Registering an online business involves choosing a legal structure, filing paperwork with your state, getting a federal tax ID, and setting up sales tax collection if you sell taxable products. The total cost is typically under $300 in state filing fees, and you can complete most of the process within a few days. Here’s how to work through each step.
Pick a Business Structure
Your legal structure determines how much paperwork you file, how you pay taxes, and whether your personal assets are protected if the business runs into trouble. Three structures cover the vast majority of online businesses.
A sole proprietorship is the simplest option. If you start selling products or services online without filing any formation documents, you’re already operating as one. There’s no state registration required for the business itself. The downside: your personal assets and business assets are legally the same thing. If someone sues your business or it takes on debt, your house, car, and savings could be on the line. You report business income on your personal tax return and pay self-employment tax on your profits.
A limited liability company (LLC) separates your personal finances from the business. If the LLC faces a lawsuit or bankruptcy, your personal assets are generally protected. Profits and losses pass through to your personal tax return, so you avoid the corporate-level tax. You still owe self-employment tax on your share of profits. LLCs require state registration, an operating agreement, and ongoing compliance filings, but the paperwork is manageable for most small online businesses.
A corporation (C corp) offers the strongest liability protection and makes it easier to raise outside capital by selling stock. The tradeoff is double taxation: the corporation pays income tax on its profits, and shareholders pay tax again on any dividends they receive. Corporations also require more extensive record-keeping, bylaws, a board of directors, and regular reporting. Most solo online businesses don’t need this structure unless they plan to seek investors.
Register Your Business Name
If you’re operating under any name other than your own legal name, you’ll likely need to file a “doing business as” (DBA) registration. A DBA is simply an assumed or trade name, the name customers see on your website, invoices, and packaging. Banks often require a DBA filing before they’ll let a sole proprietor or general partnership open a business bank account, so this step matters even if your state doesn’t strictly mandate it.
DBA requirements vary by location. Some states handle DBA filings at the state level, others require you to file with the county where you operate. If you operate under that trade name in multiple jurisdictions, you may need to register in each one. LLCs and corporations that want to operate under a name different from their officially registered entity name can also file a DBA for that purpose.
File Formation Documents With Your State
Sole proprietors can skip this step since there are no formation documents to file. If you’re forming an LLC or corporation, you’ll register with your state’s business filing office (often the Secretary of State).
For an LLC, you file articles of organization, a short document that lists your company name, business address, member names, and registered agent. You should also draft an operating agreement, which spells out how financial and management decisions get made. Some states require this document, and even where it’s not required, having one prevents disputes later.
For a corporation, you file articles of incorporation, which include the company name, business purpose, number and value of shares being issued, and the names of directors and officers. You’ll also need bylaws that define internal governance, officer duties, and shareholder rights.
Both structures require you to designate a registered agent before you file. This is a person or service located in your state that receives legal documents and official notices on behalf of your company. You can serve as your own registered agent in most states, or you can hire a registered agent service for a yearly fee.
Filing fees in most states total less than $300, though the exact amount depends on your state and business type. Processing times range from same-day to several weeks, and many states offer expedited processing for an additional fee.
Get an Employer Identification Number
An Employer Identification Number (EIN) is a federal tax ID issued by the IRS. You need one if you plan to hire employees, operate as a partnership or corporation, or pay certain taxes. Even sole proprietors who don’t strictly need an EIN often get one to keep their Social Security number off business documents.
The fastest way to get an EIN is through the IRS online application at irs.gov. It’s free, and if your application is approved, you’ll receive your EIN immediately. One important note: form your LLC or corporation with your state before you apply. If you apply for an EIN before your entity exists at the state level, the IRS may delay your application.
The online tool is available Monday through Friday from 6:00 a.m. to 1:00 a.m. Eastern, Saturdays from 6:00 a.m. to 9:00 p.m., and Sundays from 6:00 p.m. to midnight. You’ll need your business entity type and the Social Security number of the person who controls the business. Complete the application in one sitting because you can’t save your progress, and the session expires after 15 minutes of inactivity. You’re limited to one EIN application per responsible party per day. If you can’t apply online, the IRS also accepts applications by phone, fax, or mail.
Register for Sales Tax Collection
If your online business sells taxable goods or services, you may need to collect and remit sales tax in states where you have “nexus,” meaning a sufficient connection to that state. For online sellers with no physical presence in a state, nexus is typically established through economic activity: reaching a certain dollar amount of sales or number of transactions delivered into that state.
Most states set their economic nexus threshold at $100,000 in gross sales during the previous or current calendar year. A handful of states set higher bars, with thresholds of $250,000 or even $500,000. Some states also trigger registration if you hit 200 or more separate transactions, even if your dollar total is lower. A few states have no sales tax at all.
Once you cross a state’s threshold, you’re required to register with that state’s tax authority, collect the appropriate sales tax on orders shipped there, and file regular returns (usually monthly, quarterly, or annually depending on your volume). Many states allow you to register through their department of revenue website. If you sell into many states, the Streamlined Sales Tax Registration System lets you register in multiple participating states through a single application.
Even if your sales are small today, track your revenue by state from the start. Crossing a threshold without realizing it can lead to back taxes, penalties, and interest.
Open a Business Bank Account
Keeping business and personal finances in the same account is one of the fastest ways to undermine liability protection. If you formed an LLC or corporation to shield personal assets, mixing funds can give a court reason to disregard that protection entirely.
To open a business bank account, you’ll typically need your EIN (or Social Security number for a sole proprietorship), your formation documents or DBA certificate, and a government-issued ID. Having a dedicated account also simplifies bookkeeping and tax filing since every transaction in the account is clearly a business expense or revenue.
Check for Licenses and Permits
Running a business online doesn’t exempt you from licensing requirements. Depending on what you sell and where you’re located, you may need a general business license from your city or county, a home occupation permit if you work from a residential address, or industry-specific licenses for regulated products like food, health supplements, or alcohol.
Your state’s business portal and your local city or county clerk’s office are the best starting points for identifying which permits apply. The SBA also maintains a directory of state-level licensing resources. Applying early prevents delays, since some licenses take weeks to process and you can’t legally operate without them.
Registering in Multiple States
If your online business has a physical presence in more than one state, such as employees, inventory, or an office, you may need to “foreign qualify” in those additional states. This means registering your existing LLC or corporation to do business in a state where it wasn’t originally formed. Each state charges its own filing fee for foreign qualification, and you’ll need a registered agent in each state where you register.
For most small online businesses operating from a single location, this isn’t necessary right away. But as you grow, adding warehouse space, hiring remote workers, or storing inventory in fulfillment centers can create obligations in new states for both registration and tax purposes.