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Disclaimer: This Guide is a compilation of publicly available information. It is intended as general information, not legal advice. 

1. What is Compliance?

Compliance is an internal business area. Its function is to keep a company in good standing with relevant governments.


There are plenty of companies you can hire to handle it for you. We’re one of them. But while compliance can be confusing, it’s not complicated, and you can definitely handle it on your own. 

To do business in the US, most companies need a Federal Employer Identification Number, commonly abbreviated as a FEIN or just EIN. 

This is the number you use when you file business tax returns with the IRS, but it’s also used as an ID by many other entities including banks, credit rating agencies, and some states. 

If you don’t have an EIN yet, it’s easy to request one here. The IRS will provide you with an EIN Assignment Letter. Be sure to keep that letter somewhere safe, because from time to time you will need it and it’s an absolute pain to replace. 

Every state has their own process, but generally, there are three entities to register with and report to: 

  • The Secretary of State (SOS)

  • The Department of Revenue (DOR) 

  • And the Department of Labor (DOL)


Their names can vary in some states. For example, in CA the DOR is called the Franchise Tax Board. 

To register a new business, start with the SOS, then the DOR, and then the DOL. The DOR and DOL often have minimum requirements before you’re required to register with them. For example, companies with revenue under a certain amount often don’t need to register with the DOR, and sole proprietors without employees don’t need to register with the DOL. 

If you’re doing business in another state, you’re supposed to register there. We say supposed to because in this digital age of cloud infrastructure and internet sales, where we’re doing business can be hard to pinpoint.

A few clear cut situations include:

  • You buy or rent a physical location in a new state

  • You hire a salaried employee in a new state

  • An existing employee permanently moves to a new state 


When one of these things happens, it’s time to register as what’s called a “foreign entity”, or “foreign corporation”.

Two local jurisdictions to check requirements for are your county and city. 

Most of the time their requirements will be pretty simple, or they may not even have any. On the other side of the spectrum,  big cities often have rigorous ones with taxes and teeth. 

We once saw a hapless business (not a client) that had started up in SF but for their first year didn’t pay salaries to their founders and had no revenue to speak of, so they didn’t realize they needed to register with the city. Five years later SF figured it out, and sent them a $14,000 fine. 

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