Where Should I Register An Online Business?

Updated January 2019

We get many inquiries regarding where to register an online business. Having no tangible presence (i.e. a storefront) understandably leads to some confusion, including whether registration is necessary, and if so, in which state to register or incorporate. Luckily, it’s not that complicated. I’ll help you through the process, step by step.

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Do I need to register an online business?

The rationale to register an online business is the same as if you had a storefront or physical presence. Do you want to limit your personal liability, save money on taxes, have complex ownership or employees, or add credibility to your business? If so, then registering with the Department of State is necessary.

There are many types of entities to form. Typically, registering with the state involves filing a formation document, along with submitting a fee, to the state’s Corporation Division. The state will review and hopefully approve your application.

Where should I register an online business?

Just as if you had a storefront, it usually makes the most sense to register (that is, incorporate) in the state in which you, the owner lives and works. For example, if you run an ecommerce business from your home in Minnesota, start by registering in Minnesota. Many websites and even professionals will tell you to incorporate in Delaware or Nevada because of their tax-friendly environments. We usually find that the home state is more cost effective for a small business.

What else must I do in my home state?

Having an online business still means that you obtain an EIN, register for applicable sales and state taxes, and obtain licenses and permits for your business. Be sure to research your specific needs with state and local level authorities.

If you’re still unsure of which tax registrations or licenses you need, please contact us. Harbor Compliance can help you research your business’ needs.

Growing an Online Business

If you’ve been successful and experienced growth, congratulations! You now have more compliance responsibilities.

If you have added assets or employees in another state, you will probably have to obtain authority to transact business there as well. This process is known as “foreign qualification.” For example, if you hire a website administrator in Florida, you need to foreign qualify in Florida as a “foreign Minnesota LLC/Corporation.” If you have foreign qualified successfully, you will need to obtain licenses and permits, and register for applicable taxes, just as you did in your home state.

You are responsible for maintaining your business in both states (or three, or ten…), whether that be with Departments of State, Revenue, or Licensing. This can add significant administrative cost, but should be worth it since you’re running a successful online business!

That wasn’t so bad, was it? Hopefully this post has given you an idea of how this process works.

If you’d like assistance, Harbor Compliance specializes in business formation and compliance. We can register an online business, and help you stay compliant. Visit our website (an online business…) to get started!

Read More:

Guidance for online retailers and state sales tax after South Dakota v. Wayfair.
What you need to know about registered agents and business addresses when starting or expanding your business.
Get a helpful compliance checklist to audit your practices.
Take a quick tour of our 4,000-page Information Center and become your resident compliance guru.