Can you start your own business when you’re in the military? Absolutely! Plenty of service members start small businesses while on active duty or in the Reserves or National Guard. Starting your own business can be a great way to earn extra income and create a smooth transition into civilian life after you leave the service. Plus, some states waive business formation fees for military service members and veterans, and there are a growing number of small business grants and no interest or low-interest loans available to military members. Even so, starting a business while in the military comes with some unique challenges. Here are some things to keep in mind.
Follow the Military’s Ethics Regulations
There’s no rule against having other employment or starting a business while serving in the military. However, be careful to adhere to the military’s code of ethics regulations. As an active service member, you’re prohibited from using your military status for personal financial gain. This means you should avoid doing anything that could look like a conflict of interest.
For example, you aren’t allowed to use military logos on your advertisements, as this would imply that your business is endorsed by the US government. Even wearing your uniform during a sales pitch meeting could be viewed as a conflict of interest. You also can’t use your rank to pressure subordinates into buying your product.
Remember that the Military Is Your First Priority
While you’re serving in the military, your military duties legally have to come first. If your business starts to interfere with your job as a service member, the chain of command could get involved. Even “part-time” service members in the Reserves or National Guard are on call 24 hours a day, 365 days a year. So if you’re called to active duty, you may have to put your business on hold.
For this reason, it’s good to be realistic about the scope of your business while in the military. It may be a good idea to start small, making and selling a few products online or doing freelance work for a few clients. You can always increase the scale of your business later. It may also be helpful to have a civilian business partner who can run the business in your absence if you’re deployed.
Tip: Whether you’re ready to start your business today or need more time to figure things out, Northwest can help. Get a free account with Northwest to access the resources and tools you’ll need to form your business yourself or hire us to do it for you. No obligations.
Best State to Form Your Business While in the Military
One of the biggest challenges for service members who want to start a business is deciding where to form their business. Since members of the military move frequently, it can be hard to know whether to form your business in your home state or in the state where you’re currently stationed.
If you have a sole proprietorship (the default structure for an unregistered one-person business), you’ll just need to get any necessary business licenses and permits in the states and municipalities where you do business. However, if you want to start an LLC, you’ll need to file formation paperwork (usually called Articles of Organization) with the Secretary of State (or equivalent) in the state where you form your business, and you’ll need to register with any other states where you conduct business.
Usually, the best state to form an LLC is your State of Legal Residence—the state where you pay taxes and where you plan to return after retirement. For example, one of our clients, who wants to form an LLC, has a legal residence in Texas but is currently stationed in Kentucky. The client could form their LLC in Texas even though they don’t currently live there.
However, it’s important to realize that LLCs need to be registered in every state where they do business. Registering an LLC outside of its state of formation is called foreign registration or foreign qualification. If our client wants to do business in Kentucky as well as Texas, they would need to register as a foreign LLC in Kentucky.
Through foreign qualification, you can register your business in any state you move to, with your State of Legal Residence remaining the home state for your business. The only problem is that registering and maintaining an LLC in multiple states gets expensive fast. Fortunately, a growing number of states are waiving business fees or offering no interest or low-interest loans for active service members and/or veterans.
State Incentives for Military Members to Start Businesses
Here are some states that waive business fees or offer other incentives to business owners who have served in the military.
California
California offers a Business License, Tax and Fee Waiver for honorably discharged veterans who sell goods (but not services).
Georgia
Georgia veterans can apply for a Business Certificate of Exemption from local business taxes and fees.
Maryland
Maryland’s Military Personnel and Veteran-Owned Small Business Loan Program (MPVOLP) offers no interest loans of up to $50,000 to small businesses owned by veterans, reservists, and National Guard members.
Michigan
Michigan’s Licensing and Regulatory Affairs office will waive fees for the Articles of Organization and Annual Statement for LLCs that are majority-owned by veterans.
Texas
Texas offers a new veteran-owned business tax exemption. Under this law, businesses formed between January 1, 2022 and January 1, 2026 that are 100% veteran-owned qualify for an exemption from certain filing fees and Texas franchise tax for their first five years in business.
Learn more about the TX New Veteran-Owned Business Tax Waiver.
West Virginia
The West Virginia Boots to Business Waiver waives the business formation fee and annual report fees for the first four years for businesses that are at least 51% owned by veterans, active service members, or the spouses of veterans or service members.
Find out more about West Virginia’s Veteran-Owned Business Waiver.