Key Summary
- To register a business in the USA, you will need to prepare for tax obligations, registering with the relevant state agencies and obtaining an EIN.
- States that offer the best place to register a new business include Delaware, Indiana, and Wyoming.
- States that are better avoided for setting up a new business include California and Hawaii.
- Ensuring ongoing compliance with legal requirements and tax obligations is crucial with factors to consider including annual reporting and tax filings.
How to Register a Company in the USA
If you are wondering how to register a company in the USA, the process can seem daunting. Likely, you have already taken steps to start your business such as coming up with a name, creating a plan and potentially even choosing the structure you want to take (more on this below).
So, if you are ready to take the leap in to registering your company in the USA, here are the steps you will need to follow:
1. Decide Where to Register
Before anything else can be actioned on this list, you will need to decide where you are going to register your business.
When deciding where to register a business, several factors come into play. You should consider:
- The overall business climate, including economic stability
- State specific incentives such as tax breaks, grants, and business development programs
- Market accessibility, including proximity to customers and suppliers
Best States to Register a Business
When registering a business in the USA, the choice of location can significantly impact your company’s success and financial health. Here’s a few of the more notable states to register a business in:
Delaware
Delaware stands out as a premier location for business registration, especially for corporations. It’s renowned for its business-friendly legal system, particularly in corporate law, and a well-established corporation court specializing in business matters. The state offers numerous advantages like privacy protection, investment-friendly laws, and efficient processing of corporate paperwork.
Wyoming
Known for its low tax burden, Wyoming does not levy corporate or individual income taxes. The state offers a business-friendly climate with minimal regulatory interference, making it appealing for startups and established companies.
Indiana
Indiana’s business-friendly environment includes competitive corporate tax rates and incentives for business growth and investment. Its central Midwest location offers logistical advantages. The state’s supportive atmosphere, along with cost-effective living and operational expenses, appeals to both entrepreneurs and established businesses.
Nevada
Nevada’s competitive appeal lies in its favorable tax structure, including no corporate or personal income tax. Privacy-conscious businesses value the state’s anonymity provisions. Additionally, Nevada’s low cost of living and minimal reporting requirements support startups and small businesses seeking financial privacy. This makes it an ideal choice for those prioritizing tax benefits and privacy.
Top 10 Best States to Register a Business
| Rank | State | Legal System | Privacy Protection | Tax Structure | Regulatory Environment | Economic Stability | Business Incentives | Geographic Location | Cost of Living |
|---|---|---|---|---|---|---|---|---|---|
| 1 | Delaware | 10 | 9 | 7 | 8 | 8 | 8 | 7 | 7 |
| 2 | Wyoming | 8 | 8 | 9 | 9 | 7 | 8 | 8 | 8 |
| 3 | Indiana | 7 | 7 | 8 | 8 | 7 | 9 | 9 | 8 |
| 4 | Nevada | 7 | 8 | 9 | 7 | 8 | 8 | 7 | 9 |
| 5 | Texas | 7 | 7 | 9 | 8 | 9 | 8 | 9 | 7 |
| 6 | Florida | 8 | 7 | 8 | 7 | 9 | 8 | 8 | 8 |
| 7 | South Dakota | 8 | 7 | 9 | 8 | 6 | 8 | 8 | 8 |
| 8 | New Hampshire | 7 | 8 | 7 | 8 | 7 | 7 | 8 | 7 |
| 9 | Utah | 7 | 7 | 7 | 8 | 9 | 9 | 8 | 6 |
| 10 | Tennessee | 6 | 7 | 7 | 8 | 8 | 8 | 8 | 8 |
Nevada’s competitive appeal lies in its favorable tax structure, including no corporate or personal income tax. Privacy-conscious businesses value the state’s anonymity provisions. Additionally, Nevada’s low cost of living and minimal reporting requirements support startups and small businesses seeking financial privacy. This makes it an ideal choice for those prioritizing tax benefits and privacy.
Nevada’s competitive appeal lies in its favorable tax structure, including no corporate or personal income tax. Privacy-conscious businesses value the state’s anonymity provisions. Additionally, Nevada’s low cost of living and minimal reporting requirements support startups and small businesses seeking financial privacy. This makes it an ideal choice for those prioritizing tax benefits and privacy.
2. Find a Registered Agent
Every state will have varying procedures for registering a business, however, one factor that remains the same for every state is the requirement to have a registered agent to register your business.
The main rules for a registered agent include:
- The agent must have a physical street address within the state. Only having a P.O Box is not acceptable.
- The agent must be available during normal business hours.
- The agent must be at least 18 years old. Alternatively, it can be a company that offers registered agent services.
- A corporation or LLC cannot act as its own agent, but in most states, it is allowed for one of its employees or the owner to be the agent.
Whilst you can be your own company’s agent, it is not recommended. There are numerous downsides such as your home address being visible on all documentation and being personally liable. It is also restrictive for those who travel frequently as you wouldn’t be deemed available during normal business hours.
