Starting a business in the United States means clearing three separate layers of government paperwork: an Employer Identification Number (EIN) from the IRS, entity registration with your state, and the business licenses, permits, and state registrations that authorize your specific activity at the federal, state, or local level. Miss any layer and you risk fines, forced closures, or the loss of the liability protection your business structure was supposed to provide.
The Employer Identification Number
An EIN is a nine-digit number the IRS assigns to businesses, nonprofits, trusts, and estates for tax purposes. It functions like a Social Security number for the entity. Under 26 U.S.C. ยง 6109, anyone required to file a federal return or statement must include a tax identification number so the IRS can track who owes what.1Office of the Law Revision Counsel. 26 USC 6109 – Identifying Numbers
Not every business needs one. A sole proprietor with no employees and no excise tax filings can use a personal Social Security number. An EIN is required if any of the following applies:
- You have employees or plan to hire them.
- Your business is a corporation, partnership, or multi-member LLC.
- You file excise tax returns or alcohol, tobacco, and firearms taxes.
- You withhold taxes on non-wage income paid to a non-resident alien.
Trusts, estates, nonprofits, and retirement plans also need their own EINs.2Internal Revenue Service. Employer Identification Number
How to Apply
Applying is free. The IRS online application walks you through a short questionnaire and issues the number at the end. Fax and mail applications are slower alternatives. Third-party sites that charge a fee for this service are marketing, not government: the IRS never charges for an EIN.3Internal Revenue Service. Get an Employer Identification Number
When You Need a New EIN
An EIN stays with the entity it was assigned to and doesn’t get renewed. But certain structural changes require a fresh number. Sole proprietors need a new EIN if they incorporate, form a partnership, or declare bankruptcy. Corporations need one when they receive a new charter, convert to a partnership or sole proprietorship, or merge into a newly created corporation. LLCs need a new EIN if they dissolve and re-form as a different entity type. Whenever the legal identity of the business fundamentally changes, the old EIN no longer applies.4Internal Revenue Service. When to Get a New EIN
What Your EIN Unlocks
Beyond tax filings, the EIN is the credential that opens most other business relationships. Banks require it before opening a commercial checking or savings account. Under the Bank Secrecy Act’s Customer Identification Program, financial institutions must verify the identity of every business entity that opens an account, and the EIN is typically the first piece of documentation they request.5FFIEC BSA/AML Examination Manual. Assessing Compliance with BSA Regulatory Requirements – Customer Identification Program The same applies to business credit cards and commercial loans.
Your EIN also appears on every W-2 you issue to employees and every 1099 you send to contractors. Getting it wrong on those forms triggers IRS penalties that scale with how long you wait to fix the error. For returns due in 2026, the penalty starts at $60 per incorrect return and can climb to $340 per return if you miss the August 1 correction window. Intentional disregard pushes the penalty to $680 per return.6Internal Revenue Service. Information Return Penalties
Registering Your Business With the State
The EIN doesn’t create your business as a legal entity. That happens at the state level, usually through the secretary of state’s office. Corporations file articles of incorporation. LLCs file articles of organization. Names vary by state, but the purpose is the same: establish a legal entity separate from its owners, with a governance structure and a name on the public record.
Every state requires the registered name to be distinguishable from existing entities on file. If the name you want is taken, you’ll need to pick something different or add a distinguishing word before the state will accept your filing.
Registered Agent
Every corporation and LLC must designate a registered agent in its formation state. The agent receives legal documents and government notices on the business’s behalf, including lawsuit papers, tax correspondence, and compliance reminders. The agent must be at least 18, keep a physical street address in the state (not a P.O. box), and be available during normal business hours. An owner can serve as registered agent, or you can hire a commercial service.
Formation Fees and Annual Reports
State filing fees for a new LLC or corporation generally run between $50 and $500, depending on the state and entity type. Expedited processing costs more. After formation, most states require an annual or biennial report confirming the business is still active and that its address and officer information are current. Annual report fees typically range from nothing to around $500, and some states also impose franchise or privilege taxes on top.
Skipping these reports is one of the most common compliance failures, and the consequences are harsh. The state can administratively dissolve the entity, stripping away the limited liability protection that separated the owners’ personal assets from business debts. A dissolved company loses good standing, can forfeit exclusive rights to its name, and may find its bank accounts frozen. Reinstatement usually requires filing every delinquent report and paying back fees and penalties, and the longer the lapse runs, the more expensive the fix.
Operating in More Than One State
A business formed in one state that starts operating in another typically needs to “foreign qualify” in that second state by filing a certificate of authority. “Foreign” here doesn’t mean international. It means any state other than the one where the entity was originally formed.
What counts as “doing business” varies, but common triggers include maintaining a physical office or storefront, employing workers there, or regularly accepting orders from customers in that state. Most states also list activities that don’t count, like holding a bank account or shipping goods through the state in interstate commerce.
Skipping foreign qualification creates real problems. The business typically loses the right to file lawsuits in that state’s courts, so unpaid invoices and breach-of-contract claims become unenforceable there. States can impose retroactive fees, penalties, and interest for every year the business operated without authorization. If the state catches the violation, it can issue a cease-and-desist order shutting down operations until the business comes into compliance.
