Starting a business in the United States opens doors to one of the world’s largest consumer markets and most dynamic entrepreneurial ecosystems. With over 34.8 million small businesses operating nationwide and nearly 479,000 new businesses forming each month, the U.S. remains the premier destination for entrepreneurs.
To start a business in the United States, you’ll need to register your business. It’s the foundation that protects your personal assets, establishes credibility with customers and investors, and unlocks access to funding, tax benefits, and legal protections you can’t get otherwise.
This guide walks you through every step on how to register a business in the U.S., from choosing the right structure to filing the necessary documents and staying compliant with federal, state, and local requirements.
Key Takeaways:
- Business registration creates a separate legal entity that protects your personal assets
- Registration costs range from $20 to $520 depending on your state and business structure
- The process involves seven core steps: business planning, structure selection, naming, EIN application, state/local registration, banking, and licensing
- New 2026 update: U.S. domestic companies are now exempt from beneficial ownership reporting requirements
Understanding Business Registration
What Does It Mean to Register a Business?
Registering a business means creating a separate legal entity that’s distinct from you as an individual. This separation is crucial because it establishes a legal boundary between your personal finances and your business operations.
Think of it like creating a new person in the eyes of the law. Your business can own property, enter contracts, take on debt, and face lawsuits independently of you. If something goes wrong with your business, creditors typically can’t come after your house, car, or personal savings.
Let’s say you’re starting a small consulting firm. Without registration, you’re operating as yourself—any business debt becomes your personal debt, and any lawsuit against your business puts your personal assets at risk. Once you register as an LLC or corporation, you’ve built a legal shield between your business activities and your personal life.
Why Business Registration Matters
Registration isn’t legally required for every business. For example, sole proprietors using their legal name can operate without formal registration. But registration offers benefits that unregistered businesses simply can’t access.
First, you gain access to business loans and lines of credit. Banks and lenders require proper registration before they extend credit to your business. Without registration, you’re limited to personal loans, which means your personal credit score takes the hit.
Second, registration allows you to establish business credit separate from your personal credit. This becomes essential as you grow and need larger financing for equipment, inventory, or expansion.
Third, registration provides brand protection. Once registered, no one else in your state can operate under your business name. You can also register your name as a trademark for nationwide protection.
Fourth, many clients and partners require proof of registration before they’ll work with you. Registration signals professionalism and permanence. A registered business commands more respect in the marketplace than an informal operation.
Finally, certain tax deductions and benefits are only available to registered businesses. You’ll be able to write off business expenses, separate business income from personal income, and potentially save thousands annually.
Costs and Considerations
Business registration costs vary significantly based on your state and chosen business structure. Filing fees for basic registration typically range from $20 to $520. States like Kentucky charge as little as $40 for LLC formation, while Massachusetts charges around $520.
Beyond the initial filing fee, you’ll encounter additional costs like name reservation, which ranges from $10 to $150 if you want to secure your business name before finalizing your structure.
Business licenses and permits add another layer of expense, ranging from $15 for basic local permits to $10,000 or more for specialized industry licenses in fields like healthcare or food service.
If you hire professionals to help with formation, legal fees for an attorney can cost $500 to $2,000, while accountants charge $100 to $500 for initial tax setup. Many entrepreneurs handle the basic registration themselves and bring in professionals for complex situations.
State-specific fees may also vary for annual reports and franchise taxes. Delaware charges an annual franchise tax starting at $175, while Wyoming has no franchise tax and charges just $60 for annual reports.
You’ll need to plan for these ongoing costs too. Most states require annual reports ranging from $50 to $500. Professional licenses need renewal every one to three years. And you’ll need to maintain a registered agent, which costs $50 to $300 annually if you use a service rather than designating yourself.
How to Register a Business in the U.S.: A Step-by-Step Guide
Step 1 – Write a Business Plan
Before you register anything, you need a clear roadmap for your business. A business plan forces you to think through the fundamentals of who you’re serving, how you’ll make money, what resources you need, and how you’ll compete in your market.
Your business plan doesn’t need to be a 50-page document. A solid plan covers these essential components in 10 to 15 pages.
Start with your target market. Who are you selling to? Get specific and don’t say “everyone who needs accounting services.” Your target market can be “medical practices with 5 to 20 employees in suburban areas who struggle with healthcare-specific tax compliance.”