3. Understanding What Legal Structure And It’s Tax Obligations
To successfully register a business, you need to know what legal structure to register it as and what tax and legal obligations this brings.
To ensure a smooth journey in the business world, it’s essential to grasp the intricacies of both federal and state tax obligations. This includes comprehending the tax code relevant to your business structure, such as sole proprietorship, LLC, corporation, or partnership.
Each business type has distinct tax considerations, and staying informed about these obligations is paramount to maintaining financial compliance.
Here’s a detailed overview for each business type:
1. Sole Proprietorship
Taxation
Treated as a pass-through entity. Income and losses are reported on the owner’s personal tax return (IRS Form 1040, Schedule C).
Self-Employment Tax
Sole proprietors must pay self-employment tax (Social Security and Medicare) on their net earnings.
State Taxes
May vary, but typically include income tax and potentially others depending on the state.
2. Limited Liability Company (LLC)
Default Taxation
By default, treated as a pass-through entity for a single-member LLC or a partnership for multiple members. Profits and losses pass through to members’ personal tax returns.
Election Option
Can elect to be taxed as a corporation (S-Corp or C-Corp).
Self-Employment Tax
Members typically pay self-employment taxes on their share of profits.
State Taxes
May include franchise taxes or others depending on the state laws.
3. Corporation (C-Corp)
Corporate Taxation
Subject to federal corporate income tax. Profits are taxed at the corporate level and again at the individual level when distributed as dividends (double taxation).
State Taxes
Corporate income tax, franchise tax, and others depending on the state.
Filing Requirements
Must file an annual report and IRS Form 1120.
4. S Corporation (S-Corp)
Pass-Through Taxation
Profits and losses pass through to shareholders’ personal tax returns, avoiding the double taxation of C-Corps.
Eligibility Requirements
Must meet specific IRS requirements, including a limit on the number of shareholders and type.
State Taxes
Varies by state, but typically less burdensome than C-Corp taxes.
5. Partnership
Taxation
Treated as a pass-through entity. Profits and losses reported on partners’ personal tax returns.
Annual Return
Must file Form 1065 to report income, deductions, gains, losses, etc.
Self-Employment Tax
Partners generally pay self-employment tax on their share of partnership income.
State Taxes
Vary by state, and can include income tax and others.
The main rules for a registered agent include:
Record-Keeping
All business structures must maintain accurate financial records for tax purposes.
Estimated Taxes
Businesses may need to pay estimated taxes quarterly if they expect to owe a certain amount.
Employment Taxes
If the business has employees, obligations include withholding payroll taxes and paying employer payroll taxes.
Sales Tax
If selling goods or services, the business might need to collect and remit sales tax.
Staying informed and compliant with these tax obligations is essential for the financial health and legal standing of your business.
It is also vital to stay well-versed in the local regulations and legal requirements that pertain to your specific business type and location. These regulations can vary significantly from one state to another and may influence your business operations, licensing, and compliance.
4. Registering Your Business Entity
Officially registering your business entity is a critical step in the journey of establishing your company in the USA. This step needs to be done before you can apply for your business licenses.
It also needs to be done before you apply for an EIN (more on this below).
It is at this point that you confirm the legal structure of your business i.e LLC, C-Corp etc. You will need to file either Articles of Incorporation (for corporations) or Articles of Organization (for LLCs). You do this with your chosen state’s Secretary of State.
You will also need to confirm your business name. Check with the US Patent and Trademark Office to be sure that you can use your chosen name.
Once filed, your business will become a legally recognized separate entity which means it is now liable and taxable.
5. Employer Identification Number
Another critical step in the process is obtaining an Employer Identification Number (EIN).
An EIN is important if you want to have a US business bank account. To open one you will need an EIN and also have a US office address with mail forwarding for your company. Many registered agents, such as us at Valis International offer packages where you will receive an office address.
Getting an EIN for your Business
Here’s a quick lowdown on how to get an EIN for your company:
- To apply for an EIN, you will need:
- Your Social Security Number or an Individual Taxpayer Identification Number.
- You will also require your personal and business details, type of business, the reason for applying, business start date, and number of employees.
- Choose your application method. Online is, typically, faster but you can also fax or mail it if you are unable to return the form online.
- When applying online, you will need to visit the IRS EIN application page. Follow the online prompts to guide you through the application.
- Before submitting your application, thoroughly check it. Mistakes can lead to long delays.
- When applying online, you will receive your EIN straight after submission. If you apply via fax or mail, you are likely to wait around 6 weeks.
6. Obtaining Required Licenses and Permits
Obtaining the required licenses and permits is a crucial step in ensuring your business operates legally in the US.
The specific licenses and permits you need can vary based on factors such as your industry, business location, and the nature of your activities.
Here’s a detailed breakdown of this essential aspect of business registration:
Research and Identification
Begin by conducting thorough research to identify the licenses and permits that apply to your specific business. These requirements can differ significantly between industries and regions. Some common permits and licenses include:
- Business Operation License- Required for most businesses to operate legally.
