Legal Requirements for Starting a Business: Checklist for 2026

Starting a business involves entity selection, registrations, licenses, insurance, and hiring compliance. A clear roadmap prevents delays and compliance issues.

This article walks through each area in sequence, so you can see how one step feeds the next — from establishing your entity to running your first payroll. You’ll also learn where expert support can make a difference.

Understanding Your Legal Compliance Roadmap

Legal compliance for a new business moves through three layers: federal, state, and local. Each has its own requirements, and working through them in the right order prevents unnecessary delays.

Federal requirements come first. Every business needs an EIN and the appropriate employer tax accounts. This is also where founders start to understand how tax credits versus tax deductions work and whether any business tax exemptions apply.

State requirements follow. These include entity registrations, business name filings, state tax accounts, and industry-specific licenses. The specifics vary, so reviewing your state’s small business resources before filing can save time.

Cities and counties add their own rules on top of what the state and federal government requires. Depending on where you operate, you'll deal with business licenses, zoning checks, or permits for your type of work. How long this takes depends entirely on your location, so find out the usual wait times before you pick an opening date.

Look at federal, state, and local requirements together. You'll spot what needs to happen first and what can wait. Miss the sequence, and you end up stalled, waiting for paperwork you should have filed weeks ago.

Quick-Start Legal Checklist for Businesses

Step 1: Choose and Register Your Business Entity

Your business structure impacts liability, taxes, and complexity. Common options include sole proprietorship, LLC, and corporation (S or C Corp).

• Sole Proprietorship: Simple, but no personal liability protection.
• LLC: Liability protection and flexible tax treatment.
• Corporation: Best for raising capital and issuing shares.

How To Form Your Entity

Once you choose a structure, the state registration process follows a predictable sequence:

1. Check name availability on your Secretary of State website
2. File Articles of Incorporation (corporation) or Organization (LLC)
3. Appoint a registered agent
4. Create governance documents (operating agreement or bylaws)
5. Review annual reporting rules and fees

Most states process filings in 1–2 weeks; some offer expedited service. For specifics, use your Secretary of State’s website.

What Is a Registered Agent and Do You Need One?

A registered agent is required for LLCs and corporations. They receive legal notices at a physical address in your state.

Options include:

• Yourself (requires availability during business hours)
• Attorney
• Professional service ($50–$300/year) for privacy and reliability

Step 2: Register Your Business Name and Protect Your Brand

Choosing a name has legal implications. Before you settle on a name, make sure the name is available in your state to avoid confusion (among other issues) with another business that’s already using the same or similar name in your state.

• Check Name Availability
  • Search your Secretary of State database
  • Check USPTO for trademarks
  • Verify domain names and social media handles
• Register Your Business Name With the State
  • LLCs/Corporations: Name included in formation filing
  • Sole Proprietors/Partnerships: File a DBA (trade name) if using a name other than your own
• Consider Trademark Registration
  • Optional but recommended for brand security
  • USPTO Process: 6–12 months, $250–$350 per class
  • Ideal for businesses planning growth or heavy marketing

DBA vs. LLC: Understanding the Difference

Choosing between a DBA and an LLC affects liability and branding. Here’s what to know:

• DBA (Doing Business As): Public-facing name only; no separate entity or liability protection.
• LLC: Creates a legal entity with liability protection and flexible tax options.

Step 3: Obtain Your Federal Employer Identification Number (EIN)

An EIN is your business’s federal tax ID, required for hiring employees, opening bank accounts, and filing certain tax returns. Most owners apply right after formation to avoid using a Social Security number.

• Who Needs an EIN
  • Has employees
  • Operates as a corporation or partnership
  • Files certain federal tax returns or excise taxes
  • Withholds taxes on income paid to non-residents
  • (Sole proprietors without employees can skip it, but many apply for privacy)
• When To Apply
  • After forming your entity
  • Before opening a business bank account or hiring
• What You’ll Need
  • Legal entity name and formation details
  • Responsible party’s taxpayer ID
  • Business activity description
  • Ownership structure
• If Your Structure Changes
  • Reorganizations may require a new EIN — verify with the IRS

Step 4: Register for State and Local Tax Accounts

Once your entity is formed and you have an EIN, the next step is to set up state and local tax accounts. These registrations vary widely by state, so it’s important to confirm which apply to your business.

What you may need to register for:

• Sales Tax Permit: Required if your products or services are taxable in your state. This allows you to collect and remit sales tax.
• State Employer Accounts: Created when you hire employees. These usually include unemployment insurance and, in some states, disability insurance. Workers’ compensation may also be tied to this step.
• Local Tax Registrations: Some cities or counties require their own business tax permits or revenue accounts.

Businesses operating in several states — or with remote employees — will have to register for employer tax accounts in each state where employees work. That process can get complicated, especially when states handle payroll taxes differently.

Step 5: Apply for Business Licenses and Permits

Licensing rules vary widely, and most businesses deal with requirements at three levels: federal, state, and local. What you need depends on your industry and where you operate, so it’s smart to confirm the exact business license requirements before you open your doors.