Next, outline your products or services. What exactly are you selling, and what makes your offering different from competitors? Maybe you’re starting a service-based business with eco-friendly cleaning products, or perhaps you’re launching your consulting practice with industry-specific AI solutions.
Your marketing strategy comes next. This outlines how customers will find you. Will you rely on social media, local advertising, referrals, or a combination? You need to be realistic about customer acquisition costs and timelines.
Financial projections matter enormously. Project your revenue, expenses, and cash flow for at least your first year. Include startup costs, monthly operating expenses, and anticipated revenue. If you’re opening a physical location like a bakery, estimate your startup costs carefully and factor in seasonal fluctuations.
Include a management structure that shows who is responsible for what. Even if you’re a solo founder initially, outline how you’ll add team members as you grow.
Finally, identify your funding needs and sources. How much capital do you need to launch? Will you self-fund, seek loans, or bring in investors? Your business structure choice in the next step depends partly on your funding strategy. When thinking about revenue, consider pricing your services competitively while ensuring profitability.
Update your business plan annually as your business evolves. Use it to guide major decisions, including which business structure makes the most sense for your situation.
Step 2 – Choose a Business Structure
Your business structure determines your liability exposure, tax obligations, and ability to raise capital. This decision has long-term consequences, so choose carefully based on your specific situation.
Sole Proprietorship
A sole proprietorship is the simplest business structure. If you start working for yourself without filing any formation documents, you’re automatically a sole proprietor.
The advantages include minimal paperwork, full control over all business decisions, and pass-through taxation, where business income flows directly to your personal tax return.
While there are benefits, it also has its downsides, including unlimited personal liability. You and your business are legally the same entity.
If your business gets sued or can’t pay its debts, creditors can pursue your personal assets. Your home, car, and savings are all at risk.
Sole proprietorships work well for low-risk businesses, freelancers, and consultants testing a business idea before committing to a more complex structure. Think freelance writers, independent consultants, or photographers just starting out.
Partnership
Partnerships involve two or more people sharing ownership and responsibilities. There are two main types of partnership business.
A general partnership means all partners share equal liability and management authority. Each partner can make binding decisions for the business, and each is personally liable for all business debts and obligations.
A limited partnership has general partners who manage the business and accept unlimited liability, plus limited partners who invest capital but don’t participate in daily management. Limited partners risk only their investment amount.
Partnerships offer pass-through taxation and shared resources but come with significant liability risks. Partnership agreements should clearly define profit sharing, decision-making authority, and dispute resolution procedures.
Example: Two friends opening a boutique clothing store might form a general partnership, splitting ownership 50/50 and sharing all responsibilities and risks equally.
Corporation
Corporations offer the strongest liability protection because they’re completely separate legal entities from their owners. You own shares in the corporation, but the corporation itself owns the assets, holds the debts, and faces lawsuits.
C corporations face double taxation. The corporation pays taxes on its profits, then shareholders pay taxes again on dividends they receive.
However, C corps can have unlimited shareholders, offer multiple stock classes, and attract venture capital and institutional investors more easily than other structures.
C corps make sense for businesses planning to raise significant capital, go public eventually, or grow beyond a certain size. Startups seeking venture capital almost always form as C corporations.
S corporations avoid double taxation by passing income directly to shareholders’ personal tax returns, similar to LLCs. However, S corps have strict eligibility requirements: no more than 100 shareholders, all shareholders must be U.S. citizens or residents, and only one class of stock is allowed.
To form a corporation, you file Articles of Incorporation with your state, appoint directors, issue stock, and hold regular board meetings. Corporations require more ongoing paperwork than other structures.
For example, A tech startup planning to seek venture funding and scale nationally would form as a C corporation to attract institutional investors and offer stock options to employees.
Limited Liability Company (LLC)
LLCs combine the liability protection of corporations with the tax flexibility and operational simplicity of partnerships. This makes them the most popular structure for small businesses.
LLC members (owners) aren’t personally liable for business debts. Your personal assets remain protected if the business faces lawsuits or financial problems. Meanwhile, profits pass through to members’ personal tax returns, avoiding the double taxation that C corps face.
LLCs offer operational flexibility. You can be managed by members (owners) or designate separate managers. You can have one member or multiple members. You can split profits in any way you choose, regardless of ownership percentages.
