Federal Start Up Requirements for Small Businesses
03/12/2012
Before a small business can legally begin, it must comply with federal environmental
regulations as well as get the required tax and securities registrations and, in
some cases, business licenses. 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 should look like.
Below, we set out a general outline of these requirements at the federal level.
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).
Environmental Regulations
It's possible that you'll become involved with environmental regulations at the federal level (overseen by the Environmental Protection Agency, or EPA). For example, you may buy a piece of contaminated industrial property that needs cleaning up, or you may need a license to dispose of toxic by-products from your manufacturing process. For more information, go to the EPA's Small Business Gateway at www.epa.gov/smallbusiness.
Securities Registration
If you're starting out your business as a corporation, a limited liability company, or a limited partnership, and you'll be sharing ownership with people who will not be actively working in the business, you may need to comply with federal (as well as state) securities laws.
Fortunately, many small corporations get to skip the registration process because of securities "exemptions." For example, SEC rules don't require a corporation to register a "private offering," which is a non-advertised sale of stock to either:
• a limited number of people (generally 35 or fewer), or
• those who, because of their net worth or income earning capacity, can reasonably be expected to take care of themselves in the investment process (often called "accredited investors").
Below, we set out a general outline of these requirements at the federal level.
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).
Environmental Regulations
It's possible that you'll become involved with environmental regulations at the federal level (overseen by the Environmental Protection Agency, or EPA). For example, you may buy a piece of contaminated industrial property that needs cleaning up, or you may need a license to dispose of toxic by-products from your manufacturing process. For more information, go to the EPA's Small Business Gateway at www.epa.gov/smallbusiness.
Securities Registration
If you're starting out your business as a corporation, a limited liability company, or a limited partnership, and you'll be sharing ownership with people who will not be actively working in the business, you may need to comply with federal (as well as state) securities laws.
Fortunately, many small corporations get to skip the registration process because of securities "exemptions." For example, SEC rules don't require a corporation to register a "private offering," which is a non-advertised sale of stock to either:
• a limited number of people (generally 35 or fewer), or
• those who, because of their net worth or income earning capacity, can reasonably be expected to take care of themselves in the investment process (often called "accredited investors").
Source:NOLO
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