Federal Small Business Requirements
Created by FindLaw's team of legal writers and editors | Last reviewed September 21, 2022
When starting a business there are federal small business requirements that must be met by all start-ups. Both state and federal governments place certain requirements on small businesses in order for the companies to function properly. From a federal perspective, there are several major small business requirements that the government imposes upon businesses.
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Business Structure and Taxes
One of the very first decisions of a business will be to decide what kind of business structure it will adhere to. The type of structure will determine how much regulatory paperwork the business will have to file as well as the taxes it will pay. The different structures for small businesses include:
- Sole proprietor (taxes paid through personal income tax return of owner);
- Partnership (taxes paid through personal income tax return of owners);
- Corporation (taxes paid by corporation);
- S corporation (taxes paid through personal income tax returns, but owners must be paid "reasonable compensation");
- Limited Liability Company (LLC) (hybrid legal structure, taxes paid like a partnership, but receive personal liability shield);
- Non-profit (may be tax exempt).
The tax and regulatory implications of the various business structures increase the more the business heads toward being classified a corporation. Corporate taxes are more complicated than paying taxes on business profits and professional assistance from a tax attorney or accountant should be obtained. The specific tax forms required by the IRS for each of the above business structures can be found on the IRS website or the U.S. Small Business Administration site.
Employer Identification Numbers
Employer Identification Numbers (EINs) are typically required of all businesses (although most sole proprietors with no intent to hire employees are exempt - - check the IRS website to confirm whether your business needs to apply). An EIN is used by the IRS to identify a business entity for purposes of tracking the business and determining what taxes it and the parties related to the business (employees, suppliers, etc) owe the government. Businesses can now apply for EINs online, with the EIN being issued immediately during the application session.
Licenses and Permits
In addition to the requirement of obtaining an EIN, businesses in certain industries are required to apply for licenses and permits to do business. While a majority of businesses don't have to register with the federal government (but do with state agencies), if your business falls into the following categories, you should consult with the governing federal agency to determine whether you need a license or permit (see "Federal Business Licenses" for more information):
- Agriculture - the U.S. Department of Agriculture issues permits for business involved in the importation and interstate transportation of animals, animal products, biologics, biotechnology and plants.
- Alcoholic beverages - manufacturers, wholesalers, importers and retailers of alcohol beverages must register, pay special taxes and maintain certain records with the Alcohol and Tobacco Tax and Trade Bureau(ATTB).
- Aviation - the Federal Aviation Administration (FAA) issues licenses for pilots, aircraft, airports, and medical aviation services.
- Environmental - the Environmental Protection Agency (EPA) imposes environment regulations at the federal level. If your business buys or sells land that is contaminated, you'll need to go through the EPA to get rid of the contaminants.
- Firearms, ammunition and explosives - manufacturers, dealers and importers of firearms and ammunitions are controlled by the Bureau of Alcohol, Tobacco and Firearms (ATF).
- Fish and wildlife - businesses engaged in any wildlife activity, including the importation of any wildlife or their derivative products, must receive a permit from the U.S. Fish and Wildlife Service.
- Investment Advising - the Securities and Exchange Commission (SEC) requires those who professionally counsel on investments to be licensed.
- Mining and drilling - Minerals Management Service (MMS), a bureau in the U.S. Department of the Interior, is the federal agency that manages the nation's natural gas, oil and other mineral resources.
- Radio and television broadcasting - If your business broadcasts information by radio, television, wire, satellite and cable, you are required to obtain a license from the Federal Communications Commission (FCC). The FCC doesn't regulate the internet.
- Interstate ground transportation - you must register if your business will cross state lines.
- Maritime transportation - the Federal Maritime Commission issues licenses for businesses that transport freight or passengers on the ocean.
Naming Your Business and Protecting Your Property
Once you've decided on your business structure and determined whether the business falls under the purview of a federal agency, you'll need to choose a business name and see whether it violates another business' federally protected trademark. You can do a simple search with the U.S. Patent and Trademark Office (USPTO),as well as a search for similar businesses using internet search engines.
You may have already picked a business name, but because of the potential waste of time and money related to marketing a name that you ultimately can't use, you should take at least a few precautionary steps before plunging in. Additionally, once your business gets rolling, you should take steps to protect your business' trademark. You can register your business name with the USPTO even before you start using the name in business (it's called an Intent to Use application).
Additionally, if your business has any intellectual property, you'll want to protect it by registering it with the USPTO, whether they're patents, copyrights or trademarks. And after you've registered your property, you need to vigilantly protect it on your own (the USPTO isn't an enforcement agency).
Give Your Small Business the Best Chance at Success
While you may be a brilliant entrepreneur, trying to decipher all the federal business law requirements can be confusing. Working through a reputable DIY business formation service or consulting with a skilled business lawyer can help you meet all the requirements and save you hours of lost productivity.
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