How to Register a Business and Obtain Business Licenses & Permits

Starting a business requires legal registration and securing the appropriate licenses, but the process varies based on your business’s structure and the region it operates in. Understanding these requirements will help keep your business legally protected and getting this right will help you avoid some serious headache.

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Do You Need to Register Your Business?

Yes. You need to register your business to ensure legal compliance, protect personal assets, and enhance credibility.

IMPORTANT: From January 1, 2024, there will be new requirements from the Financial Crimes Enforcement Network (FinCEN) affecting certain U.S. businesses. You can e-file through FinCEN here.

Mandatory Business Registration Steps for 2024

Starting January 1, 2024, U.S. businesses must submit Business Ownership Information (BOI) or a list of their beneficial owners to FinCEN. Existing companies must file by January 1, 2025. New businesses in 2024 have 90 days after receiving a public notice of their creation to file registration documents with FinCEN.

What Type of Businesses Are Required to Submit?

  • Domestic reporting companies that are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States. Financial Crimes Enforcement Network (FinCEN)
  • Foreign reporting companies that are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office. Financial Crimes Enforcement Network (FinCEN)

How to Register Your Business?

Whether you need to register your business depends on several factors, including the nature of your business, its structure, and where you plan to operate. Here’s a breakdown to help determine your registration needs your business:

1. Business Structure

  • Sole Proprietorships: If you operate under your own name and do not form a separate business entity, registration may not be mandatory, though you might still need to file a “Doing Business As” (DBA) if you use a trade name.
  • Partnerships, Corporations and Limited Liability Companies (LLCs): These entities typically require registration with the state. This process provides legal protections and separates personal assets from business liabilities.

2. Location, Location, Location..

  • State Requirements: Each state has different requirements for business registration. For instance, if you plan to conduct business in multiple states, you might need to register in each state as a foreign entity. Start here, using the Small Business Administrations “state selector.” This resource will help you to the identity which office or state entity you’ll use to register your business.

3. Business Activities:

  • Tax Obligations: Most businesses need to register with their state’s department of revenue for tax purposes, especially if they are collecting sales tax or have employees. You can find a complete list of states and their departments of revenue by visiting the American Institute of CPAs (AICPA).
  • Understanding and complying with these registration requirements is crucial for operating legally, avoiding fines, and protecting your personal and business interests. Each business’s needs will vary, so consider consulting with a legal professional to ensure you meet all the necessary requirements for your specific situation.

Federal and State Registration Requirements

Breaking it down into manageable steps can simplify the process. Below, we provide a beginner’s guide to help you navigate through each stage of federal and state registration requirements

Federal Registration

  • Beneficial Ownership Reporting: As of January 1, 2024, report beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Existing businesses must comply by January 1, 2025. New businesses have 90 days post-formation to register.
  • Federal Tax ID: Apply for a Federal Tax Identification Number (EIN) via the IRS website.
  • Trademarks and Patents: Register trademarks and patents through the United States Patent and Trademark Office to protect intellectual property.
  • Special Registrations: File as a nonprofit or S Corporation with the IRS using the designated forms.

State Registration

  • General Registration: Register in every state where you conduct business. This includes states with your physical presence, significant client interactions, substantial revenue, or employee base.
  • Specific State Requirements: Contact each state’s Secretary of State or similar agency. Check whether online registration is available or if hard-copy submissions are required.

Once your business is registered, the next crucial step is obtaining the appropriate licenses. This section outlines the processes involved in securing state and local licenses, providing you with a clear roadmap to ensure your business operates legally across various jurisdictions.

Do You Need a Business License or Business Permit?

Determining whether you need a business license is contingent upon several factors, including your business’s location, the industry in which it operates, and its specific activities.

For example, if your business is based in California and engages in selling physical goods, you will need a seller’s permit through the California Department of Tax and Fee Administration. Similarly, if you operate a food service business in Texas, you must obtain a food handler’s license from the Texas Department of State Health Services. In New York, if your business involves any form of construction or building, a contractor’s license issued by the NYC Department of Buildings is necessary. Additionally, businesses that deal with personal data in sectors like healthcare or financial services must comply with state-specific regulations, such as HIPAA in healthcare, which might require additional compliance certifications or licenses.

Guide to Business Licenses

To be clear, the reason you may encounter generic statements around where and how to acquire business license and permits is because it truly does vary by state and industry. I would recommend using the Small Business Administration’s state selector to get started. Simply select your state.

State and Local Licenses

  • Local Requirements: Many local governments require businesses, even home-based ones, to obtain a business license or permit to operate legally within their jurisdictions.
  • License Needs Assessment: Determine necessary licenses based on industry, location, and business activities.
  • Resource Utilization: Contact your local Chamber of Commerce office or state’s Department of Revenue for guidance.
  • Legal Consultation: Engage a state-licensed business attorney to ensure compliance with licensing requirements.

Specialty Licenses

  • Industry-Specific Licenses: Obtain necessary licenses from industry-specific agencies, required in sectors like healthcare, construction, and food services.
  • Environmental Permits: Acquire environmental permits if your business operations affect the environment.

Additional Considerations

  • Timeline Estimates: Federal registration typically takes 1-3 weeks. State registrations and obtaining licenses can vary significantly.
  • Cost Estimates: Costs range from minimal for federal registrations to several hundred dollars for licenses, depending on the type and locality.
  • Common Pitfalls: Avoid missed deadlines, incorrect submissions, and overlooking local regulations to prevent fines and legal issues.

Now, It’s Your Turn

By following the structured guidelines provided in this article and making use of the resources listed, you are well on your way to ensuring that your business complies with all necessary regulations. Regularly updating your knowledge of these requirements will keep your business operations uninterrupted.

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