File formation documents with the Secretary of State
Legal entities are created by filing formation documents with the department that handles business filings for that state. In many states, this is the Secretary of State’s office.
Some states require additional filings or steps at the time of formation, such as publishing a notice in a local newspaper or filing an initial report.
Obtain your federal tax identification number
Also called an employer identification number or EIN, a federal tax ID number is issued by the IRS to identify your business entity for tax purposes, including filing federal business tax returns.
Most legal entities need an EIN regardless of whether they have employees.
Fulfill internal corporate requirements
Legal entities must comply with governance requirements that may be imposed by state statute, the entity's formation documents, or their internal governing documents.
Corporations are subject to more extensive statutory requirements, such as holding annual meetings, maintaining meeting minutes, and adopting corporate bylaws.
While many corporate formalities are not legally required for LLCs, they are considered best practices and are highly recommended to maintain liability protection.
For more information, see The Corporation Handbook and The LLC handbook.
Register a fictitious business name
Operating under a name other than the legal business name typically requires completing a "doing business as" (DBA) filing, also called an assumed name or fictitious name filing.
DBA registration requirements vary by location. Some states handle DBA filings at the state level, while others require registration at the county or local level. If you plan to use a DBA, you may need to file it in each jurisdiction where you operate.
Open a business bank account and obtain a business credit card
Businesses should maintain their own bank account separate from the owners’ personal accounts. Owners must not use the entity’s bank account for personal purposes. Contact your bank to confirm the documentation required to open a business account. For legal entities, this will include the formation documents and EIN.
Also, consider obtaining a business credit card. A line of credit can reduce the number of times your business must prepay for products and helps to establish a credit history for the business.
Note: When a company (the subsidiary) is owned by another company (the parent), the subsidiary’s assets should be kept separate from the parent’s. The subsidiary should maintain its own bank account and its own books and records.
Obtain state tax ID
Whether your business needs a state tax ID number depends on your state tax obligations. These vary by state and local jurisdiction.
Check your state's Department of Revenue website or consult with an accountant to determine what registrations and tax IDs your business requires.
Complete payroll tax registration
Businesses with employees must establish the proper payroll tax accounts and identification numbers in each state where they have employees.
State Unemployment Tax (SUTA) registration:
Register for your state unemployment tax account, which may be called SUTA, unemployment insurance, or unemployment tax depending on your state. Employers pay these taxes into a fund that provides benefits to unemployed workers. Registration is typically handled through your state's Department of Labor or Department of Revenue.
New hire reporting:
Federal law requires all employers, even those with just one employee, to report new hires to their state's designated agency.
Additional considerations:
- Obtain state withholding tax ID numbers if required in your state
- Register for workers' compensation insurance (required in most states)
- Verify local payroll tax requirements (if applicable)
File for foreign qualification
If your entity conducts business in a state other than the one in which it was formed, it will have to file for foreign qualification in those other states.
The state where you create your business entity recognizes it as a domestic entity, while any other state regards it as a foreign entity. Foreign qualification is the process through which a business entity receives authorization to legally conduct business in a state where it was not originally formed.
You will also need to obtain a registered agent located in each state where you register as a foreign entity.
For more information, see Guide to foreign qualification and What constitutes doing business.
Obtain the necessary business licenses and/or permits
Most businesses need licenses or permits to operate legally. These are usually issued at the state and/or local level.
Certain businesses and professions have additional regulatory requirements beyond basic business licensing. These may include specialized licenses, certifications, or registrations at the federal, state, or local level.
For more information, see Understanding business license requirements and obligations.
