The main legal steps to start a small business in the United States: business structure, registration, EIN, licenses and permits, taxes, zoning, insurance, contracts and, once you hire, employer obligations.
| Structure | Key points |
|---|---|
| Sole proprietorship | Simplest; no separate legal entity; owner is personally responsible for debts |
| Partnership | Two or more owners; a written partnership agreement is strongly recommended |
| Limited liability company (LLC) | Separate entity that can limit personal liability; flexible tax treatment |
| Corporation (C or S) | Separate entity with more formalities; S corporation is a tax election with eligibility rules |
The right structure depends on liability, taxes, how many owners you have and your plans for growth. Many small business owners talk to an accountant or attorney before deciding.
See how EZTime works for your industry, from time tracking to shift scheduling.
LLCs and corporations are formed by filing documents, such as articles of organization or incorporation, with the state, usually the secretary of state. Sole proprietors and partnerships operating under a name other than the owners’ legal names often need to register a trade name, sometimes called a DBA, with the state or county. Check that your chosen name is available and does not conflict with an existing trademark.
An Employer Identification Number from the IRS identifies your business for federal tax purposes. You need one if you have employees, operate as a corporation or partnership and in several other situations, and banks often ask for one to open a business account. The IRS issues EINs free of charge.
Beyond federal income tax, most businesses must register with state tax agencies. If you sell taxable goods or services, you will likely need a sales tax permit and must collect and remit sales tax. Some states and cities have gross receipts or business privilege taxes. Learn your filing deadlines, including estimated tax payments, and keep organized records from day one.
Before signing a lease or running a business from home, confirm that zoning allows your activity at that address. Some businesses also need environmental, waste or parking approvals. Lease terms, landlord rules and homeowners’ association rules can add further restrictions.
Insurance needs depend on your industry. Common policies include general liability, professional liability, commercial property, commercial auto and, once you hire, workers’ compensation, which most states require for employees. Clients, landlords and lenders may require specific coverage.
Use written contracts with customers, suppliers and partners. Protect your brand by checking trademarks before you commit to a name and consider registering your own. Add clear terms of service and a privacy policy if you sell online or collect customer data, and follow the privacy and consumer protection laws that apply to your business.
Read hiring your first employee, the new-hire paperwork checklist, the federal employment laws guide and time record retention requirements.
| Item | Done? |
|---|---|
| Business structure chosen | |
| Entity formed or trade name registered | |
| EIN obtained | |
| Local and state licenses and permits | |
| Sales and other tax registrations | |
| Zoning confirmed | |
| Insurance in place | |
| Business bank account opened | |
| Contracts and terms prepared | |
| Employer registrations (if hiring) |
Many businesses start at home. Even then, you may need a local business license or home occupation permit, and some activities, such as preparing food for sale, have specific rules. Check whether customer visits, signage, deliveries or employees working at your home are allowed, and review your homeowners or renters insurance, since it often excludes business activities. Cottage food laws in many states allow limited sales of certain homemade foods under special conditions.
Legal setup is not a one-time task. Licenses, permits and registrations often need annual renewal, minimum wages change, and new local rules appear. Keep a calendar of renewal dates and filing deadlines, review your obligations each year and whenever you add a location, start selling in a new state or hire your first employee in a new place.
Once you hire, EZTime helps with day-to-day employer obligations: an accurate time clock and records for hours worked, labor rule alerts for overtime and breaks, digital HR forms with e-signatures for onboarding paperwork and a digital employee file with expiry reminders for licenses and certifications. See EZTime for small business owners.
Usually a business structure, state registration if required, an EIN, licenses and permits, tax registrations, zoning approval and insurance.
No. Sole proprietorships are legal in every state, but an LLC can help limit personal liability. Get advice for your situation.
You need one if you have employees or operate as a partnership or corporation, among other cases. Many banks also ask for one.
It depends on your activity and location. Check with your city, county and state licensing agencies.
You take on payroll tax, I-9, new-hire reporting, unemployment insurance, workers’ compensation, posting and wage and hour obligations.
EZTime keeps hours, breaks and employee documents in order from your first hire.