How to Register a Business in the US: Complete Guide

Starting a business in the US is a dream for many entrepreneurs, but the registration process can be a daunting hurdle.

When you get it right, you’ll meet all legal requirements, avoid costly fines, and build a solid foundation for future growth. But miss a step, and you could face delays, penalties, or even risk shutting down before you get off the ground.

With the complexities of business registration, relying on guesswork isn’t enough. Our guide will help you avoid legal headaches and create a path to sustainable growth from day one.

Step 1: Choose your business structure

Selecting the right business structure is an important decision to make when starting your business. It affects your legal responsibilities, taxes, personal liability, day-to-day operations, and funding options.

Sole proprietorship

A sole proprietorship is the simplest form of business structure. It’s ideal for individuals who want to run their business alone and keep things uncomplicated. If you’re engaged in any kind of business activity without registering as another type of entity, you’re automatically considered a sole proprietor.

Unlike other business structures, a sole proprietorship does not create a separate legal entity. This means that there is no distinction between you and your business—your personal assets and liabilities are intertwined with those of your business.

As a result, you can be held personally liable for any debts or obligations your business incurs. For example, if your business is sued or cannot pay its debts, creditors can pursue your personal assets, including your home, car, or savings.

A sole proprietorship is easy and inexpensive to set up. You don’t need to register with the state, and you can operate under your own name or register a trade name, known as a DBA (Doing Business As).

However, raising capital can be challenging, as banks are typically hesitant to lend to sole proprietors, and you cannot sell stock or equity in your business.

• Pros: Full control, minimal paperwork, and low costs
• Cons: Unlimited personal liability, difficulty raising capital, and lack of continuity if the owner leaves

Partnership

A partnership is a business structure where two or more individuals share ownership and responsibilities. There are two common types of partnerships: Limited Partnerships (LP) and Limited Liability Partnerships (LLP), each offering different levels of liability and management control for the partners involved.

In a LP, one partner, known as the general partner, has unlimited liability and takes on most of the business management responsibilities. Other partners, called limited partners, have limited liability, meaning their personal assets are protected in the event of legal or financial troubles, but they also have limited control over day-to-day operations.

This type of structure allows passive investors to contribute capital without being involved in business decisions.

In contrast, a LLP offers protection to all partners, shielding them from personal liability for business debts or actions taken by other partners. Each partner retains some level of control and involvement in the business’s operations, making this a more equitable structure for professional groups, such as law firms, accounting firms, or medical practices.

• Pros: Shared responsibility, minimal paperwork, and pass-through taxation (profits are taxed on personal income)
• Cons: Shared liability, potential for disputes, and reliance on partner agreements

Partnerships can be a good fit for businesses that involve multiple owners, professional groups, or those who want to share responsibility while retaining flexibility in the business’s structure and operations.

Limited Liability Company (LLC)

An LLC combines the benefits of a corporation and a partnership. Owners, called members, are protected from personal liability, meaning their personal assets, such as houses or cars, are protected in most cases if the business faces lawsuits or bankruptcy.

By default, LLC profits and losses are passed through to the members, avoiding the double taxation seen in corporations. Members report business income on their personal tax returns, much like in a sole proprietorship or partnership.

While LLCs offer liability protection and flexible tax options, they also come with some drawbacks. For example, in many states, LLCs have a limited lifespan. If a member joins or leaves the LLC, the business may need to be dissolved and re-formed unless specific agreements are in place to handle ownership transfers.

Members of an LLC are considered self-employed and must pay self-employment taxes for Social Security and Medicare contributions.

• Pros: Personal liability protection, flexible tax options, and easier to manage than corporations
• Cons: Limited lifespan in some states, self-employment taxes, and more paperwork than sole proprietorships or partnerships

Best for medium- or high-risk businesses and owners looking to protect personal assets.

Corporation

A corporation is a separate legal entity from its owners, offering the strongest protection from personal liability.

There are two main types: C-Corp and S-Corp.

