Starting a business can feel overwhelming. There are business structures to choose from, registrations to complete, licenses to research, taxes to consider, and ongoing compliance requirements to manage.
The good news is that you don't have to figure everything out at once.
If you're wondering how to start a business, the process can be broken down into a series of manageable steps. This guide walks you through the major decisions and legal, administrative, and compliance requirements you should consider when starting a business in the United States.
Let's walk through each step.
1. Decide What Type of Business You Want to Start
Before dealing with registrations and paperwork, clearly define what your business will do.
Consider:
- What product or service will you provide?
- Who are your customers?
- How will the business make money?
- Will you operate online, from a physical location, or both?
- Will you have employees?
- Will you have business partners?
- Will you operate in one state or multiple states?
You don't need a 50-page business plan to get started. But you should have a clear understanding of what you're selling, who you're selling to, and how the business will operate.
Create a simple business plan
At minimum, identify:
- Your product or service
- Your target customer
- Your expected pricing
- Your expected expenses
- Your marketing strategy
- Your expected revenue
- Your business goals
Once you understand the business itself, you can begin making the legal and administrative decisions necessary to establish it.
2. Choose a Business Name
Your business name will become part of your company's identity, so it's worth taking the time to choose carefully.
Before committing to a name, check:
- State business-name availability
- Domain-name availability
- Social-media availability
- Federal trademark databases
- Whether another business is already using a confusingly similar name
A business name being available for registration with your state does not necessarily mean that the name is legally available for use.
You should also determine whether you want to operate under your legal business name or use a separate DBA (Doing Business As) name.
For example, a company could legally operate as:
ABC Holdings LLC
while doing business publicly as:
ABC Home Services
The requirements for registering a DBA vary by state.
Related resource: How to Choose a Business Name
3. Choose Your Business Structure
One of the most important decisions when starting a business is choosing the appropriate legal structure.
Common business structures include:
- Sole proprietorship
- Partnership
- Limited Liability Company (LLC)
- Corporation
- S corporation tax election
These structures can have different consequences for liability protection, taxation, ownership, administration, and reporting requirements.
Sole proprietorship
A sole proprietorship is generally the simplest business structure for an individual operating a business.
However, the business and owner are generally not legally separate entities, which can create personal liability concerns.
Partnership
A partnership may be appropriate when two or more people operate a business together.
There are several types of partnerships, and the legal and tax consequences can differ depending on the structure.
LLC
A Limited Liability Company (LLC) is a popular choice for many small-business owners.
An LLC can provide liability protection while generally offering more administrative flexibility than a corporation.
Corporation
Corporations are separate legal entities with their own ownership and governance structures.
Corporations can be useful for businesses with more complex ownership arrangements, outside investors, or plans to raise significant capital.
S corporation
An S corporation isn't technically a separate state-law business structure. Instead, it is generally a federal tax election available to qualifying businesses.
Whether an S corporation election makes sense depends on your circumstances.
Related resource: LLC vs. Sole Proprietorship: Which Is Right for Your Business?
Related resource: LLC vs. Corporation: What's the Difference?
4. Register Your Business
Once you've chosen your structure, you'll generally need to register the business with the appropriate state or local government agency.
For example, if you form an LLC, you'll typically file formation documents with your state.
Depending on your business and location, you may also need to register:
- Your legal business name
- A DBA
- A trade name
- Foreign qualifications in other states
- Professional licenses
- Local business registrations
The exact requirements depend on where your business operates and what it does.
Do you need to register in more than one state?
Possibly.
If your company is formed in one state but conducts business in another state, you may have additional registration requirements.
This is commonly referred to as foreign qualification.
Don't assume that forming an LLC in one state automatically gives you permission to operate everywhere without additional registrations.
5. Get an Employer Identification Number (EIN)
An Employer Identification Number, or EIN, is a federal tax identification number issued by the IRS.