Formation requires filing Articles of Organization with your state and creating an Operating Agreement that outlines member rights, profit distribution, and management structure.
A small digital marketing agency with three partners would benefit from LLC status, which is a liability protection for their personal assets while maintaining operational flexibility and pass-through taxation.
Choosing the Right Structure
Several factors should guide your decision on the legal structure for your business.
Consider the number of owners. Solo entrepreneurs often start as sole proprietors or single-member LLCs. Multiple owners require partnerships, LLCs, or corporations.
Evaluate your liability tolerance. High-risk businesses like construction, food service, or professional services benefit from LLC or corporate structures. Low-risk businesses like consulting can start as sole proprietorships.
Think about your funding goals. If you need bank loans, form an LLC or corporation. If you plan to seek venture capital eventually, start as a C corporation or be prepared to convert later.
Analyze tax implications. Most small businesses benefit from pass-through taxation offered by sole proprietorships, partnerships, LLCs, and S corps.
Only choose C corp taxation if you have specific reasons, like retaining earnings in the business or planning significant equity fundraising.
Remember that you can change your structure later. Many businesses start as sole proprietorships or LLCs and convert to S corps or C corps as they grow.
Step 3 – Pick a Business Name
Your business name is more than branding—it’s a legal identifier that must be unique and properly registered.
Start by brainstorming names that reflect your brand identity and are easy to remember. Avoid names that are too similar to existing businesses in your industry or state.
Check availability through multiple channels. First, search your state’s business database to confirm no other registered business uses your chosen name. Every state maintains a searchable database through their Secretary of State website.
Second, check the U.S. Patent and Trademark Office database to ensure your name doesn’t infringe on existing trademarks. Even if your state allows the name, you could face legal challenges from trademark holders.
Third, verify domain name and social media handle availability. Your business name loses value if you can’t secure matching online properties. Check domain registrars and major social platforms before finalizing your choice.
Sole proprietorships operating under your legal name don’t require name registration. But if you want to operate under any other name, you need to file a “Doing Business As” (DBA) certificate, also called a fictitious name registration or trade name.
LLCs and corporations must include a business entity designation in their legal name. You’ll need “LLC,” “Limited Liability Company,” “Inc.,” “Incorporated,” “Corp.,” or similar terms depending on your structure and state requirements.
Some states restrict certain words in business names. Financial terms like “bank,” “insurance,” or “trust” often require special licensing. Medical terms may require professional credentials.
Consider trademarking your business name for nationwide protection. Trademark registration costs $250 to $750 per class of goods or services and provides legal recourse if someone copies your name. The process takes six to twelve months.
Tools like the Wix business name generator and Stripe Atlas name checker can help you brainstorm available names and verify availability across multiple databases simultaneously.
Once you’ve confirmed availability and filed your registration, reserve the name in other states where you might expand. Many states offer name reservation for $10 to $150, holding the name for 60 to 120 days while you complete formation.
Step 4 – Apply for an Employer Identification Number (EIN)
An Employer Identification Number is your business’s Social Security number. The IRS uses this nine-digit number to identify your business for tax purposes.
You need an EIN if you have employees, operate as a corporation or partnership, withhold taxes on non-wage income, have a Keogh retirement plan, or file employment, excise, alcohol, tobacco, or firearms tax returns.
Sole proprietors without employees can use their Social Security number for business purposes, but most choose to get an EIN anyway. An EIN protects your personal SSN from exposure and helps establish business credit separate from personal credit.
Applying for an EIN is free and straightforward. The IRS offers four application methods.
The fastest method is online through the IRS website. The application takes about 10 minutes, and you receive your EIN immediately upon approval. Online application is available Monday through Friday, 7 AM to 10 PM Eastern Time. You can only apply for one EIN per responsible party per day.
Before applying online, confirm your business is already formed with your state. If you’re forming an LLC or corporation, complete your state registration first. The IRS may delay your application if your business entity doesn’t exist yet in state records.
For international applicants without a U.S. SSN or ITIN, apply by phone at 267-941-1099, Monday through Friday, 6 AM to 11 PM Eastern Time. The representative will verify your information and issue your EIN during the call.
