Federal, state and local: who does what
Think of the USA like a big school. The principal (federal government) sets some rules for everyone. Each classroom (state) has its own rules too. And your table group (city or county) might have a few more. A business follows all three.
- Federal (whole country): the IRS handles federal taxes and gives out the EIN (Lesson 4). The SBA (Small Business Administration) offers guides, counseling and loan programs (Lesson 7). Some activities need a federal license, such as alcoholic beverages, aviation, firearms, commercial fisheries, broadcasting, and transportation and logistics (SBA).
- State: most states require businesses such as LLCs and corporations to register with the Secretary of State or a similar office. States set filing fees, sales tax, state income tax and employment taxes. The SBA says "States tend to regulate a broader range of activities than the federal government."
- Local (city or county): many local governments license activities like construction, plumbing, restaurants, retail and vending machines (SBA examples).
- The SBA says ownership rules, liability, taxes and filing requirements "can vary by state."
- Write three lines on a page: your state, your county, your city.
- For each one, search for its official website. Look for addresses that end in .gov.
- Open your state's Secretary of State business page (names can differ by state).
- Bookmark it.
- Write one sentence for each level: what the federal government (IRS, SBA), your state and your city or county control for your business.
- Check: you have three official .gov links saved and a one-line note for each level.
Videos by other creators on YouTube, for reference. They are not made by or affiliated with The Future Market.
Read the video script
[Host] "Starting a business in the US? You answer to three levels."
[Text on screen: Federal = IRS, SBA] "Federal: the IRS for taxes, and the SBA for help."
[Text on screen: State = Secretary of State, sales tax] "State: where you form your LLC and handle sales tax."
[Text on screen: Local = city or county licenses] "Local: your city or county may want a license too."
[Host] "Same country, different rules by state. Always check yours."
Write down your state, county and city. Find the official website for each (look for .gov addresses). Bookmark your state's Secretary of State business page.
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I'm learning "Start a Small Business in the USA (LLC, EIN, SBA)" on The Future Market. Lesson 1: "Federal, state and local: who does what". What the lesson teaches: - Federal (whole country): the IRS handles federal taxes and gives out the EIN (Lesson 4). The SBA (Small Business Administration) offers guides, counseling and loan programs (Lesson 7). Some activities need a federal license, such as alcoholic beverages, aviation, firearms, commercial fisheries, broadcasting, and transportation and logistics (SBA). - State: most states require businesses such as LLCs and corporations to register with the Secretary of State or a similar office. States set filing fees, sales tax, state income tax and employment taxes. The SBA says "States tend to regulate a broader range of activities than the federal government." - Local (city or county): many local governments license activities like construction, plumbing, restaurants, retail and vending machines (SBA examples). - The SBA says ownership rules, liability, taxes and filing requirements "can vary by state." The exercise I'm working on: Write down your state, county and city. Find the official website for each (look for .gov addresses). Bookmark your state's Secretary of State business page. I'm stuck. Please: 1. Explain the main idea in plain, simple words with one everyday example. 2. Walk me through the exercise one small step at a time. Ask me what I've done so far before giving the next step. 3. Don't just give me the final answer. Help me do it myself, and check my work when I share it.
I'm a parent helping my child (about 8 years old) with a lesson called "Federal, state and local: who does what" from the course "Start a Small Business in the USA (LLC, EIN, SBA)". Here's what the lesson says: Think of the USA like a big school. The principal (federal government) sets some rules for everyone. Each classroom (state) has its own rules too. And your table group (city or county) might have a few more. A business follows all three. The activity: Write down your state, county and city. Find the official website for each (look for .gov addresses). Bookmark your state's Secretary of State business page. Please explain this so an 8-year-old understands: short sentences, a fun everyday example, and no hard words. Then give me 3 simple questions I can ask my child to check they understood, and a way to do the activity together, one tiny step at a time.
Sources
- SBA, Apply for licenses and permits: www.sba.gov/business-guide/launch-your-business/apply-licenses-permits
- SBA, Register your business: www.sba.gov/business-guide/launch-your-business/register-your-business
Pick your business structure
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Register with your state (LLC or DBA)
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Get your EIN (free, from the IRS)
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Taxes: self-employment, estimated payments and sales tax
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Licenses, permits and your first employee
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Free help, SBA loans, and rules where you live
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Final project
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Quiz
Which federal agency issues EINs?
The IRS.
How much does an EIN cost from the IRS?
Nothing. The IRS says you never have to pay a fee for an EIN.
How is a single-member LLC owned by one person taxed by default?
As a disregarded entity; business activity goes on the owner's Schedule C.
Who usually registers LLCs: the federal government or the state?
The state, usually through the Secretary of State's office.
What does the SBA say the total cost to register a business usually is?
Less than $300 in most cases, varying by state and structure.
What is the self-employment tax rate?
15.3% (12.4% Social Security + 2.9% Medicare).
At what level of net self-employment earnings must you pay SE tax?
$400 or more.
Who generally must make estimated tax payments?
Individuals who expect to owe $1,000 or more when they file.
Is sales tax federal or state?
State (and sometimes local), not federal.
What is the maximum SBA microloan?
$50,000.
Final exam
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Certificate
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