Small Business Requirements, Employee Rights, Tax & Insurance – By State

More and more people have started their own businesses in the United States over the past decade, thanks to the high rating of 91.6 (out of 100) by the World Bank for ease of starting a business.

In this article, we will outline the main requirements for establishing and operating a small business and the necessary processes for guaranteeing employee rights, conforming to tax laws, and insuring against risks.

There are many differences between the States, and the following table will guide you in locating the relevant information for where you are located.

Table of GOV sources

(click on the relevant state for a quick jump)

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming

State Requirements Employee Rights Tax Insurance


Business Services | Alabama Secretary of State Alabama Department of Labor Business Privilege Tax Incentives – Alabama Department of Revenue ALDOI – Health Insurance for Small Businesses


Business Licensing FAQs, Business Licensing, Division of Corporations, Business and Professional Licensing Employees’ Frequently Asked Questions Alaska Sales Tax Information, Office of the State Assessor, Division of Community and Regional Affairs Insurance for small businesses (


Business – Arizona Department of Revenue Labor Frequently Asked Questions (English) | Industrial Commission of Arizona Small Business Income and Surcharge Guidance NMWCA-Business-Information –


Owning a Business – FAQs » Arkansas Department of Labor and Licensing Validation request Arkansas Insurance Department


Starting a Business – California Secretary of State All Workers in California Have Rights (PDF) Small businesses – Commercial Insurance Guide


Checklist for New Businesses Laws, Regulations, & Guidance – Department of Labor & Employment Business Income Tax – Department of Revenue – Taxation Small Business Insurance | DORA Division of Insurance


Small Businesses Employee Rights Connecticut Law About Small Business Companies with Approved Small Employer Health Insurance Policies


Step 2: Requirements for Delaware Businesses – Division of Revenue – State of Delaware Wage Payment – Delaware Department of Labor Doing Business in Delaware – Division of Revenue – State of Delaware Small Business Insurance – Delaware Department of Insurance – State of Delaware


Resources – Open MyFlorida Business New and Small Businesses – U.S. Department of Labor Florida – Internal Revenue Service Florida Insurance Requirements – Florida Department of Highway Safety and Motor Vehicles


First Stop Business Guide ( Employment Laws and Rules | Georgia Department of Labor File Small Business Taxes | Business – Georgia Office of Insurance and Safety Fire Commissioner

Hawaii | Starting a Business Department of labor and industrial relations labor law requirements for new employers General Excise Tax (GET) Information – Department of Taxation Insurance – Hawaii Small Employer/Small Business FAQs


Licenses, Permits and Regulations » Employee Rights & Laws | The Official Website of the State of Idaho Business income tax – Idaho State Tax Commission Insurance »


Step by Step Guide – First Stop Worker Rights – Employees Businesses – Businesses Insurance – About

Indiana – Business Owner’s Guide DOL – Wage & Hour FAQs Indiana Tax Handbook for New and Small Business Owners IDOI: Small Business Insurance


Starting a Business Misclassification of Workers in Iowa | Iowa Workforce Development Tax Guidelines for Starting a Business | IDR SMALL GROUP HEALTH COVERAGE  (PDF – CHAPTER 513B)


Obtain Business Licenses and Permits | Business Center One Stop Workplace Laws and Requirements FAQs – Kansas Department Of Labor Kansas Department of Revenue – Pub. KS-1216 Business Tax Application Insurance Information for the Small Business Owner (PDF)


Start My Business Managing Employees Business – Department of Revenue Insurance (


Start a Business Small Business Assistance | Louisiana Department of Environmental Quality Corporation Income & Franchise Taxes – Louisiana Department of Revenue Small Business

Maine Business: Starting a Business Maine Department of Labor: Maine Laws Governing the Employment of Minors – Business: Taxes Health Insurance for Small Businesses | PFR Insurance


Start a Business in Maryland | Maryland Department of Commerce Employer and Employee Rights Resources – Maryland Business Climate | Business Taxes | Maryland Department of Commerce Commercial Insurance ( – PDF)


Starting a New Business | Law about small business in Massachusetts | Business Taxes | Workers’ Compensation Insurance Requirements |


LEO – MI Small Business LEO – Workplace Rights Michigan Business Tax LEO – Insurance Requirements


Starting a Business – Minnesota Department of Employment and Economic Development Employee rights FAQs – Minnesota Department of Labor and Industry Business Taxes – Minnesota Department of Employment and Economic Development Liability Insurance (


Start Your Business in Mississippi  (PDF) MDES – Required posters Business – DOR Mississippi Insurance Department – Health Care SHOP Enrollment


