You know that idea that’s been niggling at you for months and just won’t die? That’s probably your business. The tricky part isn’t having the idea. It’s knowing what order to do everything in, so you don’t spend money on a logo before you’ve checked that anyone wants what you’re selling.
This guide walks through how to start a business in 14 steps, from testing your idea to opening your doors. It’s written for people starting a small business in the United States, and it leans on official sources like the U.S. Small Business Administration (SBA) and the IRS so you can check the details yourself. Rules vary by state, city and industry, and this is general information rather than legal, tax or financial advice. For decisions about structure and taxes, talk to a lawyer or accountant.
The short version: a 14-step checklist
- Test your idea
- Write a simple business plan
- Work out startup costs and funding
- Choose a business structure
- Pick a name and check it’s available
- Register your business
- Get an EIN
- Apply for licenses and permits
- Open a business bank account
- Get insurance
- Set up bookkeeping and taxes
- Plan for staff, contractors and suppliers
- Build your website and marketing basics
- Sort out your space, then launch
1. Test your idea before you spend money
Back-of-the-envelope planning is enough at this stage. Who is your customer? What problem are you solving for them? Who else solves it, and why would someone choose you? Talk to ten potential customers, look at what similar businesses charge, and try to make a first sale or get a few people to pre-order. If strangers won’t pay for it, better to find out in week one than month six.
2. Write a business plan you’ll actually use
The SBA describes two common formats. A traditional plan is detailed and comprehensive, with sections like an executive summary, market analysis, marketing and sales, and financial projections. It’s the version lenders and investors commonly ask for. A lean startup plan is high-level, fast to write and covers only the key elements: your customers, your value, your channels, your costs and how you make money. If you’re not applying for a loan, start lean. You can always expand it later, and our basic tips for a business plan will help you get going.
3. Work out startup costs and how to fund them
List everything you need before you can make your first sale, then add a cushion for the things you forgot. Next, decide how you’ll pay for it. The SBA lists several routes, including self-funding with savings or help from family and friends, bank or credit union loans, SBA-guaranteed loans through participating lenders, venture capital (which is offered in exchange for an ownership share), and crowdfunding, where many contributors give small amounts and are usually repaid with a product or perk instead of ownership.
The SBA describes its role as guaranteeing loans made by lenders, not lending directly. If your budget is tight, start with how to start a business without money, and read the SBA’s guide to funding your business before you apply for anything.
4. Choose a business structure
Your structure affects your taxes, your paperwork and how exposed your personal assets are if the business is sued or can’t pay its debts. The SBA’s comparison of business structures explains the main options:
- Sole proprietorship: the simplest option, but there’s no separation between you and the business, so you can be personally liable for its debts.
- Partnership: two or more owners. In a general partnership each owner has unlimited personal liability. Other partnership types limit that for some or all owners.
- Limited liability company (LLC): owners are generally protected from personal liability, and profits pass through to your personal tax return by default.
- Corporation (C corp or S corp): owners aren’t personally liable. A C corp pays corporate income tax, and an S corp passes profits through to owners but has eligibility limits.
If you’re going into business with a friend, put the partnership agreement in writing, including what happens if one of you wants out. The SBA notes that ownership rules, liability and taxes vary by state, so confirm the details with a business tax specialist or lawyer.
5. Pick a name and check that it’s available
Choose something easy to spell, easy to say and not too close to an existing business. Search your state’s business registry, search the internet and search the federal trademark database before you commit. Then check that a matching domain name and social handles are free.
It helps to know the difference between a business name and a trademark. The U.S. Patent and Trademark Office explains that a trademark is any word, phrase, symbol or design that identifies your goods or services, and that you gain rights by using a mark, but those rights are limited to the geographic area where you provide your goods or services. Federal registration gives nationwide rights. If your brand name is central to the business, consider a quick consult with an intellectual property attorney before you invest in packaging and signage. Read the USPTO’s overview of what a trademark is.
6. Register your business
What you register depends on your structure. The SBA says that if you operate under your own legal name as a sole proprietor, you generally don’t have to register anywhere. If you use a different business name, most states require you to register it as a DBA (“doing business as”), and the SBA is clear that a DBA doesn’t provide legal protection by itself. LLCs, corporations, partnerships and nonprofit corporations will probably need to register with the state where they do business, often through the Secretary of State’s office. Skipping registration can mean losing personal liability protection and some legal and tax benefits. Start at the SBA’s register your business page.
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7. Get an EIN (it’s free)
An Employer Identification Number is like a Social Security number for your business. The IRS says businesses generally need one to hire employees, operate as a partnership or corporation, or pay certain taxes, and that you can apply online for free. The IRS issues the number immediately online if the application is approved, and warns that you should never pay a fee for an EIN. A few practical details from the IRS: you must finish the online application in one session, and if you’re forming an LLC or corporation, form it with your state first, or your application may be delayed. Apply through the IRS EIN page, and avoid any site that charges you.
