Federal Start-Up Requirements for Small Businesses
Find out what you have to submit to the federal government when you start a business.
Before a small business can legally begin, it must address a number of requirements with governmental agencies, from the city to the state to the federal government. None of these requirements are difficult or even terribly time-consuming. But finding out what you need to do can be like putting together a jigsaw puzzle without knowing what it will look like.
Below, we set out a general outline of these requirements at the federal level. For information on municipal permits and regulations, see Local Start-Up Requirements. For details on state registrations and licenses, see State Start-Up Requirements.
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The various permit and license requirements for new businesses have three main purposes:
- to identify your business and make sure you're accountable for your actions
- to protect the public health and safety, and
- to keep track of your finances for tax purposes.
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Tax Registrations
You should know about two kinds of federal tax registrations.
Employer Identification Number. The first is the Application for an Employer Identification Number (EIN), Form SS-4, which is available free at www.irs.gov. All corporations, limited liability companies (LLCs), and partnerships, as well as sole proprietors who will hire employees, must apply for EINs.
Although using an EIN is a good way to keep your business and personal affairs separate, the IRS doesn't like to give an EIN to a sole proprietor without employees. In that case, you will probably use your own Social Security number rather than a separate EIN.
S Corporation Tax Form. Second, if your business is a corporation and you want to elect status as an S corporation (for special tax treatment), you need to file Form 2553, Election by a Small Business Corporation, also available at www.irs.gov.
Licenses for Regulated Businesses
You’re not likely to need a federal license or permit unless your business activity or product is supervised by a federal agency, such as:
- public transportation and trucking (the Motor Carrier Safety Administration)
- investment advice (the Securities and Exchange Commission)
- preparation of meat products or production of drugs (the Food and Drug Administration), or
- tobacco products, alcohol, and firearms (the Bureau of Alcohol, Tobacco and Firearms in the U.S. Treasury Department).
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