Many businesses need an EIN, particularly businesses that:
- Have employees
- Operate as corporations
- Operate as partnerships
- Have certain tax obligations
- Want to establish business banking and financial accounts
Even when an EIN isn't strictly required, obtaining one can be useful for separating your business activities from your personal finances.
Related resource: What Is an EIN and Does Your Business Need One?
6. Determine Your Business Tax Obligations
Starting a business also means understanding your tax responsibilities.
Depending on your business structure and activities, you may have obligations involving:
- Federal income tax
- State income tax
- Self-employment tax
- Payroll taxes
- Sales tax
- Local taxes
- Excise taxes
- Estimated tax payments
Your tax obligations can also change as your business grows.
For example, hiring employees can create additional payroll and reporting responsibilities.
Selling products in multiple states can also create additional sales-tax considerations.
Because tax rules can be complicated and depend heavily on your circumstances, consider working with a qualified tax professional.
7. Obtain Required Licenses and Permits
Registering your business doesn't necessarily mean you're ready to operate.
Depending on your industry and location, you may need additional licenses or permits.
Examples can include:
- Professional licenses
- Contractor licenses
- Health permits
- Food-service permits
- Sales-tax registrations
- Local business licenses
- Zoning approvals
- Industry-specific registrations
The requirements can vary significantly between businesses.
A restaurant, construction company, accounting firm, online consulting business, and medical practice can all have very different regulatory requirements.
Related resource: How to Find the Licenses and Permits Your Business Needs
8. Open a Business Bank Account
Once your business is established, consider opening dedicated business financial accounts.
Avoid mixing personal and business finances whenever possible.
A separate business bank account can help you:
- Track revenue
- Track expenses
- Simplify bookkeeping
- Prepare for tax filing
- Demonstrate separation between you and your business
- Manage payroll and other business expenses
You may also want to establish a business credit card and accounting system.
Keeping accurate financial records from the beginning is much easier than trying to reconstruct them later.
9. Set Up Your Accounting and Recordkeeping
Your business should have a system for tracking its financial activity.
At a minimum, establish a process for recording:
- Revenue
- Expenses
- Payroll
- Taxes
- Loans
- Business assets
- Owner contributions
- Distributions
- Receipts and supporting documentation
Depending on your business, you may also need to track inventory, accounts receivable, accounts payable, depreciation, and other financial information.
Good recordkeeping isn't just about preparing taxes. It gives you a clearer picture of how your business is performing.
10. Protect Your Business With Insurance
Business insurance can help protect your company against certain risks.
The appropriate coverage depends on your industry and circumstances, but businesses may consider:
- General liability insurance
- Professional liability insurance
- Commercial property insurance
- Workers' compensation insurance
- Commercial auto insurance
- Cyber liability insurance
- Product liability insurance
Some types of insurance may also be required by law or by a landlord, lender, customer, or contract.
Don't assume that an LLC eliminates the need for insurance. Legal liability protection and insurance serve different purposes.
11. Create Your Business Contracts and Legal Documents
Many businesses need contracts and other legal documents to operate effectively.
Depending on the business, these may include:
- Operating agreements
- Partnership agreements
- Employment agreements
- Independent contractor agreements
- Customer agreements
- Vendor agreements
- Non-disclosure agreements
- Website terms of service
- Privacy policies
- Refund and cancellation policies
Having the appropriate documents in place can help establish expectations and reduce confusion as the business grows.
Related resource: Essential Legal Documents Every Small Business Should Have
12. Understand Your Ongoing Compliance Requirements
This is one of the most commonly overlooked parts of starting a business.
Forming your business is only the beginning.
After your company is established, you may have recurring requirements such as:
- Annual reports
- State filings
- Federal tax filings
- State tax filings
- Local business-license renewals
- License renewals
- Registered-agent requirements
- Payroll filings
- Sales-tax filings
- Corporate or LLC recordkeeping
- Beneficial ownership or other regulatory reporting when applicable
Some deadlines occur annually. Others may occur monthly, quarterly, or based on specific events.