A C-Corp is the most common form of corporation and is characterized by its ability to raise capital through the sale of stock. It provides strong personal liability protection, meaning owners (shareholders) are not personally responsible for business debts.

C-Corps also have an independent existence, meaning the business can continue to operate even if the ownership changes. This structure makes it easier to attract investors and raise funds, which is one of the key reasons why larger businesses choose to form as C-Corps.

However, sometimes C-Corps face the drawback of double taxation: the business pays corporate taxes on its profits, and shareholders pay taxes again on dividends they receive. In addition, forming and maintaining a C-Corp involves significant paperwork, strict record-keeping, and compliance with state and federal regulations.

An S-Corp is a special type of corporation designed to avoid double taxation. Profits and losses are passed directly to shareholders’ personal tax returns, avoiding the corporate tax rate.

However, S-Corps must meet specific IRS eligibility requirements, such as having no more than 100 shareholders and only issuing one class of stock. Additionally, S-Corps are subject to many of the same regulatory requirements as C-Corps.

• Pros: Limited liability, easier to raise capital, and continuity
• Cons: More expensive to form, extensive record-keeping, and compliance requirements

Best for businesses looking to scale, raise significant capital, or go public.

See also: How to Scale a Startup Business in the US with Deel

Benefit Corporation (B Corp)

A B Corp is a for-profit corporation recognized in many US states that balances profit with mission. While similar to a traditional C corporation, a B Corp has additional accountability.

Shareholders hold the business responsible for creating a positive social or environmental impact alongside financial returns.

These corporations must often file annual benefit reports to ensure transparency regarding their public good contributions. Although third-party certifications exist, they are not required to establish a legal B Corp.

• Pros: Mission-driven accountability, enhanced transparency, and a positive brand image for socially responsible enterprises
• Cons: Additional reporting requirements (e.g., annual benefit reports), potential increased scrutiny from stakeholders, and varying legal requirements by state

Best for businesses that want to integrate social responsibility with profit and attract customers or investors focused on ethical practices.

Close Corporation

A Close Corporation is similar to a Benefit Corporation but with a simplified structure, designed for smaller businesses.

It avoids many of the formalities typical of larger corporations, such as the need for a board of directors. Close Corporations have restrictions on the public trading of shares and are often governed by a small group of shareholders, giving it a more flexible governance model.

• Pros: Simplified management structure, fewer formalities compared to traditional corporations, and flexibility in operations
• Cons: Shares are typically not publicly traded, limited to a small number of shareholders, and state regulations can vary

Best for small businesses or family-owned companies seeking a less formal corporate structure with more control retained by the owners.

Nonprofit Corporation

A Nonprofit Corporation is organized to pursue activities that benefit the public, such as charity, education, or scientific research. Nonprofits can apply for tax-exempt status under IRS code 501(c)(3), allowing them to avoid paying federal and state income taxes.

While nonprofit corporations operate similarly to traditional corporations, they are bound by rules that prevent profits from being distributed to members or political campaigns. Nonprofits must also comply with strict guidelines to maintain their tax-exempt status.

• Pros: Tax-exempt status, eligibility for grants and donations, and a focus on public service or charitable goals
• Cons: Strict regulations on profit distribution, detailed reporting requirements to maintain tax-exempt status, and limited to specific organizational purposes

Best for organizations focused on charitable, educational, or public service missions that seek tax-exempt status and are prepared to comply with regulatory requirements.

Cooperative

A Cooperative is a business structure owned and operated by its members for mutual benefit. Profits and earnings are shared among the members, who also have voting rights, ensuring democratic control of the cooperative's operations.

Typically, cooperatives have an elected board of directors and officers to manage the business, but each member has equal voting power, regardless of the number of shares they hold.

Members often purchase shares to join the cooperative, but their vote’s weight remains uniform, encouraging equality.

• Pros: Shared profits among members, democratic decision-making process, and member-focused services
• Cons: Can be complex to manage with many members, profit-sharing may reduce individual earnings, and decision-making can be slower due to collective input

Best for groups of individuals or businesses that want to pool resources, share profits, and have a say in business operations through a democratic process.