Types of business licenses include:

• Federal: Required only for regulated industries (e.g., alcohol, firearms, aviation) — check the SBA for details.
• State: May include trade credentials, seller’s permits, or general business licenses. Rules vary by state.
• Local: Cities/counties often require business licenses, zoning clearance, health permits, and signage approval.

When it comes to timelines, a lot of common permits land somewhere in the four- to eight-week range, so it’s worth building that into your timeline. Most licenses also expire, so make a note of the renewal dates as soon as you receive them.

Industry-Specific Licensing Requirements

General business licenses are only part of the picture. Many industries have their own rules, and those can take the most time to clear. A few examples:

• Restaurants and Food Service: Health department approval, food-handler training, and, in some cases, liquor licensing.
• Construction and Contractors: State contractor licensing, project-specific building permits, and bonding or insurance requirements.
• Professional Services: Licenses issued by state boards — for example, CPAs, attorneys, real estate brokers, and other regulated fields.
• Healthcare: Clinical licenses, background checks, and in some cases, Drug Enforcement Administration (DEA) registration for controlled substances.
• E-Commerce and Home-Based Businesses: Seller permits, sales tax registrations tied to nexus rules, and local home-occupation permits.

Each state handles these requirements differently, so your state licensing board or industry regulator should be the first stop when you’re mapping out timelines and prerequisites.

Step 6: Secure Required Business Insurance

Insurance requirements vary by state law, your industry, and the risks your business takes on. Some coverage is mandatory once you hire employees. Other policies aren’t legally required but are important for protecting the business if something goes wrong.

Required Insurance

Most states require workers’ compensation once you hire employees. Other common mandates include commercial auto, state disability (in select states), and unemployment insurance tied to payroll taxes. Penalties for non-compliance can be severe.

Recommended Insurance

Some coverage isn’t required by law but is still worth considering. Many businesses carry general liability and add coverage like professional liability, property, cyber, or business interruption based on risk.

Step 7: Set Up Payroll and Hiring Compliance Systems

Once you bring on employees, you move into a different set of federal and state rules. These requirements apply regardless of how small your team is, and they begin on day one of employment.

• Complete Federal Hiring Requirements
  • Form I-9 for work authorization verification, file retention, and self-audit schedules for limited timeframe authorizations
  • Form W-4 for withholding information collection before first payroll
  • New hire reporting for state reporting within required timeframe (typically a few days)
• Set Up Payroll Tax Accounts
  • Federal income tax withholding
  • Social Security and Medicare taxes
  • Federal unemployment (FUTA)
  • State unemployment insurance
  • State income tax withholding, if your state has one
  • Local payroll or city taxes in certain jurisdictions
• Build a Payroll Infrastructure
  • Direct deposit or other payment methods
  • Timekeeping and attendance
  • State-specific pay frequency rules
  • Record retention and year-end forms
• Multi-State Compliance
  • Separate tax accounts for each state
  • Different wage, overtime, and leave rules
  • Nexus issues for remote employees

Step 8: Maintain Ongoing Compliance

Once you've completed the initial registration and hiring steps, your focus shifts to maintaining compliance over time. Launching the business is only the start. Most states require regular filings and renewals to keep your entity in good standing, and these deadlines show up throughout the year.

What you’ll need to keep up with:

• Annual reports with the Secretary of State for LLCs and corporations
• Business license renewal deadlines, which may be annual or every two years
• Professional license renewals, sometimes with continuing education requirements
• Insurance renewals and periodic reviews to make sure coverage still fits the business
• Tax deadlines, including quarterly payroll filings and annual returns
• Regulatory changes, especially if you operate in several states

A compliance calendar is the easiest way to keep track of these deadlines. You can set it up yourself or use a system that sends reminders.

State-Specific Requirements

These eight steps provide the roadmap, but the details —fees, timelines, and specific forms — depend on where you're doing business. Every state handles business setup a little differently. Instead of repeating those details here, use your state’s official resources to confirm the exact steps, fees, and renewal rules. Your Secretary of State’s website, state tax agency, and local licensing offices will have the most accurate information.

A quick check of your state’s portals can help you find:

• Business formation filings and fees
• State tax registration requirements
• Unemployment insurance and workers’ comp rules
• Professional licensing boards
• City and county business license offices

These sources give you the specifics you’ll need once you’re ready to file.

When To Get Professional Help

Some parts of starting a business are simple enough to handle on your own. Others are easier — and cheaper in the long run — when you bring in professional support. The right approach depends on your structure, the number of people you plan to hire, and the states where you operate. Consider help for:

• Entity Formation: Multi-owner LLCs or corporations often need an attorney for agreements and filings.
• Payroll and Taxes: Multi-state payroll and complex tax accounts are best handled by a payroll service.
• Licensing: Professional credentials or multi-location approvals benefit from an attorney or consultant.
• HR Compliance: Growing teams may need a PEO or HR partner for hiring, policies, benefits, and HR consulting.