This post is part of a series designed to help you register a high-impact startup. Here, we focus on state registration specific to the US, although similar processes may be common in other jurisdictions.
Business licences
Depending on your industry and location, you may need to obtain various permits and licenses in order to operate your business legally. The process of identifying and applying for business licenses might look slightly different based on location but it’s mostly similar throughout the US:
- Identify the necessary licenses: Before applying for licenses, research and identify which ones are required for your business based on your industry and location. Common examples include professional licenses, industry-specific licenses and business activity permits. A good place to start is your state’s Secretary of State office or Department of Revenue. You can also use online resources such as the SBA’s permit and license guide, which allows you to search for necessary licences by state and industry.
- Check with the issuing agency: After identifying the required licenses, check with the issuing agency to confirm the specific requirements and process for applying. This may vary by state or even by county or city.
- Gather the necessary documentation: Depending on the license, you may need to provide various types of documentation, such as proof of insurance, zoning approval or educational credentials.
- Complete the application: Once you have gathered all the necessary documentation, you can complete the licence application. This can often be done online or by mail, depending on the issuing agency. Most licenses require payment of a fee — the amount may vary depending on the type of license and issuing agency.
- Display your licence: After submitting your application and fee, you will need to wait for the licence to be approved. This may take several weeks, so it’s important to plan accordingly. Once you’ve received your license, you may need to display it prominently at your business location if doing so is required by law.
State IDs
When you obtain your EIN, you receive a federal ID number. But, depending on the nature of your business, your state may require a state ID number to operate. Sometimes, you can use state tax ID numbers for other functions, like protection against identity theft for sole proprietors. Tax obligations differ at the state and local levels, so you’ll need to check with your state’s websites.
Eligibility
The need for a state tax ID number ties directly to whether your business must pay state taxes:
- If your business is a partnership, corporation (including nonprofits), or LLC, you’ll probably need to register with any state where you conduct business activities.
- There are nine states that generally don’t levy a state income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming), so requirements may differ there.
To know whether you need a state tax ID, research and understand your state’s laws regarding income taxes and employment taxes, the two most common forms of state taxes for small businesses.
Where to register
Most states require you to register with the Secretary of State’s office, a Business Bureau, or a Business Agency.
If your partnership, corporation (including nonprofits), or LLC conducts business activities in more than one state, you might need to form your business in one state and then file for foreign qualification in other states where your business is active.
The state where you form your business will consider your business to be domestic, while every other state will view your business as foreign. Foreign qualification notifies the state that a foreign business is active there.
Foreign qualified businesses typically need to pay taxes and annual report fees in both their state of formation and states where they’re foreign qualified.
To foreign qualify, file a Certificate of Authority with the state. Many states also require a Certificate of Good Standing from your state of formation. Each state charges a filing fee, but the amount varies by state and business structure.
Check with state offices to find out foreign qualification requirements and fees:
Application process
The process to get a state tax ID number is similar to getting a federal tax ID number, but it will vary by state. You’ll have to check with your state government for specific steps, but the process will likely entail that you:
- Get a registered agent: If your business is a partnership, corporation (including nonprofits), or LLC, you’ll need a registered agent in your state before you file. A registered agent receives official papers and legal documents on behalf of your company, and must be located in the state where you register. Many organizations prefer to use a registered agent service rather than take on this role themselves.
- Register your business entity with your state: This involves filing paperwork such as Articles of Incorporation, Articles of Organisation or Partnership Agreements, depending on your business structure. (If you’re registering a partnership, you’ll also require a certificate.) For more information, see Create governing documents.
- File for taxes: Depending on your business structure and where your business operates, you may need to register for federal, state or local taxes. This may include income tax, sales tax and payroll tax. We’ll cover filing forms with the government in a future post.
- Obtain any necessary insurance: Depending on your industry and location, you may need to obtain certain types of insurance such as liability insurance or workers’ compensation insurance. We’ll cover business insurance in a future post.
Depending on your business type and location, there may be additional state requirements you need to comply with such as registering for unemployment insurance or complying with environmental regulations.
It’s often worth outsourcing your state registration to a third party, like Harbor Compliance.
Stay tuned for our next post: Establish tax exemption.