What Are the Legal Requirements for Starting a Business?

Last Updated December 15, 2025

Recent data from the U.S. Census Bureau revealed that 5.2 million new businesses were registered in 2024. If you’re considering adding your own business to this growing list of businesses in the U.S., you first need to abide by several legal requirements.

The question is, how do you legally start a business? The many applications and forms may feel overwhelming, but there might be less to do than you think.

In this article, we’ll explore the legal requirements for starting a business, including the 10 steps you can take to establish your new venture as a legal business entity.

What Are the Legal Requirements for Starting a Business?

Broadly speaking, the legal requirements for starting a business vary by state, county, and city. In addition to exploring the various legal documents required to start a business, review this list of state government websites for guidance on specific requirements in your area. For the most accurate business and startup legal advice before starting a business, consult with a business attorney.

This step-by-step guide will help you make sure you’ve covered all your bases, starting with naming your business.

1. Determine Your Business Name

Forming a business legally requires selecting an appropriate name that establishes it as a separate and distinct entity. This name will not only differentiate it from other companies but also inform subsequent steps in establishing a legal business, including drafting formation documents, formally registering the business, obtaining necessary licenses and permits, and opening a business bank account.

Your business name is also central to your brand, from generating awareness of the products or services you offer to marketing your value proposition and cultivating a corresponding customer experience. For these reasons, it’s a good idea to type your prospective business name into the United States Patent and Trademark Office database to ensure it’s not already taken.

2. Select Your Business Location

Decide if you want your business to take place at a brick-and-mortar location, or if you’ll conduct your business from your home, whether that’s in-person or strictly online. For a business with a physical location, you’ll need to follow the appropriate steps for building, leasing, or purchasing the building or space. Don’t forget to research applicable zoning ordinances, proper licensing and permits, and relevant insurance coverage.

If you’re running a business from home, the legal requirements may be similar, depending on what you offer. For example, if you own and operate a hair salon in your detached garage, you may need special permits, licensing, and insurance to do business legally. Such legal requirements may not be applicable if your business model involves consulting or bookkeeping services.

3. Choose Your Business Structure

As one of the most critical legal requirements for a business, your chosen business structure dictates liability, taxes, registration, compliance, ownership, and, by extension, control. The appropriate business structure also supports official recordkeeping practices. Below are the most common business structures available:

• Sole proprietorship: Unregistered businesses automatically fall into this category, which places liability solely upon you should something happen. Sole proprietorships cannot sell stock, and many lenders consider them to be higher risk, limiting funding options.
• Partnership: Limited partnerships (LPs) and limited liability partnerships (LLPs) allocate liability differently among two or more business partners. Attorneys, real estate offices, and consulting firms are common examples of partnerships.
• Limited liability company (LLC): As one of the most common business structures, an LLC protects you from being personally liable and shields you from paying corporate taxes.
• Corporation: Several types of corporations (also known as corps) exist, including S corps, C corps, benefit corps, and 501(c)(3) non-profit corps. While you must register your business as a corporation to sell stock, C corps provide the strongest protection against personal liability, while S corps help you avoid the double taxation of C corps.

You can learn more about the specifics of each type of business structure and other related topics by visiting the Small Business Administration’s website. For more information on which business structure best fits your company, seek legal advice for business startups like yours from a small business attorney.

4. Register Your Business

Registering your business with the corresponding federal and state government agencies establishes it as a legal entity, but doesn’t automatically grant your business tax identification or reporting capabilities. In most cases, you’ll register through the Secretary of State’s office, but specifics depend on your geographical location and business structure. Required documents and registration fees will also vary.

In addition to registering on a federal and state level, you’ll also need to appoint a registered agent who will act as the legal contact for your business. You can act as the registered agent so long as you live in the state you’re registered in. Alternatively, you can appoint a partner to take on this role if you’re involved in a partnership, or you can pay a service to do the same.

5. Obtain Federal and State Business Tax IDs

No list of legal requirements for opening a business is complete without addressing how to obtain tax identification at the federal and state levels to pay taxes, hire employees, and open a business bank account.

At the federal level, you can get an EIN by filling out Form SS-4 on the IRS website. While it’s free to apply for an EIN, state-level tax ID requirements and related costs vary, so check with your local Secretary of State or business bureau for more details.

6. Apply for the Appropriate Licenses and Permits

The specific licenses and permits you apply for will vary depending on your chosen industry, geographic location, and whether the federal government regulates your kind of business activities. For example, if you own a business in radio, you’ll need to explore the required licensing through the Federal Communications Commission (FCC). Alternatively, if you operate a business in the transportation and logistics industry, you’ll need to go through the U.S. Department of Transportation (DOT).

While small business legal requirements for federal licensing and permitting are relatively standardized, state-level requirements can vary by county and city. Local agencies may require additional permits, including health inspections, signage approvals, or sales tax registrations. Research the legal requirements of your city and county to avoid fines and ensure full compliance.

7. Open a Business Bank Account

A business bank account can help you separate and keep track of business-related expenses while opening the door to potential in-house financing opportunities. Banks often request a variety of legal documents to start a business bank account, including documentation of your business structure, your EIN, ownership or partnership agreements, and any necessary licenses or permits.

8. Comply With Tax Obligations

As a business owner, it’s your fundamental responsibility to pay taxes. Your tax obligations include federal, state, and local taxes, including income taxes, estimated quarterly taxes, self-employment taxes for Social Security and Medicare, employment taxes if you hire staff, and excise taxes on goods, services, or activities. Stay on top of these tax-related responsibilities to avoid penalties or legal issues and ensure your business remains compliant.

9. Obtain Insurance

Protecting your business with the right insurance is a crucial step in managing risk and ensuring long-term stability. Common types of business insurance include:

• General liability: This type of insurance covers bodily injury, property damage, medical expenses, and legal claims.
• Product liability: Product liability insurance protects against financial loss from defective products that cause injury or harm.
• Professional liability: This covers malpractice, errors, or negligence. It includes types of insurance like medical malpractice and E&O insurance.
• Commercial property: Commercial property insurance protects physical property from fire, storms, vandalism, and other damage.
• Home-based business insurance: This business insurance covers equipment and provides liability protection for employees or customers in a home setting.
• Business owner’s policy: This type of insurance combines several coverages into a single policy, often suited for small businesses.

Selecting the right combination depends on your business type, structure, and the specific risks you face. Regularly reviewing your policies helps ensure continued protection as your business grows and evolves.

10. Adhere to Labor and Employment Laws

Navigating new business legal requirements involves setting up operations while understanding and adhering to labor and employment laws. For example, the Fair Labor Standards Act (FLSA) and the Occupational Safety and Health Act (OSHA) set clear standards regarding payroll taxes, offered benefits, and workplace safety. State-level obligations—like workers’ compensation, unemployment insurance, disability and family leave coverage, and reporting new hires—also add a layer of compliance that protects your employees and your business.

In-Summary: Legal Requirements for Starting a Business

If it’s been your dream to open your own business, but a lack of knowledge and confidence surrounding complex legalities has held you back, let this 13-step process guide you. You’ve just become familiar with the legal requirements for starting a business and the resources you can use to make your dream a reality. Now, all that’s left to do is start marking off items from your checklist.

Michael McCareins

Michael McCareins is the Content Marketing Associate at altLINE, where he is dedicated to creating and managing optimal content for readers. Following a brief career in media relations, Michael has discovered a passion for content marketing through developing unique, informative content to help audiences better understand ideas and topics such as invoice factoring and A/R financing.