Imagine: You have a fantastic new business idea, but you need funding to get it off the ground. That requires business registration.
Or maybe you already have a successful business and have been making sales for years, and now you want to get business funding. There’s only one problem with your application: you never officially registered your business.
If you’ve been in either of these positions, then this guide is for you.
The laws for registering a business in the U.S. vary by state. However, there are general requirements you should be prepared for. The registration process costs money, but you can register your business yourself or with the help of a business attorney, depending on your budget.
Here’s what we’ll cover:
- State laws for registering a business
- Choosing a business entity
- Federal, state, and local registration: What do you need to do?
- Getting a DBA and operating agreement
- Registering for an employee identification number (EIN)
- Opening a business bank account
- The cost of business registration
- Bonus: Registering your biz with Google
Check state laws before registering a business
Because new businesses must typically register at a state level, requirements vary from state to state. However, the process generally begins with deciding on a business structure (more on that below!) and name.
Take Austin, Texas for example. As one of the top U.S. cities for businesses, Austin follows Texas rules for business registration. In Texas, entrepreneurs must register their business with the local county clerk’s office. They can also register on the Secretary of State’s online portal.
Phoenix, Arizona is another business capital in the U.S. In Arizona, you must register your business with the Arizona Department of Revenue. You also must register any business that you acquire.
In the economic and political hub of Washington, D.C., new businesses must register with the D.C. Office of Tax and Revenue.
And so on, and so forth. You get the idea—each state is different!
Wherever you live, you’ll need to provide information like your business name, structure, employee identification number (or social security number), business or home address, and any other pertinent information the state requires.
FYI: Before digging into the first step, know that you can always hire a business attorney or use a service that bundles all these steps together. More on that below, but there’s no need to get overwhelmed!
Choose which type of business entity you want to register
There are different types of business entities you can form. The entity you choose determines the structure of your business, so make sure you select one that meshes with your planned operations.
There are five types of business structures according to the Internal Revenue Service (IRS):
- Sole proprietorship: An unincorporated business entity that a single individual owns. Sole-member LLC owners are sole proprietors unless they treat the LLC as a corporation or partnership for tax purposes.
- Partnership (general partnership or limited liability partnership): A business or trade relationship between 2+ people.
- Corporation: The IRS says, “A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders.” Corporations can take special deductions in addition to regular deductions.
- S corporation: A domestic corporation with 100 or less shareholders can form an S corporation. It helps business owners avoid double taxation on corporate income.
- Limited liability company (LLC): A state-based entity with one or multiple members. An LLC with one member is called a single-member LLC.
- Nonprofit, not-for-profit, or charity: May receive tax exemption from the IRS depending on the structure.
Once you decide on your entity type, you will be able to form your articles of organization (or articles of incorporation).
You can then register your business name. Check that the name is available as a business name and website domain. If there are any similar business names, consider making it a little more unique to differentiate yourself.
Some businesses also require a business license, which you can get after you select an entity. Check to see if you require a license for local operation, land use and building, health and safety, signage, environmental compliance, and more.
Pro tip: Individuals operating a one-person business (aka a sole proprietorship) typically don’t have to register their business in order to claim the income and pay taxes on it. However, forming a business under a different structure, such as an LLC, could help remove you from personal liability of anything relating to your business. You may also want to get an EIN as a sole proprieter, and there are tax implications that you may want to talk to a CPA about.
Business registration at the federal, state, local levels: Which ones you need and when
Most businesses must register with the state they’re based in as well as any states they operate in. This includes any LLC, corporation, partnership, or nonprofit.
How do you know which state agencies you need to register your business with? An easy rule of thumb is if you’re physically located in the state, you have in-person client meetings on a regular basis in a state, a substantial portion of your revenue comes from a state, your business activities take place in a state, and/or you employ people who live in a state.
Federal business registration is typically not required. However, you may need to get a federal tax ID, trademark, or nonprofit tax exemption, which all require you to file with federal agencies like the IRS and U.S. Patent and Trademark Office.
Businesses are only required to register at the local or county level in certain states. If you use a DBA (doing business as) name, you will need to officially register it with the state or local government. Local agencies typically help with business licensing and permitting, which some businesses require.
Ultimately, the rules vary for business registration. Factors like type of business, headquarters and operations locations, and more all impact the steps you’ll take to register your business.
Optional: Select a DBA and get an operating agreement
Once you choose your business name, you may want to select a DBA (doing business as) name. This is also called a fictitious business name. Once you register your DBA, you can officially use it in any normal business scenarios (like invoicing and marketing).
A lot of businesses—big and small—use DBAs. Take International Business Machines Corporation, for example. That name may not ring a bell, but you likely recognize its fictitious name, IBM.
Many small business owners or sole proprietors may register their business name as their own full name, but set up a DBA with a branded name.
While a DBA is a different name from your legal name, a properly registered DBA serves the same legal purposes as your company’s official name.
Then there’s the issue of whether or not to get an operating agreement…
An operating agreement comes in handy when multiple partners are forming a business. It is a legal document that defines the relationship between business owners. An operating agreement lays out expectations for management, operations, interpersonal dealings, and what happens if the company shuts down.
