Yet another governmental level to deal with.

You can bet that the state where you're starting your business will have bureaucratic hoops for you to jump through. These may range from filing organizational papers and getting a license for your occupation to tax registration and environmental compliance.

Regulated Occupations and Products

You probably know that states give licenses to people practicing the traditional professions, such as lawyers, doctors, accountants, teachers, architects, and engineers. States also license people in a broad range of trades, from auto mechanics and barbers to real estate agents and tax preparers. Sometimes licenses are issued to the business, while other licenses are taken out by the individual. You can't guess which occupation needs a license, so you'll just have to ask. Your state website or trade association is a good place to start.

The licensing procedures will vary, but you'll probably have to show evidence of training in the field, and you may have to pass a written exam. Sometimes you have to practice your trade or profession under the supervision of a more experienced person for a while before you become fully licensed. Some licenses are good for a limited period before there is retesting. Others require proof of continuing education in the field.

The state may also want you to get a license if you make or sell certain products, such as liquor, food, lottery tickets, gasoline, or firearms.

Tax Registration

If you're engaging in retail sales, you probably need to register for or get a sales tax license or seller's permit. This lets you collect sales taxes from your customers, which you'll pay to the state. You need this permit even if you're also selling goods that are exempt from your state's sales tax. When the time comes, you'll owe tax only on the taxable sales. If your business both sells products and performs services, it will be important to keep your labor sales separate from sales of goods, since sales of services aren't usually taxed (only in some states).