8. Apply for licenses and permits
The SBA says most small businesses need a combination of licenses and permits from both federal and state agencies, and local governments often add their own. Federal licenses apply to activities a federal agency regulates, such as broadcasting or alcohol. States tend to regulate a broader range of activities, and counties and cities commonly regulate things like restaurants, retail and construction. Check your state’s Secretary of State website and your county and city websites to see what applies to you. Use the SBA’s licenses and permits guide to find the right agency. Some licenses expire, so put renewal dates in your calendar.
9. Open a business bank account
Open one as soon as you start taking in or spending money for the business. The SBA says keeping business funds separate from personal funds can help with limited personal liability protection, and it makes tax time and bookkeeping far less painful. Banks commonly ask for your EIN (or your Social Security number if you’re a sole proprietor), formation documents, any ownership agreements and your business license. Even if your structure doesn’t require a separate account, it’s smart to have one.
10. Get the right insurance
The SBA lists common types: general liability, product liability, professional liability, commercial property, home-based business insurance and a business owner’s policy that bundles several. It also notes that the federal government requires every business with employees to carry workers’ compensation, unemployment and disability insurance, and that some states require more. Ask a licensed insurance agent or your accountant which coverage fits what you do, especially if you work from home, since the SBA notes home-based business insurance is typically added as a rider to a homeowner’s policy. Compare options on the SBA’s business insurance page.
11. Set up bookkeeping and taxes
Every business has legal and tax obligations around record-keeping, and it’s much easier to do it right from day one. Track every sale and expense, save receipts, and keep business and personal spending separate. You can hire an accountant or bookkeeper, or use accounting software built for small businesses. The SBA says businesses need to meet federal, state and local tax obligations, that your income tax obligations depend on your structure, and that if you have employees you’ll have employment taxes to handle and payroll taxes to report. It also says to keep employment tax records for at least four years. Because tax rules depend on where you are and how you’re set up, a one-off chat with a tax professional is worth it. Our self-employment checklist covers the personal-finance side.
12. Plan for staff, contractors and suppliers
If you’ll hire employees now or later, learn your obligations early, including payroll taxes, workers’ compensation and written contracts that set out everyone’s rights and responsibilities. Hiring a contractor is not the same as hiring an employee, and getting that wrong can be costly, so ask your accountant or the relevant state agency before you decide.
If you sell a product, find suppliers carefully. Request samples, compare quality and reliability, make sure you know who is responsible if something goes wrong in production, and look into the working conditions where your products are made.
13. Build your website and marketing basics
You don’t need a perfect site on day one. You do need a clear page that says what you offer, who it’s for, how to buy or get in touch and why you’re worth trusting. Use a simple website builder, claim the domain you checked in step five, and set up one or two social channels where your customers already spend time. Share your “why,” show your work, and write helpful content that answers the questions your customers are searching for. When you’re ready to reach the press, start with a short, specific pitch rather than a mass email.
14. Sort out your space, then launch
If you’re working from home, check any local rules that apply to home-based businesses, and your lease or HOA terms. If you’re going bricks-and-mortar, you’ll need to decide whether to buy or lease, and what equipment you need. Before you sign a commercial lease or buy property, have an accountant and a lawyer look over the terms, because both choices come with tax and legal implications. Then set a launch date and throw one hell of a launch party.
The first year: what to expect
Most first-year lessons are the unglamorous ones: pricing too low, mixing personal and business money, and waiting too long to ask for help. Read 3 hard lessons from the first year of business before you start, and give yourself permission to adjust as you learn. Starting a business is a long list of small, solvable tasks. Do them in order, keep records, and you’ll be further along than most people who only have the idea.
Want more help along the way? Browse the Girlboss career guides for practical tools as you go.
Frequently Asked Questions
What is the first step to start a business?
Test your idea. Talk to potential customers, check what similar businesses offer, and see whether anyone will pay for yours before you spend on branding, registration or equipment. A simple plan and a rough cost list come next.
How much does it cost to start a small business?
It depends entirely on the business. A service you run from your laptop costs far less to start than a restaurant or a product business. Add up your own startup costs, including registration fees, licenses, insurance and any equipment, then add a cushion for surprises.
Do I need an LLC to start a business?
No. You can operate as a sole proprietor under your own name, but an LLC or corporation can separate your personal assets from the business. The right choice depends on your risk, your taxes and your state, so ask a lawyer or accountant.
Do I need an EIN?
Many businesses do, such as those with employees or those set up as partnerships or corporations. Some sole proprietors without employees can use their Social Security number instead. The IRS issues an EIN free of charge, so it costs nothing to apply if you need one.
Can I start a business while working a full-time job?
Many people do, but check your employment contract first for rules about outside work, competing businesses and anything you create. Keep your business activity off company time and equipment, and tell your employer if your contract requires you to.
Where can I get free help starting a business?
The SBA publishes free guides on planning, launching, funding and managing a business. Your state’s Secretary of State website is also a good place to start for registration and licensing questions.