You can also apply by fax using Form SS-4. Fax the completed form to 855-641-6935. The IRS typically faxes back your EIN within four business days.
Mail applications take the longest—four to six weeks. Complete Form SS-4 and mail it to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999.
Have this information ready before applying: your business legal name, business address, responsible party’s name and SSN or ITIN, business structure type, reason for applying, and expected number of employees in the first year.
Once you receive your EIN, wait at least 10 business days before using it to open a bank account. This gives the IRS time to update its systems and ensures banks can verify your EIN during account opening.
Keep your EIN confirmation letter safe. You’ll need it for banking, tax filing, and various business transactions. If you lose it, call the IRS Business and Specialty Tax Line at 800-829-4933 to request a replacement.
Third-party services like Stripe Atlas can help with EIN application and business formation simultaneously, streamlining the entire process for new businesses.
Step 5 – Register with State and Local Governments
State-Level Registration
State registration makes your business legally recognized in your state of operation. The specific requirements depend on your chosen business structure.
LLCs file Articles of Organization with the Secretary of State. This document includes your business name, principal address, registered agent information, member names, and management structure. Filing fees range from $40 to $520 depending on your state.
Corporations file Articles of Incorporation, which include the business name, registered agent, number of authorized shares, incorporator information, and business purpose. Some states require additional details about directors and officers.
Most states allow online filing, which is faster and more convenient than mail submissions. Online processing typically takes one to two weeks, while mail processing can take four to eight weeks.
Every state requires businesses to maintain a registered agent with a physical address in the state. The registered agent receives legal documents, tax notices, and official correspondence on your behalf. You can serve as your own registered agent or hire a professional service for $50 to $300 annually.
Local Government Registration
After state registration, check with your county and city for additional requirements. Many local jurisdictions require general business licenses or permits, even if your state doesn’t.
Visit your county clerk’s office or city business licensing department to determine local requirements. Most counties and cities have online portals showing required licenses based on your business type and location.
Home-based businesses often need special permits or zoning approvals. Some residential areas restrict commercial activities, while others allow them with proper permits. Check with your local zoning office before operating from home.
Filing fees for local business licenses typically range from $25 to $300 annually, varying by location and business type.
Foreign Qualification
If you plan to conduct business in multiple states, you need to foreign qualify in each additional state. Foreign qualification means registering your business, which was formed in one state, to operate legally in another state.
You need to foreign qualify if you have a physical office, employees, or significant business activity in another state. Simply selling to customers in another state typically doesn’t trigger foreign qualification requirements, but thresholds vary by state.
To qualify, file a Certificate of Authority in each state where you’ll operate. You’ll also need to appoint a registered agent in each state. Foreign qualification costs $100 to $500 per state, plus annual renewal fees and registered agent fees.
Insurance Requirements
Many states mandate specific insurance coverage for registered businesses. Workers’ compensation insurance is required in most states if you have employees. Minimum coverage levels and requirements vary by state and industry.
Professional liability insurance may be required for licensed professions like healthcare providers, lawyers, and accountants. General liability insurance, while not always legally required, is essential for businesses dealing with customers or operating physical locations.
Important 2026 Update: Beneficial Ownership Reporting
In March 2025, the Financial Crimes Enforcement Network (FinCEN) implemented a significant rule change regarding beneficial ownership information (BOI) reporting.
Under the previous Corporate Transparency Act requirements, all U.S. companies had to report information about their beneficial owners to FinCEN. The March 2025 interim final rule changed this significantly.
Now, all entities created in the United States—including LLCs and corporations—are exempt from beneficial ownership reporting requirements. This exemption applies to both new and existing domestic companies.
However, foreign entities registered to do business in any U.S. state must still file BOI reports with FinCEN.
Foreign reporting companies registered before March 26, 2025 had until April 25, 2025 to file their initial reports. Foreign companies registering after March 26, 2025 have 30 days from their registration date to file.
This update eliminates a significant compliance burden for U.S. entrepreneurs and small business owners. You no longer need to report beneficial ownership information unless you’re registering a foreign entity to operate in the United States.
Step 6 – Open a Business Bank Account
A business bank account separates your personal and business finances, which is critical for several reasons.
First, separation protects your limited liability status. Mixing personal and business funds can pierce the corporate veil, exposing your personal assets to business liabilities. Courts may disregard your LLC or corporate protection if you treat business funds as personal money.