Doing Business Under a Different Name
A “doing business as” name, or DBA, is any name a business uses publicly that differs from its legal name. For a sole proprietor, the legal name is the owner’s personal name. For an LLC or corporation, it’s whatever appears on the formation documents. If the business operates under anything else, most states require a DBA filing, sometimes called a fictitious business name statement or assumed name certificate. The filing is usually handled at the county clerk’s office. Banks routinely require proof of DBA registration before opening an account under a trade name. There’s no limit on how many DBAs one entity can register, as long as each is properly filed.
Federal Licenses and Permits
Certain industries need federal permission before they can operate at all, on top of any state and local credentials. The agency depends on the activity:
- Alcohol manufacturing or wholesale: Alcohol and Tobacco Tax and Trade Bureau (TTB)
- Firearms, ammunition, and explosives: Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)
- Broadcasting (radio, television, satellite): Federal Communications Commission (FCC)
- Aviation operations or maintenance: Federal Aviation Administration (FAA)
- Commercial fishing: National Oceanic and Atmospheric Administration (NOAA)
- Agriculture (importing animals or plants across state lines): U.S. Department of Agriculture (USDA)
- Mining or drilling on federal land: Bureau of Safety and Environmental Enforcement
- Nuclear energy: U.S. Nuclear Regulatory Commission
Fees and requirements vary by agency, and most federal licenses carry renewal obligations. Track expiration dates and confirm renewal requirements directly with the issuing agency.7U.S. Small Business Administration. Apply for Licenses and Permits
State and Local Licenses and Permits
Below the federal layer, states and municipalities regulate a much broader range of activities. Construction, restaurants, retail, dry cleaning, plumbing, farming, and vending machines are all commonly licensed at the state or local level.7U.S. Small Business Administration. Apply for Licenses and Permits Many cities also require a general business license or business tax certificate simply to operate within city limits, even when the underlying activity isn’t specially regulated.
Professional and occupational licenses add another layer. Food service, childcare, healthcare, and similar fields typically need health department clearances or industry-specific certifications before they can open, often involving inspections, background checks, and proof of training or education.
Zoning and HOA Rules
Every license application will need to show that the business location is properly zoned for the intended activity. Commercial businesses in commercial zones rarely have trouble. Home-based businesses hit zoning friction constantly. Most residential zoning ordinances allow small, non-polluting home businesses but impose restrictions on signage, customer foot traffic, noise, and the share of the home used for business purposes.
Homeowners in subdivisions or condominium complexes face an extra hurdle. Covenants, conditions, and restrictions imposed by a homeowners association are often stricter than city zoning rules and tend to be enforced more aggressively. A home-based business that satisfies the city’s zoning code can still violate a CC&R. Check both before signing a lease or committing to a home office.
Documentation to Gather Before You Apply
Almost every application requires your EIN, your physical business address, and government-issued photo identification for each owner. Many jurisdictions also ask for a North American Industry Classification System (NAICS) code, which categorizes your business for statistical and regulatory tracking. For professional licenses, gather certifications, training records, or proof of examination completion. Assembling everything before you start filling out forms prevents the kind of incomplete submissions that get rejected and sent to the back of the line.
Filing, Renewing, and What Happens if You Skip It
Most licensing authorities now accept applications through online portals with real-time tracking and electronic fee payment. Paper submissions via certified mail remain an option for a physical paper trail. Processing fees range from modest amounts for basic business licenses to over $1,000 for heavily regulated industries like liquor sales or large-scale construction. Expect a processing window of roughly two to six weeks for straightforward applications. Permits requiring public hearings, environmental reviews, or on-site inspections take longer.
Licenses and permits don’t last forever. Most expire on a set cycle, whether annually, biennially, or on some other schedule, and renewal is almost always easier than applying from scratch. The SBA advises businesses to track every expiration date and confirm renewal requirements well in advance.8U.S. Small Business Administration. Stay Legally Compliant Missing a renewal can mean late fees, a gap in your legal authority to operate, or having to start the whole application over.
Penalties for running without required licenses vary by jurisdiction and industry, and they rarely stop at a fine. Common consequences include forced temporary closure while paperwork is sorted out, a longer waiting period before a license will be granted, or outright denial. Businesses in heavily regulated industries like trucking or alcohol sales can face simultaneous fines at the local, state, and federal levels. Operating without a license can also damage a business’s reputation and give unhappy customers a basis for fraud claims.
Beneficial Ownership Reporting: What Changed in 2025
The Corporate Transparency Act originally required most small companies to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). That changed in March 2025. Under an interim final rule effective March 21, 2025, FinCEN exempted all entities created in the United States from beneficial ownership reporting. The requirement now applies only to entities formed under the law of a foreign country that have registered to do business in a U.S. state or tribal jurisdiction.9Financial Crimes Enforcement Network. Beneficial Ownership Information Reporting
Foreign entities that still fall under the rule and don’t qualify for one of the 23 exemptions must file within 30 calendar days of receiving notice that their U.S. registration is effective. Filing directly with FinCEN is free. Willful violations carry civil penalties of up to $591 per day the violation continues, plus potential criminal penalties of up to two years in prison and a $10,000 fine.10Financial Crimes Enforcement Network. Frequently Asked Questions