What Are the Requirements to Start a Small Business in the United States?

If you have an idea for starting your own business but are worried about the legalities, don’t fret—it’s easier than you might think! Here are the basic steps you need to take to start your own small business in the United States.

Know which type of entity you should form

There are several types of entities you can form, depending on your business needs and goals. This will determine how much personal liability you carry, so it’s very important that you choose carefully. Here’s a list of your options: • Sole proprietorship • Partnership • Corporation (C-Corp) • S Corporation (S-Corp) • Limited Liability Company (LLC) Some states require that businesses pay an annual registration fee if they operate as an LLC or corporation; others don’t.

If you live in one of these states, check with your Secretary of State for more information. Don’t forget to open a tax ID number. The IRS requires businesses to have a Taxpayer Identification Number (TIN), which is typically either an Employer Identification Number (EIN) or Social Security Number. Additionally, you might need other licenses and permits based on what type of entity you have formed.

For example, in most states you must be licensed by your state’s licensing board if you run a retail business from home. However, because there are many variables involved in forming a new business, we recommend speaking directly with an accountant or attorney who specializes in small businesses to get up-to-date guidance for specific areas where you may have questions.

Choose your location

To start a business in most places, you must be an adult. However, there are three states where minors can be sole proprietors of businesses: Mississippi, Nebraska and Wyoming. If you live in one of these states, you can start your own business at age 14. Otherwise, you must wait until your 18th birthday to register as an independent contractor or sole proprietor with your state's Secretary of State's office. You may also need approval from other government agencies depending on what type of business you want to create.

For example, if you plan to sell liquor or food for consumption on site, you'll have to obtain a license from your state's Alcoholic Beverage Control Board. In some cases, you might have to obtain additional licenses from federal, county and municipal governments as well. In addition, it’s usually best if all owners of a business meet certain financial requirements before they begin operations.

Register your name

The first thing you’ll need is a business license. This license is mandatory for any company doing business within a city or county, and typically costs between $50 and $200 per year depending on where you’re located. You may also need additional licenses from various federal and state agencies, so be sure to do your research before starting your small business.

After you register your name with the appropriate government agency, get a social security number and fill out an employer identification number (EIN) application with the IRS. Don’t worry if all of that seems confusing—there are plenty of online resources to help walk you through it!

Obtaining a domain

If you want to set up shop online, then one of your first steps is getting yourself a website. While any number of sites will host your content for free, it’s best not to jump into something without doing some research first. Here are three things you should look for when finding an appropriate site on which to host your business: stability, reputation and features.

Most small businesses start out with what’s called a top-level domain name or TLD. Your top-level domain name might include .com, .net or another domain extension, depending on what TLD is available. These extensions refer to certain categories of websites; once again, most small businesses start out with a .com extension due to its prevalence and reachability.

Obtain licenses and permits

There are a variety of state and local licenses and permits you’ll need to get before you can officially open your doors. The exact requirements vary by location, so check with your city or county for details on what you’ll need. Here are some common licenses and permits small businesses need: business license, sales tax number, alcohol permit (if applicable), permit for sidewalk sales (if applicable), zoning clearance letter (if applicable) and more.

You might even have to register as a federal employer if you hire employees within your first year of operation—this is part of Obamacare mandates, which has led some small business owners to avoid hiring full-time workers out of fear that they won’t be able to afford health insurance costs associated with it.