Key considerations

When deciding on a structure, keep these factors in mind:

• Tax implications: Sole proprietorships, partnerships, and LLCs often benefit from pass-through taxation, while C-Corps face corporate tax rates
• Liability: Protect your personal assets by opting for structures like LLCs or corporations, especially if your business faces significant risks
• Management: Consider how you want to manage your business. Sole proprietorships offer full control, while corporations require a board of directors

Step 2: Register your business name

A distinct name helps create a memorable identity while avoiding potential legal issues. If your name is too similar to another company’s, you may face trademark disputes, which could result in costly litigation or even force you to rebrand.

For most small businesses, registering at the state level is the primary and often only requirement, especially if your business operates solely within a specific state.

State registration is typically handled through the Secretary of State’s office or equivalent business bureau.

This process establishes your business as a recognized legal entity within that state, allowing you to operate under your chosen business structure—whether it’s a sole proprietorship, LLC, partnership, corporation, or nonprofit.

When to register at the state level:

• Your business has a physical presence in the state (e.g., an office, retail store, or warehouse)
• Your employees are working within the state
• You meet with clients or conduct a significant portion of your business activities within the state
• You generate a large percentage of revenue from customers based in the state

Each state has its own set of requirements and fees for registration. Some states also have specific regulations regarding business names, including ensuring that no other business in the state has the same or a confusingly similar name.

Additionally, certain states may require you to appoint a registered agent, which is a person or entity responsible for receiving official legal documents on behalf of your business.

If your business intends to expand or operate in multiple states, you'll also need to register in those additional states under a process known as foreign qualification. This involves filing a Certificate of Authority in each state where you plan to operate and may require a Certificate of Good Standing from your home state, along with paying the applicable fees.

While most businesses can function with just state-level registration, some situations require federal registration, especially if your business will operate across state lines or internationally. Federal registration provides broader protections and compliance with federal laws that may apply to your business.

When to register at the federal level:

• You plan to operate your business nationwide or internationally, where your brand presence and name must be protected across all states
• Your business engages in regulated activities, such as providing financial services, dealing with firearms or alcohol, or operating in industries that require federal oversight
• You want to secure a trademark for your business name, logo, or slogan to protect your intellectual property across the US

Registering your business at the federal level involves additional steps:

Trademark registration: If protecting your brand is essential, registering your business name or logo with the United States Patent and Trademark Office (USPTO) gives you exclusive rights to use that name across all 50 states. This is particularly important if you’re worried about other businesses infringing on your intellectual property.

Federal Tax ID (EIN): Most businesses, especially those hiring employees, need to register with the IRS to obtain an Employer Identification Number (EIN). This number is used for tax reporting purposes and other federal filings.

Reporting requirements: As of January 1, 2024, many companies in the US will be required to report beneficial ownership information under the Corporate Transparency Act of 2021. Companies must disclose the individuals who ultimately own or control the business to the Financial Crimes Enforcement Network (FinCEN). This reporting is mandatory for existing companies by January 1, 2025, and for newly created companies, within 90 days of business formation.

Failure to comply with federal requirements could result in legal penalties or limitations on how you operate your business, making federal registration a crucial step for expanding businesses or those operating in heavily regulated industries.

Before committing to a business name, it’s essential to confirm that it's available. Two tools can help with this:

USPTO database: Use the USPTO Trademark database to search for any federally registered trademarks that may conflict with your name.

State-specific registries: Check your state’s business registry to ensure no local businesses have already claimed your desired name. Each state has its own process, so consult the appropriate resources for your location.

Running these searches early prevents potential legal challenges and allows you to secure a name that reflects your brand identity.

Once you’ve settled on a name, consider registering it as a trademark to protect it on a national level. Trademarking your business name provides exclusive rights to its use within your industry, ensuring no other businesses can legally adopt or use it.

