Once you have decided on which business entity to form, you will need to file business formation documents with the appropriate state or territory office. Many business owners choose to file their business formation documents in states like Delaware, Wyoming, or New York because these states have well-settled and favorable business laws that make it easier to resolve disputes and they have very easy online filing processes. However, you are required to register your business in any states or territories where you are engaging in business activities, so if you don’t operate your business in the state in which you filed your business formation documents, you will likely be required to register to do business in the state in which you are operating the business.
There is no single definition of what is considered “engaging in business activities.” Some activities that are considered to be business activities which require registration in the state or territory are: maintaining an office or physical presence in the state, hiring employees in the state, directing advertising or commerce activities towards the state, or deriving a significant portion of business revenue from the state.
It might be easier to file your business formation documents in the state in which you live since that’s where you’ll most likely be operating your business early on. Your home state might not have the most favorable business laws, but it can be less overhead to file in one state than maintaining multiple state or territory registrations. For example, if you live in California and you begin conducting business in California and establish your home as your principal place of business, even if you file your LLC formation documents in Delaware, you will likely still need to register to do business in California, and you will need to maintain both your Delaware LLC registration and your California business qualification. In that scenario, it may be easier to file the LLC formation documents in California and forego the Delaware formation.
Many states and territories have online portals through which you can learn about how to set up a business entity in that state or territory and file the documents. Usually, there is a small fee to file the documents, and sometimes there are additional requirements to register the business. Typically, you will need to provide the name of your business, the business address, the owners of the business, the registered agent for the business, and the number of shares authorized by the company (in the case of a corporation).
You may also be required to obtain a registered agent in your state or territory if your business is an LLC, corporation, partnership, or nonprofit corporation. A registered agent is an individual or entity you designate to receive legal documents (like documents related to lawsuits against your business) and official communications from the state or territory on behalf of your business. It is a common requirement to appoint a registered agent and include the registered agent information in the business formation documents filed with the state or territory. Appointing a registered agent can also act as a shield against unwanted mail and phone solicitation you may receive after registering your business. Many states will allow you to use the registered agent address and information on your filings in place of your personal address which can help maintain your privacy. There are many companies that provide registered agent services for an annual fee. Typically, business owners will engage one of these companies to serve as registered agent rather than appointing the owner of the business as the registered agent.
You may also need to obtain a federal tax identification number (also called an “Employer Identification Number” or “EIN”) and possibly a state tax identification number. Federal EINs are free to obtain and the application can be filed online on the IRS website. You will need a federal EIN if you pay employees; operate as a corporation or partnership; file tax returns for employment, excise, or alcohol, tobacco, and firearms; withhold taxes on income, other than wages, paid to a non-resident alien; use a Keogh Plan (a tax-deferred pension plan); or if you are involved with trusts, estates, real estate mortgage investment conduits, non-profit organizations, farmers’ cooperatives, or plan administrators. Whether you need to obtain a state tax identification number depends on the tax obligations of the state or territory in which you formed the business entity and are operating, so make sure to check with the state’s or territory’s website to learn about those requirements. Applying for tax IDs is usually done when registering your business. Waiting to obtain tax IDs can cause problems for your business because you will not be registered with the applicable tax authority.
Some business entities (like general partnerships) don’t require filing registration documents with the state or territory office. However, these business owners still need to comply with all applicable laws and regulations when operating the business. They may need to obtain relevant permits and licenses necessary to do business, and they will always need to comply with laws concerning contracts, employment, and intellectual property.
Below are links to each U.S. state or territory filing office or the relevant materials on how to form a business entity provided by each state or territory.