Second, separate accounts simplify bookkeeping and tax preparation. Every business transaction flows through the business account, creating a clear paper trail. Come tax time, you’ll have organized records of all income and expenses.
Third, business accounts enhance professionalism. Clients paying “John Smith DBA Smith Consulting” on a personal account look less established than paying “Smith Consulting LLC” on a business account.
Fourth, business accounts provide access to business banking features like merchant services, payroll processing, and business credit cards.
You can open a business bank account as soon as you receive your EIN. Most banks require these documents:
Your EIN confirmation letter from the IRS. Your state formation documents (Articles of Organization or Incorporation). Your business license, if applicable. Government-issued photo ID for all account signers. Your Operating Agreement (for LLCs) or corporate bylaws (for corporations).
Some banks require personal identification from all owners with 25% or greater stakes in the business. This is part of their Know Your Customer compliance obligations.
Research multiple banks before choosing. Compare monthly fees, transaction limits, minimum balance requirements, online banking features, and branch accessibility.
Business checking accounts typically charge $10 to $30 monthly, with fees waived if you maintain minimum balances.
Consider opening multiple accounts as your business grows. Many businesses maintain separate checking accounts for operations, savings for taxes, and savings for emergency reserves.
Also consider merchant services accounts if you’ll accept credit card payments. Merchant accounts charge transaction fees of 1.5% to 3.5% per transaction plus monthly fees. Payment processors like Square, Stripe, and PayPal offer alternatives with simpler pricing structures.
Traditional banks, online-only banks, and credit unions each offer different advantages. Traditional banks provide in-person service and established relationships.
Online banks often have lower fees and better interest rates. Credit unions typically offer more personalized service for smaller businesses.
Step 7 – Apply for Licenses and Permits
Business licenses and permits authorize you to operate legally in your industry and location. Requirements vary significantly based on your business activities, location, and structure.
Federal Licenses and Permits
Most businesses don’t need federal licenses. Federal licensing typically applies only to specific regulated industries.
If you’re involved in agriculture, you may need permits from the U.S. Department of Agriculture for transporting animals, plants, or agricultural products across state lines.
Businesses manufacturing, distributing, or selling alcoholic beverages need federal permits from the Alcohol and Tobacco Tax and Trade Bureau in addition to state licenses.
Aviation-related businesses require Federal Aviation Administration licenses and permits.
Firearms, ammunition, or explosives businesses need licenses from the Bureau of Alcohol, Tobacco, Firearms and Explosives.
Commercial fishing operations require permits from the National Marine Fisheries Service.
Radio and television broadcasting stations need Federal Communications Commission licenses.
State Licenses and Permits
Nearly all businesses need some form of state-level license or permit. At minimum, most states require a general business operating license that allows you to conduct business in the state.
Professional licenses are required for many occupations. Doctors, dentists, lawyers, accountants, real estate agents, contractors, cosmetologists, and numerous other professions need state licensing. Requirements typically include education, exams, background checks, and continuing education.
Sales tax permits are required if you sell taxable goods or services in states with sales tax. This permit allows you to collect sales tax from customers and remit it to the state.
Health permits are mandatory for businesses serving food, operating childcare facilities, or providing health-related services. Health departments conduct inspections and issue permits based on compliance with health codes.
Environmental permits apply to businesses that discharge waste, emit air pollutants, or handle hazardous materials.
Local Licenses and Permits
Cities and counties impose additional licensing requirements beyond state regulations.
General business licenses or tax certificates are required by most cities and counties. These simply register your business to operate in the local jurisdiction and ensure you’re paying local business taxes.
Zoning permits confirm your business location complies with local zoning laws. Commercial activities in residential zones may require special permits or variances.
Building permits are needed for construction, renovation, or significant changes to your business location. Electrical, plumbing, and mechanical work typically requires separate permits.
Sign permits regulate outdoor signage. Many jurisdictions restrict sign size, placement, and lighting. Operating without proper sign permits can result in removal orders and fines.
Fire department permits are required for businesses using flammable materials, hosting large gatherings, or operating in certain occupancy types.
Home occupation permits allow you to operate businesses from residential properties. These often restrict the type of business, customer visits, employee numbers, and signage.