Because operating agreements define the logistics of business relationships, one-person businesses do not require an operating agreement. However, it can still be helpful to limit personal liability.
Pro tip: You can register as many fictitious names as you want, so don’t feel like you’re stuck with one DBA!
While both of these steps are technically optional, many businesses will benefit from getting a DBA and operating agreement. Having that extra flexibility and protection from the start can go a looooong way.
Get a federal EIN
Business owners will benefit from an employer identification number (EIN).
Signing up for an EIN is a simple, quick process. You can apply for an EIN through the IRS website. The process takes just a few minutes and you end up with an EIN right away (though the IRS also sends official documentation in the mail, which takes a few weeks).
Why use an EIN when you already have a social security number (SSN)?
Get a business bank account
Getting a business bank account should be a first step after you register your business. Typically, you must complete your business registration before opening a business bank account. With the proper paperwork, you can demonstrate you’re an actual business owner.
A separate bank account for your business has a number of benefits:
- You don’t have to reveal personal bank account details to anyone.
- You can start a relationship with a bank, which could open the door to lines of credit, loans, or other funding down the line.
- A business bank account lets you accept credit card transactions.
- You can keep track of business expenses more easily (without getting lost in the swarm of personal expenses that are not related to your business).
- You can keep track of revenue more easily.
- If you want to form a partnership, incorporate, or sell your business down the line, you’ll need a business bank account to do so.
- Small business owners can use a business bank account to give themselves a set paycheck. They can reinvest the rest of the money into the business and scale.
- A separate account helps you manage cash flow better. When those quarterly estimated taxes are due, you’ll thank us.
“Keeping track of the amount of money coming into and leaving your firm as well as your monthly revenues will be made easier with a separate business bank account. Having customers pay into a corporate account rather than a personal one also presents a more professional image.” - Alex Cappozolo, co-founder of Brotherly Love Real Estate
Pro tip: You do not have to select a bank in the same state that you do business. You can choose any bank, including online-only banks that operate country-wide.
It’s also a good idea to get at least one business credit card. Building your business credit is super important, and credit cards are a great way to start. Other factors, like invoice repayments over 90+ days and long-term loan repayments, also improve your business credit.
Bonus: Registering your biz with Google
Datha Santomieri, co-founder of Steadily, says “SEO and site visibility are crucial aspects to growth in today’s market, so registering your business through Google is a must.”
Santomieri says businesses must be verified with a Google Business Profile in order to be eligible to appear on the platform. She adds, “It takes about 24 hours for your application to go through once you’ve completed this process. Once you’re verified, you can manage how your business information appears on Google, through your Google Business Profile.”
How much money you should prepare to spend on business registration
Business registration costs money. The good news? You can spend a little or a lot of money, depending on whether you do it yourself or hire a business attorney to help.
As with other business registration requirements, filing fees vary by state. For example, Pennsylvania charges $125 and up to file articles of incorporation, Hawaii filing fees cost $50 and up, and Washington state charges $200 and up.
Fortunately, there is no fee for applying for an EIN. However, some companies may be required to pay additional fees once a year or every other year. Make sure you’re aware of your state’s rules around this so you don’t end up with a shut-down business by accident! If you fail to keep up with your registration every year, then you may have to reinstate your business.
As you gather the money required to register your business, consider preparing for future costs. Upcoming quarterly estimated tax, business tax, franchise tax, state tax (including self-employment tax), and income tax payments should all be on your mind. That’s not to mention business cards, marketing materials, and all the other startup costs you may incur.
Online services to register a business
You have three options when registering your business: doing it yourself, hiring a business attorney, or going through an online service. Many small business owners choose to go with online services, as they are quick and cost-effective.
Here’s a quick breakdown of the most popular services, and their costs:
|Service||Cost||Entities offered||State restrictions?||Speed|
|LegalZoom||LLC: $79 + fees
Corp: $149 + fees
Nonp: $99 + fees
DBA: $99 + fees
|LLC, S-Corp, C-Corp, nonprofit||No||15 business days|
|ZenBusiness||Free + state fee
Expedited: $49-99 + state fee
|LLC, S-Corp, C-Corp, DAO||No||5-10 business days|
|Incfile||Free + state fee
Expedited: $299, wrapped into Platinum package
|LLC, S-Corp, C-Corp, nonprofit||No||Depends on state; 1 business day to 3 weeks|
|Rocket Lawyer||Non members: $99.99 + state fee
Members: included in $39.99/mo + state fee
New members: could cost $29.99 if canceled after 1 month + state fee
|LLC, S-Corp, C-Corp, nonprofit||No||Depends on state; 1 business day to 3 weeks|
Last word on registering a business
Registering a business may feel like a lot of work, but it’s a worthwhile endeavor. Once registered, you can dive into the nitty gritty of the work you love. With all this on your plate—registering with the appropriate agencies, paying filing fees, getting a business bank account, applying for an EIN, and more—it’s time to get started!