The 4 Legal Requirements to Know before Starting a Business in America

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The “American Dream,” often illustrated by entrepreneurial success, continues to drive individuals toward new projects and endeavors.

The allure of innovation and economic prosperity beckons, forming a vibrant entrepreneurial climate. However, beneath the surface of this promising realm lies a web of legal obligations awaiting new businesses.

In August 2023, there were an estimated 466,163 business applications, showcasing a vibrant entrepreneurial climate. The projected business formations for August 2023 stood at 32,717, a 1.7% increase compared to July according to the US government census.

Thus, while the environment is ideal for entrepreneurs, the journey of starting a business in America requires a solid grasp of the legal requirements. This knowledge will be indispensable for navigating the early stages of launching a company, which is true for both small and large companies.

This article aims to shed light on the pivotal legal steps and considerations needed to start a business venture in America.


1. Choosing the Right Structure

Before registering a business, deciding on a suitable structure is crucial as it influences various aspects, including legal liability, tax obligations, and managerial hierarchy. The U.S. Small Business Administration (SBA) elaborates on the significance of this choice and mentions that while changing the business structure is possible later on, some restrictions based on location may apply​.

The bedrock of any new business is its structural entity. Whether it’s a sole proprietorship, partnership, limited liability company (LLC), or corporation, each structure carries distinct legal, tax, and operational implications. Sole proprietorships and partnerships offer simplicity but expose owners to personal liability.

In contrast, LLCs and corporations provide a liability shield, albeit with more complex regulatory adherence. The selected business structure significantly influences the legal requirements, including registration, taxation, and liability. Hence, a meticulous comparison to align with one’s business vision and risk tolerance is imperative.

2. Registration and Licenses

The cost of registering a company in the US will include applying for a number of licenses and permits. This is a normal part of any entrepreneurial journey, and it usually commences with registering the business name and entity.

These formalities vary across different jurisdictions and are the green light for operational legality. According to USA Corporate Services, the fees can range from $480 to $1,180, depending on the state and type of registration needed,

3. Compliance and Protection: The Legal Responsibilities of New Companies

Dealing with the tax landscape begins with obtaining a Federal Tax Identification Number (EIN), a business’s social security number. The Internal Revenue Service (IRS) outlines the basic tax responsibilities for new businesses and emphasizes the importance of choosing a business structure. This is because it determines the income tax return your business will need to file.

State tax registrations follow, with specifications varying across states. A discerning understanding of sales tax, income tax, and employment tax is crucial to avoiding legal pitfalls. This underscores the importance of either mastering tax law or enlisting professional guidance.

You will also want to think about intellectual property laws. After all, they are the lifeblood of most businesses. A recent study by the U.S. Patent and Trademark Office (PTO) reveals that IP-intensive industries account for 47 million American jobs and $7.8 trillion in economic value. This makes up 41% of the U.S. gross domestic product.

Identifying and legally protecting intellectual property through trademarks, copyrights, and patents is paramount for safeguarding a business’s unique value. These legal shields not only preserve the business’s identity but also foster a competitive edge in the market landscape.

4. Employment Law Knowledge Critical for New CEOs

The process of expanding a business’s human capital is laden with legal requirements. Employee classification and verification will be pivotal for legal compliance and will dictate the subsequent tax and benefit obligations.

Drafting comprehensive job descriptions and employment agreements within the legal framework minimizes the risk of future disputes. It also lays the foundation for a harmonious work environment.

Similarly, workplace regulations are also important. Adherence to labor standards and occupational safety laws is not just a legal mandate, but an obligation toward fostering a safe work environment. Anti-discrimination policies, along with employee benefits, are areas that demand meticulous attention to ensure fairness and legal compliance, so automating benefits administration with this software for example can help streamline those tasks.


Embarking on a business venture in the United States is an exciting journey full of potential. It’s essential to understand that knowing and following the law is not just good practice; it’s essential for your business to thrive. Remember, starting a business is more than just following rules.

It’s about setting up a system that reflects your values and vision. By keeping on top of legal matters, you’re building a trustworthy foundation for your company. This not only puts you in a good position with the law but also builds trust with your customers and employees.

Manuela Willbold

Manuela Willbold

Online Media & PR Strategist at ClickDo
Blogger and Educator by Passion | Senior Online Media & PR Strategist at ClickDo Ltd. | Contributor to many Education, Business & Lifestyle Blogs in the United Kingdom & Germany | Summer Course Student at the London School of Journalism and Course Instructor at the SeekaHost University.
Manuela Willbold
Manuela Willbold
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