Industry-Specific Requirements
Some industries face particularly complex licensing requirements. Restaurants need health permits, food handler certifications, liquor licenses if serving alcohol, and sometimes music licenses for playing copyrighted music.
Healthcare providers need professional licensing requirements at both state and federal levels, plus facility licenses, DEA registration for controlled substances, and HIPAA compliance measures.
Construction businesses need contractor licenses, specialty trade licenses, bonding, and proof of liability insurance in most states. For example, industry-specific licensing requirements for home bakeries include food handler permits, cottage food licenses, and health department inspections.
Cost Ranges and Resources
License and permit costs vary dramatically. Basic local business licenses cost $15 to $300. Professional licenses range from $100 to $1,000 or more. Specialized industry permits can exceed $10,000, particularly for alcohol sales, certain healthcare services, or heavily regulated industries.
Use the SBA’s permit and license finder to identify federal requirements. Each state’s Secretary of State website provides information on state-level licenses. Contact your county clerk and city business licensing office for local requirements.
Budget for renewal costs too. Most licenses expire annually or every few years, requiring renewal fees and sometimes continuing education or inspections.
Compliance and Legal Obligations
Registration isn’t a one-time event—it creates ongoing compliance obligations that you must maintain to keep your business in good standing.
Annual Reports
Most states require annual or biennial reports from LLCs and corporations. These reports update the state on your business address, registered agent, officers, and directors. Reports are due on specific dates, often your formation anniversary.
Filing fees range from $10 to $500 depending on your state. Delaware, for example, charges $300 annually for LLCs plus a franchise tax. Wyoming charges just $60 for annual reports with no franchise tax.
Missing annual report deadlines results in late fees, penalties, and eventual administrative dissolution of your business. States typically give 30 to 90 days grace period, but dissolution proceedings begin after that.
Maintaining Corporate Records
LLCs and corporations must maintain proper internal records even if not required to file them with the state. This includes meeting minutes for significant decisions, resolutions for major actions, updated bylaws or operating agreements, and records of stock issuances or membership changes.
Proper record-keeping protects your liability shield. Courts can pierce the corporate veil if you fail to maintain your business as a separate entity. Keep business records organized and separate from personal documents.
Permit and License Renewals
Track all your licenses and permits and their renewal dates. Create a calendar with renewal deadlines to avoid lapses. Operating with expired licenses can result in fines, business closure, and criminal charges in severe cases.
Some licenses require continuing education, additional inspections, or updated documentation for renewal. Start the renewal process at least 30 to 60 days before expiration.
Consequences of Non-Compliance
Non-compliance with registration and licensing requirements carries serious consequences. Administrative dissolution removes your business from state records, eliminating your liability protection. You’ll need to file for reinstatement, pay back fees and penalties, and prove you’re current on all obligations.
Fines escalate quickly. Initial penalties of $100 to $500 grow with continued non-compliance. Some states charge daily penalties until you come into compliance.
Lawsuits become more dangerous without proper registration and insurance. If your corporate veil is pierced due to non-compliance, plaintiffs can pursue your personal assets.
Criminal penalties apply in extreme cases, particularly for operating without required professional licenses in fields like healthcare, legal services, or financial services.
Maintain a compliance calendar, set reminders for all deadlines, and consider hiring a registered agent service that provides compliance alerts.
Understanding Your Tax Obligations
Business registration triggers various tax obligations at federal, state, and local levels.
Federal Taxes
All businesses must pay federal income tax on profits. The structure you chose determines how you’re taxed.
Sole proprietorships, partnerships, S corporations, and LLCs report business income on personal tax returns. Business profits “pass through” to owners, who pay personal income tax rates on their share. You file Schedule C (sole proprietors), Schedule E (partnerships), or other relevant forms with your personal Form 1040.
C corporations face double taxation. The corporation pays corporate income tax on profits at the 21% federal rate. When the corporation distributes dividends to shareholders, those shareholders pay personal income tax on the dividends. This is why most small businesses avoid C corp status unless seeking venture capital.
Self-employment tax applies to sole proprietors, partners, and LLC members. You pay both the employer and employee portions of Social Security and Medicare taxes, totaling 15.3% on self-employment income. Make quarterly estimated tax payments to avoid penalties.