The process involves submitting an application to the USPTO, which includes a review period to confirm your name is unique. Registering your trademark also strengthens your legal standing if future conflicts arise over the name.

Step 3: Obtain an Employer Identification Number (EIN)

An EIN is a unique nine-digit number issued by the IRS, functioning as a business’s federal tax ID. Just like an SSN for individuals, an EIN is used by businesses to identify themselves when paying taxes, filing tax returns, and conducting other official business activities.

Obtaining an EIN is important for several reasons:

• If your business is required to file federal taxes, an EIN is necessary
• You'll need an EIN to hire and pay employees, as well as to report employment taxes
• Most banks require an EIN to open a business account. Additionally, an EIN is often needed when applying for certain licenses and permits
• If your business is structured as a corporation, partnership, or LLC, you are legally required to have an EIN. Even if you operate as a sole proprietor, getting an EIN can separate your personal and business finances, which simplifies tax filings and protects against identity theft

The IRS offers several methods to apply for free:

Online application

The fastest way to get your EIN is through the IRS EIN Assistant. Here's how to apply for an EIN online:

• Visit the IRS website and use the EIN Assistant tool
• Complete the application by providing your business name, structure (LLC, corporation, etc.), your name, Social Security Number (SSN), and your "Doing Business As" (DBA) name, if applicable
• Once your information is verified, you'll receive your EIN immediately, ready for use

Mail or fax application

If you prefer, you can apply for an EIN by mail or fax:

• Download and fill out Form SS-4, available on the IRS website
• Mail the form to the IRS address listed on the instructions or fax it to the appropriate number
• Processing times can take up to four weeks by mail or four business days by fax

Telephone application

For international applicants, you can apply by calling the IRS at +1 (267) 941-1099. You'll need to provide the same details as required in the form, and your EIN will be issued over the phone.

Not all businesses are required to have an EIN. Sole proprietors without employees may not need one, as they can use their SSN for tax purposes.

However, many sole proprietors still opt for an EIN to maintain separation between personal and business finances, enhance privacy by not using their SSN in business transactions, a simplify tax filings if they plan to grow the business or hire employees in the future.

Step 4: Register with state and local authorities

To legally operate your business in the US, you’ll need to register with your state's Secretary of State or an equivalent office, depending on your business structure and location. This registration process formalizes your business as an LLC, corporation, or partnership, and ensures you’re compliant with state laws.

Here’s how to register:

1. Choose a business structure (LLC, corporation, partnership, etc.) and ensure your business name complies with state naming rules
2. Submit required documents to the Secretary of State’s office. Typically, this includes your business name, physical location, registered agent information, ownership details, and management structure
3. Pay the filing fees, which vary depending on the state and business structure, and can go up to $300
4. Receive your state-issued business certificate confirming your registration, which you'll need for legal compliance and obtaining permits or bank accounts

In addition to state registration, most businesses must secure local permits and licenses. Requirements vary by location, industry, and the nature of your business. For instance, restaurants may need health department permits, while construction businesses might require zoning permits.

Start by researching specific licenses based on your industry. Local governments may require businesses to register a DBA name, or fictitious name—visit your local government’s website or office to determine which permits or licenses apply to your business. Submit your application for the necessary licenses, and pay any associated fees. Some cities may have business operating licenses, especially for brick-and-mortar stores.

Be sure to keep permits up to date by renewing them annually or as required by local regulations.

If your business sells goods or services that are subject to state sales tax, you'll need to register with your state's Department of Revenue to collect and remit sales taxes.

Follow these steps to register:

1. Gather essential business information such as your EIN, business location, and ownership details
2. Visit your state’s Department of Revenue website and navigate to the "Sales and Use Tax" section to start your registration
3. Submit your sales tax permit application online or by mail. After processing, you’ll receive a sales tax ID number, which allows you to begin collecting sales tax from customers
4. Some states are part of the Streamlined Sales and Use Tax Agreement (SSUTA), simplifying the registration process for businesses operating in multiple states. If your state participates, consider using the Streamlined Sales Tax Registration System (SSTRS) for easier multi-state tax compliance

Each state has unique sales tax rules. Register before collecting any taxes, and always review your local tax obligations to avoid penalties.