Steps for Starting a Business Wages, Hours and Dismissal Rights – Missouri labor Small Business Information Small Business Insurance Topics – Missouri Department of Insurance, Financial Institutions & Professional Registration


Small Biz Start Up Guide (PDF) Employment Laws Small Biz Start Up Guide (PDF) Insure Montana Program for Small Businesses


Starting a Business in Nebraska – Nebraska Department of Revenue Official Nebraska Department of Labor – Labor Law Business Taxes – Nebraska Legislature


Steps to Start a Small Business (PDF) Rules to be Observed by Employers (PDF) Filing Requirement FAQ Frequently Asked Questions (

New Hampshire

Business | Laws and Rules | NH Department of Labor Business Profits Tax FAQ | NH Department of Revenue Administration Workers’ Compensation | Frequently Asked Questions | NH Department of Labor

New Jersey

Starting a Business in New Jersey (PDF) Wage and Hour Compliance – Laws and Regulations Starting a Business in New Jersey (PDF) – What types of insurance am I required to provide for my employees?

New Mexico

Who must register a business? : Businesses empguide.pdf ( Businesses – Businesses NMWCA Business Information – New Mexico Workers Compensation Administration

New York

Start a Business in New York State Know Your Worker Rights Businesses ( Business Insurance (PDF)

North Carolina

Business in NC | Workplace Rights | NC DOL Tax Rate and Basis for the Tax | NCDOR Types of Insurance for your Business | NC DOI

North Dakota

North Dakota New Business Registration If You Have Employees – North Dakota New Business Registration New Businesses and Contractors | North Dakota Office of State Tax Commissioner Business | North Dakota Insurance Department


Start a Business – Labor Law – Ohio Department of Taxation Guide to Health Insurance


Business Licensing + Operating Requirements Oklahoma Department of Labor 2021 Oklahoma – Small Business Corporation Income and Franchise Tax Forms and Instructions How It Works


State of Oregon: Business – Starting a Business BOLI  – Your Rights at Work – For Workers – State of Oregon Oregon Business Xpress – Manage – State of Oregon Division of Financial Regulation – Insurance for businesses – Insurance for businesses – State of Oregon


Starting a Business | PA.GOV  Labor & Workforce – PA Department of Community & Economic Development Starting a Business in Pennsylvania – a Guide to Pennsylvania Taxes Business Insurance

Rhode Island

Start a business in Rhode Island -Help Labor Standards – RI Department of Labor & Training Pay Your Business Taxes – Rhode Island Insurance Division – Dept. of Business Regulation

South Carolina

Starting a new business in South Carolina? South Carolina – Office of Wages and Child Labor Own a small business? check to see if you qualify for these tax credits Information for Small Businesses | Department of Insurance, SC – Official Website

South Dakota

Government – Employment Laws Taxes | South Dakota Department of Revenue Division of Insurance Small Employer Health Insurance


TNSmartStartupGuide.pdf Labor Laws Business Tax Who Must Carry Insurance


Start a Business in Texas | Texas Economic Development | Office of the Texas Governor | Greg Abbott Employee Rights & Laws — Texas Workforce Commission Starting a New Business Texas Department of Insurance


Business – Employer Services & Employment Law Tax Information for Businesses Business Insurance – Utah Insurance Department


Start or Buy a Business – Department of Taxes Vermont Laws Business and Corporate – Department of Taxes A Guide for Vermont Business Owners: Workers’ Compensation Insurance (PDF)


Business – Employment Law Guide – Virginia Employment Commission Businesses – Virginia Tax Commercial Insurance Consumer’s Guide (PDF)


Linking entrepreneurs and small businesses to Washington state resources Workers’ Rights Small Business Guide: Run your business Small business health insurance options – Washington state Office of the Insurance Commissioner

West Virginia

Business Registration Fair labor standards act (PDF) West Virginia – business taxes Insurance Requirements


DOR – Starting a Business Employee Rights under Wisconsin’s Business Closing/Mass Layoff Notification Law DOR – General Information NA


Wyoming Secretary of State FAQs – Wyoming Department of Workforce Services Wyoming Department of Revenue Wyoming – Department of Insurance

What are the most active small business categories?

In the year ending March 2020, there was a small net increase in the total number of businesses in the U.S. – one million new business establishments opened and 993,809 closed. In terms of the total number of new businesses, small businesses (under 500 employees) accounted for 91% of the openings and 93% of closures. The number of employees actually fell by 100,000 over this period.

