liability company (LLC), S corporation (S-corp), or C corporation (C-corp). This protects your personal assets in case of legal action against the business. You can register in some states for as little as $50 while others charge up to $2,000. The chart below shows the LLC costs in each state.
Before choosing an entity, consider the differences between the three entity types:
- LLC: LLCs are the most common legal entity chosen by business owners. It requires the least documentation and the least amount of yearly maintenance and is the most affordable type of entity. The LLC can elect S-corp status for tax purposes, saving small businesses thousands of dollars in taxes each year.
- S-corp: An S-corp is a federal tax designation to give tax breaks to small businesses. To become an S-corp, you must set up payroll, have fewer than 100 shareholders, and issue only one class of stock. The business doesn’t pay taxes at the corporate level. Additionally, unlike an LLC, business ownership can be passed easily without triggering an expensive tax event.
- C-corp: This entity type is typically used by larger companies or those seeking investments. You’re required to organize this way if you have more than 100 shareholders. The C-corp has unlimited growth potential because it raises money through selling business shares, and another advantage is that even after the owner leaves, the business still exists. The major drawback is that a C-corp is taxed twice at both the corporate and individual levels.
Once you have a business name, an EIN, and are incorporated, you can open a business bank account. Bluevine is an excellent choice for a digital-only business checking account. You earn 1.5% interest on balances of $250,000 or less, which is why Bluevine is one of our best small business checking accounts.
Every bank will have different requirements for opening an account, which can vary depending on how your business is organized. Check out our guide on how to open a business bank account for more details.
Step 3: Register Your Business With the State
Once you have a legal entity and are registered with the IRS, you need to register with your state. There are two ways you can register your business with the state:
- Do it yourself through the state’s website: You can register your business directly through your state’s official business website. Fees will vary, starting as low as $40, and it usually takes up to 30 days. If unsure of your state’s website, you can go to the Small Business Administration’s website and use a drop-down menu to select your state.
- Use an online legal service: If you don’t want the hassle of trying to register your business through your state’s website, you can use an online legal service. It will walk you through the process step-by-step, collecting and submitting the necessary information to the state. IncFile is a great option that will register your business as an LLC for free, plus state fees.
Once you register your business through the state, there are two more things you should do. These may be concurrent with registering your business with the state:
- Choose a registered agent: A registered agent is someone you designate to represent your business and who the state will contact if there are legal actions against your business. They’re also responsible for re-registering the business each year. Typically this is someone in the business, or it could be an online legal service such as IncFile.
- Get your state taxpayer identification number: If you’re in a state that collects a state income tax, you’ll need to register for a state taxpayer identification number (STIN). If you’re a sole proprietor, you’ll need your social security number to register for this number. If you’re a legal business entity, then you’ll need your EIN. Visit your state’s official department of revenue for more information.
Step 4: Get State Licenses & Local Permits
Here are some of the licenses you may need depending on your business type:
- State professional licenses: These licenses are typically for businesses that may pose a public health risk. Each state may require different professions to obtain a professional license. Common licensed businesses include martial arts, cosmetology, physical therapists, and pawn shops. Visit your state and city’s official business license website for more information.
- Local licenses and permits: Local licenses vary by state. If you plan to open a physical location, you may need a local building inspection to ensure the facility’s safety. If you plan on selling food, you’ll need health-code inspections. Live music venues also require specific local licenses.
- Home-based business license: In the last couple of years, the amount of people running businesses from home has skyrocketed due to the COVID-19 pandemic. According to IncFile, approximately 19M small businesses are home-based. Most home-based businesses won’t need licensing. However, if you have employees, have customers, or create products at home, you might need this license. Consult your state and local government for regulations.
Step 5: Secure Your Intellectual Property
While it isn’t required to start your business, you may want to register a trademark, copyright, or patent for your business. Here are the three types of intellectual property licensing:
- Register a trademark: This provides increased legal protection for a word, phrase, symbol, and design. It protects your business branding, keeping others from using it. You can register your trademark on your own from the United States Patent and Trademark Office (USPTO). However, you may want to use an affordable online service like LegalZoom instead. If you file a patent or use a professional service, a trademark costs anywhere from $225 to $2,000.
- Obtain a copyright: Every piece of content you create has an automatic copyright. You can register your creative work with the US Copyright Office for additional legal protection. If you ever need to file a copyright infringement, you first need to register it with the US Copyright Office.
- File for a patent: This keeps others from making, using, and selling your invention for a limited number of years. Filing a patent can cost anywhere from $1,500 to more than $15,000. It can be complicated, so it’s best to hire a patent attorney to assist you.
Before your business can get started, you need to do the five steps in this guide to put your company in a position to succeed right away. If you follow this process while registering your business, you can stop potential future problems before they arise. This will keep your company legal from day one and ensure you can focus on running and growing your business. Be sure to download the checklist to help you navigate the steps needed to get your business off to a successful start.