See also: How to Register a Foreign Entity With Deel

Step 5: Understand federal and state tax obligations

Federal tax obligations

When you register a business in the US, it’s essential to understand the federal tax system. At the federal level, taxes include income tax, self-employment tax, payroll taxes, and sometimes excise taxes, depending on your industry.

The type of business entity you choose (LLC, S-Corp, sole proprietorship, etc.) will affect how your federal taxes are calculated. For example, sole proprietors and partners in a partnership will need to pay self-employment taxes to cover Social Security and Medicare contributions.

Corporations, on the other hand, may be subject to different tax brackets and payment schedules. Always stay aware of your tax filing deadlines to avoid penalties from the IRS.

State tax obligations

State tax laws can vary widely across the US, so it's crucial to research your specific state's obligations. Some states, like Texas, don’t impose personal income tax but may have business taxes like the franchise tax. Others, like California and New York, have both personal and corporate income taxes.

You may also encounter property taxes, sales taxes, or excise taxes on certain goods and services. For example, while Tennessee has no personal income tax, it compensates with one of the highest sales tax rates in the country. Consult your state’s Department of Revenue for specific guidelines.

Here are a few tips to stay on top of your tax obligations:

• Set reminders for federal and state tax filing dates
• Review your financial statements regularly to ensure you're making the correct quarterly tax payments
• Use tools such as Deel’s Compliance Hub to ease the process

Deel’s platform actively monitors and updates you on tax regulations and compliance changes across 150 countries. With its automated compliance alerts and real-time insights, you can stay ahead of changes, avoid penalties, and manage tax obligations more efficiently.

For example, Deel’s Workforce insights will notify you about expiring visas, misclassification risks, and non-compliance with tax laws—tailored to your specific business needs. This ensures you not only meet US tax regulations but also stay compliant across international markets.

See also: US Payroll Taxes: Your State-by-State Guide

Step 6: Open a business bank account

Setting up a separate bank account for your business helps keep your personal and business finances separate, safeguarding your personal assets. If your business faces legal issues, having a separate account helps protect your personal wealth from being used to cover business liabilities.

A dedicated business account also makes managing your company's finances simpler. It streamlines tracking income and expenses, making tax filing and financial planning more straightforward.

When selecting a bank for your business, consider the following:

• Look for an account with low or no fees. Compare transaction fees, account maintenance fees, and any penalties for overdrafts
• Choose an account that offers the features you need, such as online banking, high-interest savings, or a line of credit. If your business handles credit card transactions, look for a bank with good merchant services
• Ensure the bank provides convenient access to your funds through physical branches, ATMs, or online banking

To open your business bank account, you'll generally need the following:

• EIN: Essential for LLCs and corporations; sole proprietors may use their Social Security number
• Business formation documents: Include your articles of organization or operating agreement
• Ownership agreements: Documentation detailing each owner's share in the business, if applicable
• Business license: Proof that your business is legally registered and licensed to operate

Step 7: Apply for business insurance

Applying for business insurance might seem complex, but having it will help protect your business from unforeseen events and provide peace of mind as it grows.

Here's a guide to the types of coverage every business should consider.

Different industries may have unique insurance needs. For example:

• Construction: Might need coverage for on-site injuries and equipment
• Healthcare: Requires malpractice insurance for medical professionals
• Retail: Needs product liability and property insurance for inventory

Check state-specific regulations and industry standards to ensure compliance and comprehensive protection.

