The usual disclaimer: I’m not an attorney. This article should not be considered legal advice.
At a federal level, there is nothing you need to do to claim that you are in business. Congratulations! You’re a business. And on a local level becoming compliant is typically easier and more intuitive than people usually assume. And although I would never recommend anyone forgo becoming compliant, it’s not something to stress over, for the most part, it’s unlikely anyone will hassle you so long as you’re paying taxes on your business income.
Most cities and counties require some sort of business license. If you perform your work at home, this might also involve getting a home authorization permit, which will require the permission of your HOA board or landlord.
Business licenses are usually easy to obtain, they mostly require some paperwork and a fee of between $0-$200. You can check your city or county’s website for information on where to obtain and file the required paperwork.
If you operate under any sort of business name that does not include your legal name, you are usually required to file a ‘doing business as’ or ‘fictional business name’. This will help clients find the real person behind the business name if you’re up to bad biscuits. This is often done in the same place as filing for a business license and instructions can also usually be found on your city or county website.
If you would like to incorporate, hire employees, or establish your IC status in a state that has a strict definition of freelancer status, you’ll need an Employer Identification Number. It may also be required in other situations, like getting a business account with certain banks. It’s free and extremely easy to get, you can get one through the IRS’s website in about 5 minutes.
Legally, you’re automatically considered a sole proprietor and you have no obligation to change that status. Becoming an LLC or S-Corp, however, will offer some other benefits, primarily legal protection. There are, sometimes substantial, fees associated with incorporating: filing fees and yearly licensing fees. You may also choose to enlist the help of an attorney to help you incorporate- the paperwork is not difficult but an attorney can guide you on other obligations you need to fulfill to keep the legal protection you can get from incorporation. You can find the paperwork and details about incorporating on your state’s Secretary of State website.