The beginning of a new business venture is filled with excitement and the promise of opportunity. The ability to design your own brand, create a product or service, write a business plan, and build a corporate culture are a dream come true for many.
However, there’s a good deal of legwork that needs to happen behind the scenes in order for those dreams to become reality. In order to be successful, businesses must have a solid framework to support them. That means determining things like business structures, federal and state tax requirements, and employee status upfront.
By determining the optimal setup for your business first, you’ll provide your company, yourself, and your employees (if you have any) a layer of protection. Think of it as an insurance policy: if your business is playing by the rules, you’re free to go out and dream big without worry.
Here’s a brief checklist to make sure you’ve got all your bases covered.
The type of business structure you choose determines a number of major factors: tax payments, filing requirements, your own personal liability related to your business, and even the ability to fundraise. It’s critical to review all entity types before making a decision.
The most common entity types available are:
Each entity type is targeted at specific types of businesses, but it’s common to find more than one entity that’s a fit. For example, a sole business owner might choose between a sole proprietorship, an LLC, and an S-Corp. An LLC provides more protection from personal liability than a sole proprietorship, while an S-Corp provides unique tax benefits.
Make sure to evaluate all your options before making a decision. And consider any changes you might like to make in the future, as certain entity types have restrictions that could prohibit businesses from converting to a new entity.
Whether or not you need to register your business with any government agency will depend on what you do and what types of needs you have. However, it’s an important factor to know, as you could miss out on key benefits provided with registration.
That means checking with both federal and state agencies. Registration requirements for state agencies will vary by state, but they generally include a series of forms and some nominal fees. Federal requirements are fairly standardized and straightforward. For business trademarking, file with the U.S. Patent and Trademark Office. Tax-exempt status for non-profit corporations goes through the IRS.
In order to register, you’ll need access to a registered agent in your state to receive critical documents for your business. Business owners can do this themselves or outsource the work to an existing registered agent.
A federal tax ID number, also called an Employer Identification Number (EIN), identifies your business to the federal government. It also enables businesses to pay taxes, hire staff, set up business bank accounts, and request permits. EINs are fairly easy to request on the IRS website with this EIN assistant.
State tax ID numbers are only required if a business has to pay state income taxes. Check your state’s tax requirements to determine if your business needs one or not.
Depending on the line of business you’re in, you may need some combination of federal, state, city, and county licenses and permits. Federal permits are required for any industry regulated by the federal government. The U.S. Small Business Administration (SBA) offers a comprehensive list of industries regulated by the federal government – and their corresponding agencies.
After you have the federal EIN associated with your business, you can decide on a bank for business banking purposes and open an account (or multiple accounts).
Managing your business’ income and expenses will be much more straightforward if all transactions go through specified accounts. And business bank accounts generally come with benefits not available on standard personal accounts.
Here are a few things to look for when evaluating banks and types of accounts:
These inputs will likely vary based on the type of account (checking, savings, merchant services, etc.), so make sure to clearly weigh the pro’s and con’s of each account type and bank. For instance, a small local bank or credit union may provide excellent service but it may not connect easily to accounting software or even help from an outside bookkeeping firm as it might be lacking the relevant information required for accurate and neat bookkeeping.
In order to comply with federal requirements for both you and your employees, you’ll need to have them fill out the appropriate forms. The current federal tax forms for employees are form I-9, which verifies an employee’s identity and authorization to work in the U.S., and form W-4, which gives employers the ability to withhold federal taxes.
State tax forms will vary by state and depend on whether or not your state collects income tax (9 states don’t). Check with your state’s department of taxation to determine whether you need to file employee tax forms.
A business’ taxable income is determined based on its tax year, which is usually some portion of the year it starts operating. It’s the period you pay taxes for accounting purposes.
The options are a calendar year (January 1-December 31 of any given year) or a fiscal year (12 months ending on the last day of any month except for December). So if you started your business on May 1, 2025 and you want to use a fiscal year, your end of the fiscal year will be April 30, 2026.
One key caveat: the fiscal year designation is immediately available to corporations, but only available to sole proprietorships, partnerships, and LLC upon request from the federal government.
Tax payments required for your business will depend on the entity type you choose (for federal taxes) and the local requirements (for state taxes). The major types of federal taxes paid by businesses are:
Employment taxes are paid in a pay-as-you-go format, so they’re withheld from employee paychecks for each pay period. Self-employment taxes are generally paid quarterly in the form of estimated taxes, where self-employed individuals estimate what their tax payments will be and file accordingly.
If you look at the list above, it would seem that the only task that requires ongoing maintenance is paying your taxes. But that couldn’t be further from the truth. In order to conform to be informed about the health of your business, you’ll need to have a system for tracking outgoing invoices, incoming customer payments, payroll costs, business expenses, and financial changes such as funding infusions and large purchases. The tracking of incoming and outgoing flows of cash are the lifeline of your business.
Fortunately, there are multiple options available to businesses to manage their bookkeeping. You can evaluate accounting software such as QuickBooks Online and purchase a subscription with the plan to manage it all on your own. QuickBooks Online is a cloud-based software, offering features like expense tracking, customizable invoicing, payroll integration, and comprehensive financial reporting, making it suitable for businesses of all sizes. You can hire an accountant or a bookkeeper who is a QuickBooks ProAdvisor and have them manage your books using QuickBooks Online, with high-level input from you. Or you can even outsource the process entirely to an accounting platform that provides software plus accounting and bookkeeping support.
The choice depends on how much of your own internal resources you want to allocate to accounting needs (versus using outside resources).
Traditionally the role of Payroll falls on accounts payable or human resources. As the business grows, switching to a specialized provider to manage employee payments, taxes, and compliance would be more efficient. QuickBooks Online now also provides Payroll services along with the plethora of services mentioned above.
For more advice on starting and growing your business, check out the Stilz Bookkeeping blog. Stilz Bookkeeping offers high quality bookkeeping services using QuickBooks to get your books to be neat, clean and accurate. We are Intuit certified QuickBooks Advanced Level ProAdvisors. We know QuickBooks like the back of your hand.
Disclaimer: The information provided in this blog is for general informational purposes only. It is not intended as accounting, tax, legal, or other professional advice. You should not act or refrain from acting on the basis of any content in this site without first consulting a financial or tax professional. We are not liable for any potential errors or omissions in this information or for any actions taken based on this information.