According to the US Small Business Administration, the total number of small businesses in the country, segregated by the number of employees, breaks down to the following picture, based on the type of activity:

Industry Owner / Operator 1-19 employees 20 – 499 employees Total  employees
Professional Scientific and Technical Services 3726651 767250 50525 4544426
Other Services (except Public Administration) 2978235 654326 45851 3678412
Construction  2635432 659092 59193 3353717
Real Estate and Rental and Leasing 2876253 306687 13005 3195945
Administrative Support and Waste Management 2521600 309104 38871 2869575
Transportation and Warehousing 2572386 170528 19880 2762794
Retail Trade 2103399 584707 55851 2743957
Health Care and Social Assistance 2071125 569523 89831 2730479
Arts Entertainment and Recreation 1513725 116811 16797 1647333
Accommodation and Food Services 459908 420092 126494 1006494
Finance and Insurance 755353 221636 15897 992886
Educational Services 806465 74899 19323 900687
Wholesale Trade 399400 250016 40778 690194
Manufacturing 354100 183318 58877 596295
Information 358505 70584 10417 439506
Agriculture Forestry Fishing and Hunting 256372 21272 1354 278998
Mining Quarrying and Oil and Gas Extraction 82524 15655 3051 101230
Utilities  14099 4598 1225 19922
Management of Companies and Enterprises * 4702 13851 18553

It is most interesting to note that businesses with a single employee by far outnumber all the other categories other than Accommodation and Food Services.

The beginning of 2020 saw a lower demand to start new businesses, with a total of 841,180 applications representing a 4% year-over-year fall. This can largely be attributed to the economic outcomes of the coronavirus pandemic.

But by the second quarter of 2022, the numbers rebounded with 906,876 new business applications, a 7.8% rise from the first quarter and a 4.4 % increase over 2021.

This strong trend increased in Q3, with new business applications hitting a record of 1.47 million new applications – a 63% percent increase over the second quarter and a 70% jump over the previous year.

Some of the recent increases are attributed to the switch by people who lost their jobs during the pandemic to running their own businesses as a way to replace the lost income.

Some are also taking advantage of changing consumer demands.

Understanding the requirements for new businesses

Small business rules and regulations are set both by federal laws, and the legislation of the individual state in which the small business is conducting its operations. Federal law constitutes the “supreme Law of the Land“.

It takes priority over any conflicting state laws, especially with regard to inter-state commerce, labor, security, citizenship, foreign affairs and similar national issues. However, every state has its own body of laws and regulations. Therefore, if you are setting up or conducting a business, it is essential to be fully aware of the relevant federal and state laws.

Under federal law, a small business can have up to 499 employees in order to qualify for the specific benefits that are available.

These benefits relate primarily to the availability of small business loans from the federal agency, and a wide range of tax deductions, such as Energy Tax Incentives and State Sales Tax Holidays.

Examples of small business incentives

Federal and many state governments offer incentives to small businesses to start up or relocate. Some examples are:

State Benefit
Florida Energy star products, hurricane-hardened doors & windows, test equipment
Texas Generators, storm devices, preparedness items, energy star products – air conditioners, clothing, backpacks and school supplies
Virginia Energy star products, hurricane preparedness items, generators

Employee rights

The Wage and Hour Division of the U.S. Department of Labor (DOL) enforces and administers the most comprehensive federal labor laws. These laws cover most private, state, and local government employment throughout the United States and its territories. 

Employee rights

As a business owner, you have these responsibilities:

  • To pay employees correctly
  • To maintain records
  • If you employ minors, there are added responsibilities
  • To provide unpaid family or medical leave to eligible workers.

You are also obliged to notify employees of their workplace rights.

All states other than Texas have enacted some form of workers’ compensation for almost all employers. Businesses may purchase insurance voluntarily depending on the business’ size.

Smaller organizations must purchase a workers’ compensation insurance policy to cover obligations for work-related injuries to employees. Large entities may obtain permission from the  Department Of Labor to “self-insure,” which means they will pay any claims themselves.

The main differences between states are the cut-off point of the number of employees beyond which insurance becomes mandatory, and whether the choice of the insurance company is optional. Four U.S. states (North Dakota, Ohio, Washington and Wyoming) have opted to own their own  Monopolistic State Funds, and employers can only buy their insurance from these funds.

In other states, an employer that doesn’t qualify as a self-insurer must take out workers’ compensation insurance from a compulsory state fund.

The U.S. Department of Labor has decreed that individual states can legislate labor laws that afford workers additional rights and protections. Employers must comply with both federal and state laws.

These are different for each state, so you must refer to the relevant websites for every state where you conduct your business activities. The state’s contact details are here .

The main categories of state labor laws are :

  1. Minimum Wage Laws
    • Minimum Wage Laws in the States
    • Minimum Wages for Tipped Employees
  2. State Child Labor Laws
    • Employment/Age Certification
  3. Non-farm Employment
    • Agricultural Employment
    • Entertainment
    • Door-to-Door Sales
  4. Other State Labor Laws
  5. Minimum Paid Rest Periods
  6. Minimum Meal Periods
  7. Prevailing Wages
  8. Payday Requirements

The general information about particular laws administered by WHD and DOL are on their web page along with other guides for new and small businesses.


