To register an online business, you choose a legal structure, file formation paperwork with your state, get a federal Employer Identification Number from the IRS, pick up a sales tax permit, and add any licenses your specific activity requires. Done electronically, the core filings can wrap up in a few days. The piece that trips up online sellers isn’t the registration itself; it’s the sales tax obligations that can follow you into dozens of states you’ve never set foot in.
Choose a Legal Structure First
Your structure decides what you file, what you pay, and whether a lawsuit against the business can reach your personal bank account. Pick it before anything else.
A sole proprietorship is the default. Start selling without filing anything and the law treats you and the business as the same person. Total control, total exposure: creditors can go after personal assets, and profits are taxed as personal income at federal rates from 10% to 37% for 2026.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Fine for testing a side project, risky once real money is moving.
An LLC puts a legal wall between you and the business. If the company gets sued, creditors can generally only reach business assets. The IRS treats a single-member LLC as a disregarded entity, so you still report profits on your personal return; a multi-member LLC is taxed as a partnership.2eCFR. 26 CFR 301.7701-3 – Classification of Certain Business Entities The shield only holds if you keep personal and business money strictly separate; mixing funds can let a court pierce the veil. A profitable LLC can also elect S-Corp tax treatment by filing IRS Form 2553 by the 15th day of the third month of the tax year.3Office of the Law Revision Counsel. 26 USC 1362 – Election; Revocation; Termination
A corporation is a fully separate entity with shareholders, directors, and officers. A C-Corporation pays a flat 21% federal tax on profits, and shareholders pay again on dividends.4Office of the Law Revision Counsel. 26 USC 11 – Tax Imposed That double taxation is the main drawback. The structure makes sense if you plan to raise outside investment. For most online shops and service businesses, an LLC gives similar protection with less overhead.
Lock Down Your Business Name
Search your state’s business entity database (usually on the Secretary of State website) before filing anything. The name must be distinguishable from existing registered entities in that state, and getting rejected after paying your filing fee wastes both time and money.
If you’ll operate under a brand name different from your legal entity name, file a DBA (also called a fictitious name or trade name). So “Smith Enterprises LLC” selling under the brand “BrightBox” would file a DBA for “BrightBox.” Sole proprietors using anything other than their personal legal name usually need one too. Some states handle DBAs at the state level, others at the county level, and fees vary.
File Your Formation Documents With the State
LLCs file Articles of Organization; corporations file Articles of Incorporation. Most Secretary of State sites have online forms covering the basics: entity name, principal office address, business purpose, and the names of initial members or directors. Corporations also list authorized shares and par value.
Electronic filings often clear in one to five business days. Mailed applications can take weeks. LLC formation fees run under $50 in some states and $200 or more in others; corporate filings tend to run higher. Expedited processing is available in most states for an extra fee. Once approved, the state issues a certificate confirming your entity exists. If there’s an error, you’ll get a notice of deficiency with a deadline to fix and resubmit; miss it and the filing can be canceled, so watch your email in the days after submission.
Appoint a Registered Agent
Every LLC and corporation must designate a registered agent: a person or company with a physical street address in the state of formation, available during normal business hours to accept legal documents. A P.O. Box doesn’t qualify. You can serve as your own if you have a qualifying address, but many online owners use a commercial service, typically $100 to $300 per year for single-state coverage. A service keeps your home address off the public record and makes sure you don’t miss a legal notice because you were traveling.
Draft an Operating Agreement or Bylaws
An operating agreement spells out how the LLC is managed: ownership percentages, profit splits, what happens when a member leaves, how major decisions get made. Only a handful of states legally require a written one, but every LLC should have one anyway. Without it, the business starts to look like a sole proprietorship, which weakens liability protection.5U.S. Small Business Administration. Basic Information About Operating Agreements Corporations do the same job through bylaws and shareholder agreements. These don’t get filed with the state, but they’re your first line of defense in a dispute.
Get Your Federal EIN
Once your state formation is approved, apply for an Employer Identification Number from the IRS. This nine-digit number is the business equivalent of a Social Security number, and you need it to open a business bank account, file tax returns, and hire employees.6Internal Revenue Service. About Form SS-4 – Application for Employer Identification Number (EIN)
The IRS online application is free and issues your EIN immediately on approval.7Internal Revenue Service. Get an Employer Identification Number Fax and mail applications using Form SS-4 take days to weeks. Watch out for third-party sites that charge for EIN applications; the IRS never charges a fee.