- Professional or Occupational License- Necessary for specific professions or trades.
- Health Department Permits- Essential for businesses in the food service or healthcare industry.
- Environmental Permits- Mandatory for businesses that impact the environment, such as waste disposal or manufacturing.
- Zoning Permits- Required to ensure your business location complies with local zoning laws.
- Sales Tax Permit- Needed for businesses that sell taxable goods or services.
- Alcohol or Tobacco Permits- Required for businesses involved in the sale of alcohol or tobacco products.
Specific licencing requirements can make it hard to register a business in Delaware and similar states from outside of the state.
These include:
- Insurance companies: As this business type must comply with specific regulations and licensing.
- Financial institutions: Banks and other financial businesses must adhere to state and federal regulations.
- Public utilities: This covers businesses providing utilities such as water, electric, and telecommunications. They tend to face additional regulations when operating in Delaware.
- Local Zoning and Licensing: Local municipalities will have their own licensing and zoning obligations which even out-of-state businesses must comply with.
- Foreign corporations: A business registered in another state and looking to operate in Delaware, therefore deemed as “foreign”, must file a Foreign Qualification with the Delaware Secretary of State.
Non-profit organizations must also adhere to Delaware’s non-profit laws. Often, they also need to register with the Delaware Department of State.
Whilst this may seem complicated, Delaware is known as being one of the best states to register a business in. The pros almost certainly outweigh any negatives. Of course, if this all seems a little too much feel free to get in touch with us at Valis International, as we can register your business for you, removing all the hassle.
Application and Compliance
Once you’ve identified the necessary licenses and permits, follow the application process outlined by the relevant authorities. This typically involves submitting documentation, paying fees, and adhering to specific compliance standards.
Failure to obtain the required permits can result in legal consequences, fines, or business closures, therefore, thorough research and strict adherence to these requirements are essential for ensuring your business operates within the bounds of the law.
States to Avoid Registering a Business In
While many states offer favorable business environments, there are a few where the regulatory and tax burdens can be significant. Here, we’ll explore some states that may pose challenges for businesses, especially startups and smaller enterprises.
California
California’s robust economy comes with complexities for businesses. The state’s regulatory environment, including corporate and personal income taxes and high sales taxes, can be burdensome. The cost of living and doing business is notably high, which can strain small businesses and startups. Stringent labor laws, environmental regulations, and zoning laws further add to the challenges in California.
Hawaii
Hawaii, known for its breathtaking landscapes, is among the most expensive states to live and do business in. High living costs and geographic isolation can pose challenges for businesses. Hawaii imposes state income tax, general excise tax, and transient accommodations tax, which can add to the financial burden. The state’s isolation can affect supply chain logistics, increasing costs for businesses reliant on imports.
New Jersey
New Jersey faces challenges due to taxation and regulatory complexities. The state levies corporate and personal income taxes, as well as sales tax, which can be substantial for businesses. New Jersey’s regulatory landscape, including complex employment laws and environmental regulations, may be daunting for small businesses. Despite its proximity to major metropolitan areas, New Jersey also comes with higher operating costs and fierce competition.
Impact on Taxes and Business Opportunities
The location you choose for your business has a profound impact on your tax obligations and future business prospects. Different states offer various advantages, and some stand out for their favorable business environments.
States, such as Delaware, with advanced legal frameworks often attract more investors and provide greater flexibility in corporate governance. This can be pivotal for business growth and expansion, offering opportunities that align with your company’s goals and needs.
While several states offer competitive conditions, certain ones are known for their business-friendly environments, which can benefit businesses of all sizes. These states provide unique advantages and support, allowing companies to thrive and make the most of their opportunities in the United States.
Frequently Asked Questions
Do I need a physical office location to register a business in the USA?
No, many businesses, especially those operating as online businesses, do not require a physical office location to register, however, you are likely to need a registered agent with a physical address.
What are the advantages of registering my business at the state level vs. the federal level?
Registering at the state level is typically required, while federal registration, such as obtaining a federal trademark, provides nationwide protection for your business name or brand.
How long does it take to complete the business registration process in the USA?
How long it takes to register a company in the US tends to vary by state and business structure. It can range from a few days to several weeks, depending on factors like state processing times and the complexity of your business.
Can I register a business if I'm not a U.S. citizen or resident?
Yes, non-U.S. citizens and non-residents can register businesses in the USA, however, there are specific rules and requirements to follow, and consulting with legal experts is advisable.
Conclusion
Registering a business in the USA in 2024 involves crucial steps such as choosing the right business structure, crafting a comprehensive business plan, selecting an appropriate business name, and navigating tax and legal obligations.
The choice of location within the USA can significantly impact a business’s success, with states like Delaware, offering favorable business environments. Additionally, maintaining ongoing compliance with legal requirements is essential for long-term business success and stability.
Ready to take the next step in registering your new business? Schedule a free consultation call with David, our expert director, to guide you through the process.
