State Start-Up Requirements for Small Businesses
Learn about state requirements for business owners.
If you are starting a business, the state where the business will be located will require you to get a slew of licenses, permits, tax registrations, and other requirements. These may range from filing organizational papers and getting a license for your occupation to tax registration and environmental compliance.
(For information on federal licenses and registrations, see Federal Start-Up Requirements for Small Businesses. For information on city and county licenses, see Local Start-Up Requirements for Small Businesses.)
Licenses -- Professions and Products
Professional licenses. States give licenses to people practicing the traditional professions, such as lawyers, doctors, accountants, teachers, architects, and engineers. States also license people in a broad range of trades, from auto mechanics and barbers to real estate agents and tax preparers.
Sometimes licenses are issued to the business, while other licenses are taken out by the individual. You can’t guess which occupation needs a license, so you’ll just have to ask. Your state website or trade association is a good place to start.
Licensing procedures. The licensing procedures will vary, but you’ll probably have to show evidence of training in the field, and you may have to pass a written exam. Sometimes you have to practice your trade or profession under the supervision of a more experienced person for a while before you become fully licensed. Some licenses are good for a limited period before there is retesting. Others require proof of continuing education in the field.
Licenses for products. The state may also want you to get a license if you make or sell certain products, such as liquor, food, lottery tickets, gasoline, or firearms.
Tax Registration
If you engage in retail sales, you probably need to register for or get a sales tax license or seller’s permit. This lets you collect sales taxes from your customers, which you'll pay to the state. You need this permit even if you’re also selling goods that are exempt from your state’s sales tax. When the time comes, you’ll owe tax only on the taxable sales.
If your business both sells products and performs services, it will be important to keep your labor sales separate from sales of goods, because sales of services aren’t usually taxed (only in some states).
 Five states do not impose general sales taxes. In Alaska, Delaware, Montana, New Hampshire, and Oregon, you may not be required to get a state sales permit. However, cities and counties in those states may issue sellers' permits and charge sales taxes. Further, some transactions may be subject to something similar to a sales tax, although it has a different name. Your state tax agency can give you the specifics.
You’ll probably have to register with your state’s treasury department or department of revenue, except in the few states that still assess no taxes on income. You may also have to register for other business taxes.
Business Entity Filings
If you’ve chosen to start out your business as a corporation, limited liability company (LLC), or limited partnership, you’ll need to file organizational documents with your state’s Secretary of State, Department of Corporations, or similar office. Most states have sample or form documents online.
If you share ownership of your business with investors or other owners who do not help you run the business, you may need to comply with state (and federal) securities laws. For a quick rundown of these laws, see Corporations FAQ and Limited Liability Company FAQ.
If you’re starting off with a partner (a partnership) or by yourself (a sole proprietorship), you may not have any state filing to do. An ordinary partnership is created automatically when you agree to go into business with someone, so you don’t legally have to write anything down. However, a written partnership agreement is generally a good idea, as a record of the terms of your agreement. For a quick look at partnership agreements, see Creating a Partnership Agreement.
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