Employers must withhold and pay payroll taxes for employees, including federal income tax, Social Security, Medicare, and federal unemployment tax. File quarterly payroll tax returns and annual W-2 forms for employees.
Some businesses pay excise taxes on specific goods like fuel, tobacco, alcohol, or transportation services.
State Taxes
State tax obligations vary significantly by state. Most states charge corporate income tax ranging from 4% to 12%. Seven states have no corporate income tax: Nevada, South Dakota, Wyoming, Texas, Ohio, Washington, and Alaska (though some have gross receipts taxes instead).
Sales tax applies in 45 states. If you sell taxable goods or services, you must collect sales tax from customers and remit it to the state monthly or quarterly. Rates range from 2.9% to 7.25% at the state level, with local jurisdictions adding 1% to 5% more.
Many states charge franchise taxes or privilege taxes for the right to conduct business in the state. These may be flat fees or percentages of revenue.
Employer payroll taxes at the state level include state unemployment insurance and, in some states, disability insurance or family leave insurance.
Local Taxes
Counties and cities may impose additional business taxes. Common local taxes include gross receipts taxes based on total revenue, business property taxes on equipment and inventory, and local sales taxes added to the state sales tax.
Tax Deductions and Benefits
Proper registration unlocks numerous tax deductions. Deduct business expenses, including rent, utilities, office supplies, equipment, professional services, marketing, employee wages and benefits, business travel, vehicle expenses, and home office space (if meeting IRS requirements).
Depreciation allows you to deduct the cost of major assets over several years. The Section 179 deduction lets you deduct up to $1,220,000 of equipment costs in the first year rather than depreciating them.
Startup costs up to $5,000 can be deducted in your first year, with remaining startup costs amortized over 15 years.
Retirement plan contributions for yourself and employees are deductible, including SEP-IRAs, SIMPLE IRAs, and 401(k) plans.
Health insurance premiums for yourself and employees are deductible.
Working with Professionals
Consider hiring an accountant or tax professional, especially in your first few years. An experienced accountant ensures you comply with all tax obligations, maximizes deductions, advises on estimated tax payments, and handles payroll processing and quarterly filings.
Accounting fees are fully tax-deductible business expenses. The cost of professional help is usually far less than the penalties for errors or missed opportunities.
How Stripe Atlas and Other Services Can Help
Formation services streamline the registration process, especially for founders unfamiliar with legal requirements or those forming businesses in unfamiliar states.
Stripe Atlas is designed specifically for technology startups. For a one-time fee, Atlas forms your Delaware C corporation, obtains your EIN, provides legal templates for bylaws and stock agreements, facilitates 83(b) elections for founder stock, sets up banking relationships with partner banks, and provides guides and resources for startup operations.
Atlas works particularly well for companies planning to raise venture capital or operate globally. Delaware C corps are the standard for venture-backed startups, and Atlas’s streamlined process gets you operational quickly.
Other services like LegalZoom, Incfile, ZenBusiness, and Northwest Registered Agent offer formation services for various entity types across all states. Services typically include state filing, registered agent services for the first year, operating agreement or bylaws templates, and compliance reminders.
Costs range from free basic plans plus state fees to premium packages of $300 to $500 that include expedited filing, additional consultation, and ongoing support.
These services don’t replace legal advice for complex situations, but they handle routine formations efficiently for straightforward businesses.
Benefits of Registering Your Business
1. Protects Personal Assets
Registration creates legal separation between you and your business. If your LLC or corporation faces lawsuits or debts, creditors typically can’t touch your personal home, vehicles, or savings. This protection is the primary reason entrepreneurs choose to register.
The protection isn’t absolute. Courts can pierce the corporate veil if you mix personal and business finances, commit fraud, or fail to maintain proper corporate formalities. But with proper management, your personal assets remain protected.
2. Enables Hiring Employees
Registered businesses can hire employees, offer benefits, and withhold payroll taxes properly. Sole proprietors face more complexity when hiring and may struggle to provide competitive benefits packages.
Employees generally prefer working for registered entities over informal operations. Registration signals stability and legitimacy.
3. Access to Funding and Investors
Banks won’t provide business loans to unregistered businesses. Registration is a prerequisite for business lines of credit, SBA loans, equipment financing, and commercial real estate mortgages.
