Business Registration Steps

Why This Matters

When you're launching a new business, registration isn't just bureaucratic box-checking—it's the legal architecture that determines how much personal risk you carry, how you'll be taxed, and whether you can scale. Every structure choice, every filing, and every permit creates a framework that either protects you or exposes you to liability. Understanding why each step exists helps you make strategic decisions rather than just following a checklist.

You're being tested on the sequencing of registration, legal entity distinctions, and compliance requirements that separate legitimate businesses from informal operations. Don't just memorize that you need an EIN—know that it's the gateway to separating personal and business identity. Don't just know you need licenses—understand that they represent government authorization to operate in regulated spaces. Master the logic behind each step, and you'll handle any scenario an exam throws at you.

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Legal Entity Formation

Before you can do anything else, you must establish your business's legal identity. This foundational step determines your personal liability exposure, tax treatment, and ability to raise capital—everything else flows from this choice.

Choose a Business Structure

• Liability protection varies dramatically—sole proprietorships offer zero separation between you and the business, while LLCs and corporations create a legal shield protecting personal assets
• Tax treatment differs by structure—corporations face potential double taxation (corporate + dividend), while pass-through entities like S-corps and LLCs report income on personal returns
• Investor appeal depends on structure—corporations can issue stock and attract venture capital, while sole proprietorships limit your fundraising options significantly

Register with the Secretary of State

• Required for LLCs and corporations—you must file formation documents (Articles of Organization or Articles of Incorporation) to legally create these entities
• Filing fees and ongoing requirements—expect initial costs plus annual report obligations to maintain good standing status
• State selection matters—Delaware and Nevada offer business-friendly laws, which is why many companies incorporate there regardless of where they operate

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Business Identity and Branding

Once your legal structure exists, you need to establish your business's unique identity in the marketplace and with government agencies. These steps create your official presence and prevent conflicts with existing businesses.

Select and Register Your Business Name

• Uniqueness is legally required—your state won't register a name already in use, and trademark conflicts can force expensive rebranding
• Name registration happens at the state level—file a Doing Business As (DBA) or trade name registration with appropriate authorities
• Digital presence matters—secure your domain name immediately, as online identity is often as valuable as legal registration

Obtain an Employer Identification Number (EIN)

• Your business's Social Security number—the EIN is the federal tax ID that identifies your entity to the IRS and financial institutions
• Free and immediate through IRS.gov—no cost to obtain, and online applications generate your number instantly
• Required for key business activities—you cannot open a business bank account, hire employees, or establish business credit without an EIN

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Tax and Compliance Setup

Government agencies need to know you exist so they can collect appropriate taxes and ensure you're operating within legal boundaries. These registrations connect your business to federal, state, and local tax systems.

Register for State and Local Taxes

• Tax types vary by business activity—sales tax applies if you sell goods, income tax applies to profits, and some localities add business privilege taxes
• Registration creates your tax accounts—you'll receive account numbers and filing schedules from state revenue departments
• Deadlines are non-negotiable—missing tax filings triggers penalties and interest, making accurate record-keeping essential from day one

Apply for Business Licenses and Permits

• Authorization to operate legally—licenses prove you've met government standards for your industry (health permits, professional licenses, zoning approvals)
• Requirements vary by location and industry—a restaurant needs health department approval; a contractor needs state licensing; a home business needs zoning clearance
• Renewal is ongoing—most licenses expire annually and require fees plus proof of continued compliance

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Financial Infrastructure

Separating your business finances from personal accounts isn't just good practice—it's essential for maintaining your liability protection and demonstrating legitimate business operations.

Open a Business Bank Account

• Maintains the corporate veil—commingling personal and business funds can pierce your liability protection, exposing personal assets to business debts
• Requires your formation documents—banks need your EIN, business license, and Articles of Organization/Incorporation to open accounts
• Enables professional operations—business accounts provide merchant services, credit lines, and financial tracking that personal accounts can't offer

Obtain Business Insurance

• Risk transfer mechanism—insurance shifts potential losses from your business to the insurer in exchange for premium payments
• Coverage types match your risks—general liability covers customer injuries, professional liability covers service errors, property insurance covers physical assets
• Often legally required—workers' compensation is mandatory in most states once you hire employees; some contracts require proof of insurance

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Employer Obligations

If your business will have employees, additional registration requirements kick in. These protect workers and ensure proper tax withholding and workplace safety compliance.

Register for Employer Requirements

• Multiple agency registrations required—you must register with state unemployment insurance, workers' compensation systems, and potentially federal programs
• Payroll tax obligations begin immediately—employers must withhold income taxes, Social Security, and Medicare from employee wages
• Record-keeping is legally mandated—maintain I-9 forms, W-4s, and payroll records; violations carry significant penalties

Comply with Industry-Specific Regulations

• Regulated industries face additional scrutiny—healthcare, finance, food service, and childcare have specialized licensing and compliance requirements
• Regulations change frequently—staying current requires ongoing monitoring of federal, state, and industry-specific rule changes
• Non-compliance risks everything—violations can result in fines, license revocation, or forced business closure

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Quick Reference Table

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Self-Check Questions

1. Which two registration steps are most critical for maintaining the liability protection that an LLC provides, and why do they work together?

2. A new entrepreneur files Articles of Organization but skips obtaining an EIN. What specific business activities will they be unable to complete, and what risks does this create?

3. Compare and contrast state business name registration with federal trademark protection—when would a business need both, and what does each protect against?

4. If an FRQ asks you to outline the steps for a service business hiring its first employee, which registration requirements become mandatory that weren't required before?

5. Why must business structure selection happen before most other registration steps? Identify at least three subsequent steps that depend on this initial choice.