Register for Sales Tax
If you sell taxable goods or services, your home state requires a sales tax permit (sometimes called a seller’s permit) before your first sale. The application typically wants your EIN, estimated monthly sales volume, and business address. The permit itself is usually free. Collecting tax without one can trigger penalties.
Then there’s the part specific to online businesses. Since South Dakota v. Wayfair in 2018, states can require remote sellers to collect and remit sales tax without any physical presence in the state. South Dakota’s threshold, which many states adopted, was $100,000 in annual sales or 200 separate transactions delivered into the state.8Supreme Court of the United States. South Dakota v. Wayfair, Inc. (06/21/2018)
Thresholds vary in practice. Most states with sales tax use $100,000 in gross sales as the trigger, though California uses $500,000 and Alabama and Mississippi use $250,000. Many states have dropped the 200-transaction alternative, keeping only the dollar threshold. Cross a state’s threshold and you must register there, collect the right rate, and file returns on whatever schedule the state sets (monthly, quarterly, or annually).
If you sell into multiple states, the Streamlined Sales Tax Registration System lets you register in all participating member states through a single application.9Streamlined Sales Tax. FAQs – Information About Streamlined Not every state participates. Certified third-party software can automate rate calculations and filings, and businesses using it are generally shielded from audit liability for transactions it processes.
Pick Up Any Other Licenses You Need
State registration and an EIN get your entity recognized, but what the business actually does may require more.
Professional licenses. Operating online doesn’t exempt you from professional licensing. Therapists, counselors, accountants, engineers, real estate agents, and many others need state-issued licenses whether clients walk in or log in. If your state licenses the profession, you need that license before advertising services online. The SBA maintains a directory of state licensing offices.10U.S. Small Business Administration. Apply for Licenses and Permits
Home occupation permits. Running the business from home may require a permit from your city or county. These exist to protect neighbors from noise, traffic, signage, or hazardous materials. Applications usually go through the local planning or zoning department. Fines for operating without one add up quickly.
Federal licenses. Most online businesses don’t need any, but certain regulated activities do: selling alcohol, firearms, tobacco, or wildlife-related items, or broadcasting content, all require permits from the relevant federal agency.10U.S. Small Business Administration. Apply for Licenses and Permits
Register in Other States If You Operate There
If your business has employees, an office, or significant ongoing operations in a state other than where you formed, that state may require you to “foreign qualify” by registering as a foreign entity authorized to do business. This is separate from sales tax nexus. Foreign qualification means filing an application for authority, paying a registration fee, and appointing a registered agent in that state.
Skipping it has real consequences. An unqualified business generally cannot file lawsuits in that state’s courts to enforce contracts or collect debts. Most states also impose monetary penalties ranging from a few hundred dollars to $10,000 or more depending on the state and how long you operated without registering. In some states, officers who knowingly conduct business without qualifying face personal fines or even misdemeanor charges.
Keep Your Registration in Good Standing
Registration isn’t one-and-done. Most states require LLCs and corporations to file an annual or biennial report confirming basic information like the business address, registered agent, and the names of managers or directors. Fees range from $0 in a few states to several hundred dollars, with California’s $800 annual franchise tax at the high end. Miss the deadline and you’ll get late fees first; keep missing and the state can administratively dissolve your entity. Reinstatement is possible but costs more and leaves a gap in your good-standing history that complicates loans, contracts, and vendor relationships.
What About FinCEN BOI Reports?
The Corporate Transparency Act originally required most small businesses to file Beneficial Ownership Information reports with FinCEN. Under an interim final rule published in March 2025, all entities created in the United States are exempt.11FinCEN.gov. FinCEN Removes Beneficial Ownership Reporting Requirements for US Companies and US Persons, Sets New Deadlines for Foreign Companies If you’re forming a domestic LLC or corporation, you don’t need to file a BOI report. Foreign-owned entities registered to do business in the U.S. still have a 30-day filing window after their registration becomes effective.