Investors require registered corporations or LLCs before they’ll invest. Venture capitalists almost exclusively fund C corporations. Angel investors and private equity firms require proper legal structures to protect their investments.
Business credit cards, which offer rewards and help build business credit, require business registration.
4. Legal and Brand Protection
Registration prevents competitors from using your business name in your state. Combined with trademark registration, you can protect your brand nationwide.
Contracts in your business name rather than your personal name provide additional protection. Business contracts create obligations for the business entity, not for you personally (though personal guarantees may be required for small businesses).
5. Eligibility for Tax Benefits
Registered businesses have access to tax deductions unavailable to individuals. Deduct business expenses, contribute to tax-advantaged retirement accounts, deduct health insurance premiums, and take advantage of various business tax credits.
Pass-through taxation available to LLCs, S corporations, and partnerships avoids double taxation while maintaining liability protection.
6. Perpetual Existence
Corporations and LLCs continue to exist even if owners die or leave. This perpetual existence makes it easier to sell the business, transfer ownership, or plan succession.
Sole proprietorships and general partnerships dissolve when owners die or leave, creating continuity issues.
7. Enhanced Credibility
Registered businesses command more respect. Customers, suppliers, and partners view registration as a sign of professionalism and commitment. Some organizations won’t work with unregistered companies.
The “LLC” or “Inc.” after your business name signals legitimacy and inspires confidence.
Conclusion
Registering your business is the cornerstone of building a legitimate, protected enterprise in the United States.
While the process involves paperwork and fees, the protection it provides for your personal assets and the credibility it establishes with customers, lenders, and partners makes it invaluable.
From choosing your structure to obtaining licenses, each step builds toward a solid legal foundation. The updated 2026 regulations have simplified compliance for U.S. businesses, removing beneficial ownership reporting burdens.
Don’t let complexity stop you—follow this roadmap, stay organized with compliance deadlines, and you’ll establish a business positioned for sustainable growth and success.
Frequently Asked Questions
Can non-U.S. residents register a business?
Yes, non-U.S. residents can register businesses in the United States. Most states allow foreign nationals to form LLCs and corporations without requiring U.S. citizenship or residency. You’ll need an EIN from the IRS, which foreign individuals can obtain by phone. Some states and business types may have additional requirements, but ownership is generally open to non-residents. You may need a registered agent with a U.S. address and face additional requirements for opening business bank accounts.
What are the most common mistakes to avoid?
Applying for an EIN before completing state registration ranks as the most common mistake. The IRS requires your business to exist in state records before issuing an EIN. Second, mixing personal and business finances threatens your liability protection. Always maintain separate accounts. Third, missing annual report deadlines leads to penalties and administrative dissolution. Set calendar reminders for all compliance deadlines. Fourth, operating without required licenses or permits invites fines and legal problems. Research all licensing requirements before launching. Finally, choosing the wrong business structure for your situation creates unnecessary tax burden or insufficient liability protection.
Should I register online?
Yes, online registration is faster, cheaper, and more convenient than mail filing in most cases. Most states offer online filing for LLCs and corporations, with instant confirmation and processing times of one to two weeks versus four to eight weeks for mail filing. Online systems guide you through the process step-by-step, reducing errors. The SBA website provides links to each state’s online filing system. However, complex situations involving multiple classes of stock, unusual ownership structures, or professional corporations may benefit from attorney assistance regardless of filing method.
What’s the timeline for registration?
Online state filings typically process in one to two weeks in most states. Expedited processing reduces this to one to three business days for an additional fee of $50 to $500 depending on the state. EIN applications receive instant approval online during business hours. Opening a business bank account takes one to five business days after receiving your EIN, though waiting 10 business days after EIN approval improves approval chances. License and permit applications vary from immediate approval to several months depending on the type. Plan for at least three to four weeks from starting your registration to being fully operational with bank accounts and basic licenses in place.
Can I change my business structure later?
Yes, you can convert from one business structure to another, though the process involves paperwork and potential tax implications. Common conversions include sole proprietorship to LLC, LLC to S corporation for tax purposes, and LLC or S corp to C corporation when raising venture capital. The complexity and cost depend on your starting and ending structures. Some conversions are simple filings with the IRS, while others require state filings, new EINs, and transferring assets to the new entity. Consult with an accountant and attorney before converting to understand tax consequences and ensure proper handling of the transition.