The federal government levies taxes on business people based on net income, and on companies on profits. States can also levy taxes on income, as well as on sales. There is a wide range of different schemes between the states. For example, Nevada, South Dakota, and Wyoming do not tax corporate or individual income.


Nevada imposes sales tax. Alaska has no individual income or state-level sales tax, whereas Florida has sales tax but no individual income tax. New Hampshire and Montana have income tax but no sales tax.

The Tax Foundation publishes a comparison of the relative pictures of the states with regard to taxation. This shows how well each state structures its tax system.

The most recent survey produced the following ranking of the 20 ‘best’ states:

  • Wyoming
  • South Dakota
  • Alaska
  • Florida
  • Montana
  • New Hampshire
  • Nevada
  • Utah
  • Indiana
  • North Carolina

Business Insurance

Business insurance is a deductible expense. Suppose you are using part of your home as an office, or some area on your property such as an outbuilding or a field, to run your business.

In that case, you can deduct your insurance costs as part of your tax write-offs.

Similarly, suppose you are renting some space from a landlord. In that case, any cost of insuring the property that is additional to the lease (which is already a full tax deduction), can be claimed against income.

Business Insurance

For example, insuring any inventory, equipment or materials stored in the building is not included in the commercial property insurance cover of the building, so it’s your responsibility to get this cover. The full cost of the insurance is deductible in calculating taxable income.

Many other insurances are recommended for small and startup businesses. The main categories are:

  • Liability insurance
  • Asset Insurance
  • Mandatory insurance

Liability insurance

Just by being in business engaged in commercial activity, you have taken upon yourself several liabilities that a court can enforce. The main ones are:

  • General liability to compensate for losses or injuries to third parties. The claim can come from an accident or injury that can be attributed to negligence on your part, and a court can award an unlimited amount of compensation
  • Professional liability to deliver your services in a proper and professional way. It’s also known as Errors & Omissions insurance. When you accept to perform some service for a customer, you are issuing an implicit guarantee that the service provided will meet the proper standards, will satisfy any warranties that you made.
  • Product liability insurance guarantees that any physical product, part or item you sell or supply will be appropriate for its job, and will perform its intended function.

Asset Insurance

When you have invested cash in the physical assets of a business, it is in your interests to protect the investment against unforeseen events. The most common types of asset insurance are:

  • Commercial property insurance for buildings and improvements (whether owned or rented). The cover should protect in case of storms, earthquakes, hurricanes and other such natural disasters, as well as man-made events like vandalism and fire
  • Inventory. The cover should protect the value of all stored goods against water damage, fire, theft and other such risks
  • Equipment. The cover should protect the value of all tools, equipment and other work-related assets, especially if they are moved around between worksites where they are unprotected. The cover should be against risks such as fire, theft, water damage and similar possibilities.
  • Data. Business today is highly dependent on the information stored in a computer network. There are risks of cyber attacks, theft and blocking. Cyber insurance will cover these risks.
  • Auto insurance protects the value of a vehicle in case of theft, vandalism or accidental damage while it was used in work-related activity. It’s not the same as third-party accident insurance, although most insurance companies bundle auto insurance and third-party accident cover into one policy.
  • Income protection provides coverage for income lost in case activity was suspended because of sickness or personal injury to you or a key worker, until the time business resumes.

Mandatory insurance

As well as the optional insurances listed above, there are two forms of insurance for which there may be federal or state laws. Be sure to check their requirements in your location:

Workers’ compensation cover relates to federal legislation that employees who are injured on the job must receive medical care responsive to the workplace injury, as well as payment to compensate for any resulting disabilities

Vehicle third-party accident cover – not to be confused with auto insurance. It covers any claims resulting from an accident involving the vehicle in which someone other than the driver was injured.


How to create a startup business

There are several categories of activities that a new business has to carry out in order to comply with federal and state laws and regulations. These are:

  • Procedures
    • Dealing with Construction Permits
    • Getting Electricity
    • Registering Property
    • Obtaining licenses
  • Getting Credit 
    • Legal rights
    • Credit information 
    • Credit registry
    • Credit bureau
    • Minority Investors
  • Director liability
    • Shareholder rights
    • Ownership and control
    • Corporate transparency
  • Paying taxes
    • Total tax and contribution rate
    • Post Filing
  • Trading across state borders
    • Border compliance
    • Cost to export
    • Documentary compliance
  • Enforcing Contracts
    • Judicial processes
    • Resolving Insolvency