Business Starter Kit: Entity, EIN, State Filing and BOI, Explained Plainly

1. Pick a structure: sole proprietorship, LLC or S-corp election

Sole proprietorship. If you start doing business on your own and don't register anything, you're generally a sole proprietor by default. It's the simplest setup: business income goes on your personal return (Schedule C). The trade-off is that you and the business are legally the same, so your personal assets aren't separated from business debts or lawsuits.

LLC (limited liability company). You form an LLC by filing with your state. The SBA notes that an LLC can protect your personal assets in most cases if the business faces debts or lawsuits. For federal taxes, the IRS treats a one-member LLC as a "disregarded entity" (taxed like a sole proprietorship) and a multi-member LLC as a partnership by default, unless it elects otherwise.

S-corp election. An S corporation isn't a separate kind of state filing; it's a federal tax election. An eligible corporation, or an LLC that elects to be taxed as a corporation, files IRS Form 2553 to be taxed as an S corporation. Whether that saves money depends on your profit, the salary you'd have to pay yourself, payroll costs and your state's rules.

There's no one right answer. Before you choose, especially before an S-corp election, talk to a tax professional (a CPA or enrolled agent) about your numbers. Free counseling is also available through the SBA's resource partners, like SCORE mentors and Small Business Development Centers.

2. Get your EIN free, directly from IRS.gov

An Employer Identification Number (EIN) is your business's federal tax ID. You generally need one to hire employees, run a partnership or corporation, or pay certain taxes, and many banks ask for one to open a business account. If you're forming an LLC or corporation, the IRS says to form it with your state first, then apply for the EIN.

The IRS online application is free and, if approved, issues your EIN immediately. In the IRS's own words: "Beware of websites that charge for an EIN. You never have to pay a fee for an EIN." Look-alike sites often appear at the top of search results, so type irs.gov yourself.

• Finish the application in one session. It times out after 15 minutes of inactivity.
• It's only open certain hours (Eastern Time), and you can get one EIN per responsible party per day.
• Print or save your EIN confirmation letter right away.

3. File with your state (fees vary; Florida example)

LLCs and corporations are formed by filing with your state, usually the Secretary of State or a similar business division. Fees, annual report rules and deadlines vary a lot by state, so check your own state's official site. The National Association of Secretaries of State (NASS) keeps a directory of state business-registration offices.

Florida example: according to the Florida Division of Corporations (sunbiz.org), forming a new Florida LLC costs $125 total: a $100 filing fee plus a required $25 registered agent designation fee. Florida LLCs also file an annual report, listed at $138.75, and the fee jumps to $538.75 if it's received after May 1. Fees can change, so confirm on sunbiz.org before you file.

Depending on your city, county and line of work, you may also need local business licenses or permits, and possibly a fictitious name ("doing business as") registration if you use a name other than your own or your company's legal name.

4. DIY or a formation service?

You can file directly on your state's website yourself; for a simple single-owner LLC, the forms are usually short. Formation services charge a fee on top of the state fee to fill out the same forms, and many add upsells like registered-agent service, "compliance" packages or an EIN, which you can get free from the IRS.

• DIY makes sense if your setup is simple and you're comfortable reading your state's instructions.
• A service may help if you want a registered agent at a different address or reminders for annual filings. Compare the total price, including renewals.
• If you have partners, investors or complex tax questions, an attorney or CPA may be worth more than a formation website.
• Watch for official-looking letters offering to file your annual report or "certificate" for a fee. Check your state's official site first.

5. BOI reporting (FinCEN): where it stands now

Under the Corporate Transparency Act, many companies were once expected to file beneficial ownership information (BOI) reports with FinCEN. In an interim final rule published March 26, 2025, FinCEN exempted all entities created in the United States (formerly "domestic reporting companies") and their beneficial owners from BOI reporting. FinCEN then issued a final rule, effective August 14, 2026, that made those exemptions permanent. Under it, U.S. companies are exempt and don't need to file BOI reports, and U.S. persons don't need to provide BOI.

Some foreign companies registered to do business in the U.S. may still have to report. Rules can change, so check fincen.gov/boi (opens in a new tab) for the latest. FinCEN also warns about scam letters asking for payment to file BOI: there is no fee to file with FinCEN, and FinCEN has no "Form 4022" or "Form 5102."

6. Next steps once you're set up

• Open a separate business bank account. See our no-fee business banking checklist.
• Set up simple recordkeeping from day one and learn what you can deduct. See our small business deductions checklist.
• Estimate your taxes. Sole proprietors generally make estimated tax payments if they expect to owe $1,000 or more when they file.