Missing a deadline can result in penalties, loss of good standing, or other problems.
Related resource: Small Business Compliance Checklist
Related resource: Business Compliance Calendar: What to Track
Business Startup Checklist
If you're starting a business, use this basic checklist as your starting point:
- Define your business
- Research your market
- Choose a business name
- Check state name availability
- Check trademark conflicts
- Purchase your domain name
- Choose a business structure
- Register your business
- Obtain an EIN if required
- Determine federal tax requirements
- Determine state tax requirements
- Determine local tax requirements
- Research licenses and permits
- Register for applicable taxes
- Open a business bank account
- Set up accounting and bookkeeping
- Obtain appropriate insurance
- Create necessary contracts and legal documents
- Establish a compliance calendar
- Track annual reports and renewal deadlines
- Keep business records organized
What Should You Do After Starting Your Business?
Once the initial setup is complete, your focus shifts from starting the business to running and maintaining the business.
That means staying on top of deadlines, renewals, filings, licenses, taxes, corporate records, and other requirements.
This is where many business owners run into trouble.
The problem isn't necessarily that the requirements are difficult. It's that there can be a lot of them, and the deadlines are easy to forget.
A business that is properly registered today can still fall out of compliance later if required filings and renewals aren't completed.
Make Business Compliance Easier
Startup to Corporate helps business owners understand and manage the administrative requirements that come with owning a business.
Instead of trying to remember every filing, renewal, registration, and deadline yourself, you can use Startup to Corporate to organize your business information and keep track of important compliance requirements.
Ready to get your business organized?
Get Started with Startup to Corporate →
Already have a business?
Log In to Your Startup to Corporate Account →
The Bottom Line
Learning how to start a business can seem complicated because there are many different requirements to consider.
The process becomes much easier when you break it into individual steps:
Plan → Name → Structure → Register → Tax → License → Bank → Protect → Document → Comply
Most importantly, don't treat business formation as a one-time event.
Starting a business creates an ongoing set of responsibilities. Building a system to manage those responsibilities from the beginning can save you time, money, and headaches as your company grows.
Start your business with a plan—and build your compliance system at the same time.
Get Started with Startup to Corporate →
Frequently asked questions
How much does it cost to start a business?
The cost varies significantly depending on your business type, location, structure, licenses, insurance, equipment, and other requirements. At a minimum, you should account for business-registration fees and any required licenses or permits. Other costs may include insurance, professional services, software, marketing, equipment, inventory, and accounting.
What is the easiest business to start?
There isn't one universally easiest business to start. Businesses with relatively low startup costs and few licensing requirements can generally be simpler to establish than highly regulated businesses. Your ideal business should be based on your skills, experience, resources, market opportunity, and goals—not simply how easy it is to register.
Should I form an LLC when starting a business?
An LLC can be a good choice for many small-business owners, but it isn't automatically the best structure for everyone. The right structure depends on factors including ownership, liability, taxes, financing, and how you expect the business to operate and grow.
Do I need a business license?
Possibly. Business-license requirements depend on your location, industry, and activities. Some businesses need multiple licenses or permits from state, county, and local governments.
Do I need an EIN?
Many businesses need an EIN, particularly businesses with employees or certain business structures. Even when an EIN isn't mandatory, it may be useful for establishing business financial accounts and keeping business and personal finances separate.
Can I start a business by myself?
Yes. Many businesses are started and operated by a single owner. Depending on your circumstances, you may operate as a sole proprietor or establish a separate legal entity such as an LLC.
What happens after I register my business?
Registering your business is only the beginning. You may still need to obtain licenses, establish tax accounts, open financial accounts, purchase insurance, create legal documents, and keep up with ongoing compliance requirements.
Official sources
Requirements can change. Confirm details with the relevant agency.
This guide is general information, not legal, tax, or accounting advice. Requirements vary by jurisdiction and circumstances. Read our legal disclaimer.