Here’s how to choose an insurance provider:

1. Identify potential risks specific to your business and industry. This includes evaluating hazards related to your location, operations, and products
2. Seek out a licensed insurance agent with experience in your industry. Look for someone who understands your specific needs and can provide tailored advice
3. Compare quotes from multiple insurance providers. Evaluate coverage options, terms, and costs to find the best fit for your business
4. As your business grows and evolves, so do your insurance needs. Regularly review and adjust your coverage to ensure it aligns with your current operations and risks

Step 8: Set up accounting and record-keeping systems

Maintaining accurate financial records is important for meeting IRS and state requirements, accessing timely financial data to guide your business strategy, and monitoring cash flow, profitability, and growth

These tools can help you streamline your accounting processes:

• QuickBooks: A comprehensive solution known for its integration capabilities and ease of use
• Xero: Offers a user-friendly interface with strong reporting features
• FreshBooks: Ideal for service-based businesses with its invoicing and expense tracking features
• Wave: A free tool that covers basic accounting needs, perfect for startups

For businesses using Deel for managing contractors or international employees, Deel’s accounting integrations can simplify your financial management. It integrates with popular accounting software like QuickBooks and Xero, allowing for seamless syncing of invoices and expense files.

This integration helps ensure that your financial records are accurate and up-to-date, saving you time and reducing manual entry errors.

To stay organized with your accounting process:

• Choose an electronic system for efficiency and accessibility, ensuring records are complete for audits
• Record daily transactions promptly to avoid backlog and maintain accuracy
• Keep separate accounts for different transactions like sales and expenses
• Track all financial transactions using a business checkbook
• Record detailed entries in journals and summarize them in ledgers
• Use a depreciation worksheet to monitor asset depreciation over time
• Maintain employee records for compensation and benefits
• Summarize daily and monthly cash inflows through cash receipts
• Track all outgoing payments using a disbursements journal
• Maintain accurate records of employee salaries and benefits
• Regularly review your accounting system to ensure it meets your business’s needs

See also: How Can I Expand My Business in the US: 3 Options for Startups

Common pitfalls to avoid

Registering a business in the US can be a complex process, especially if you’re new to the system. Mistakes during registration can have significant legal and financial consequences.

Here are some common pitfalls to avoid:

Using an obscure business name: A difficult-to-remember or pronounced name can limit brand visibility and make it harder for customers to find or recommend you. Choose a clear, memorable name that reflects your business, and ensure it's unique to avoid legal issues.

Choosing the wrong business entity: Selecting the wrong structure can increase risk and affect taxes. Understand the pros and cons of each entity and consult a legal or financial expert to pick the right one.

Registering in the wrong state: Each state has different regulations and taxes, and registering in the wrong one can increase costs. Research state requirements and consider business-friendly states like Delaware, Wyoming, or Nevada.

Misunderstanding tax obligations: Failing to comply with US tax laws can result in fines and penalties. Work with a tax professional and set up an accounting system to manage your tax filings accurately.

Failing to obtain necessary licenses and permits: Operating without proper licenses can result in fines or even shutdowns. Determine which licenses and permits are necessary for your industry and location. Regularly review and renew licenses and permits as required.

Hiring a low-cost agent for registration: Cheap services can lead to incomplete filings or hidden fees. Choose a reputable agent and review all documentation to ensure accuracy.

Making mistakes during business registration can have serious repercussions. For example, errors in registration or compliance can lead to legal disputes, fines, or even business dissolution. Even mistakes can result in unexpected expenses, including penalties, higher taxes, or the cost of correcting errors, while non-compliance with regulations can disrupt your business operations and affect your reputation.

Register your business in the US with confidence

By following the steps outlined in our guide, you’ll ensure your business meets all legal requirements, avoids costly mistakes, and sets a strong foundation for future success.

To make this process effortless, use Deel’s US services:

• Deel Entity Setup: Streamline entity setup with expert handling of complexities for smooth global expansion
• Deel PEO: Offload compliance risks and HR admin to Deel PEO for easy management of your US team across all states
• Deel EOR: Quickly hire and onboard employees in 150+ countries with Deel’s secure EOR services, including payroll, tax, and compliance
• Deel US Payroll: Manage accurate, compliant payroll and benefits across all states with Deel’s integrated platform

Schedule a 30-minute platform demo with an expert for a platform walk-through and Q&A.