Starting a business in the United States follows a broadly consistent sequence: research the market and write a plan, estimate startup costs and decide how to fund them, choose a location and legal structure, select and protect a name, register with the right agencies, obtain a federal tax ID and any state tax ID, confirm licenses and permits, open a business bank account, and arrange insurance. The exact order and the filings you need depend on your business type, your state, and your city or county, so treat the steps below as a checklist to verify against official requirements before you begin operating.
Step 1: Research the market and write a business plan
Before you register anything, test whether customers exist and whether you can compete. The U.S. Small Business Administration (SBA) recommends market research to find customers and a competitive analysis to identify what will set your business apart. Those two exercises feed directly into a written plan.
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The SBA describes a business plan as a roadmap for structuring, running, and growing a business, and as a way to make the case to lenders, investors, or partners. Its guidance states: “Your business plan is the foundation of your business.” (U.S. Small Business Administration, Plan your business.) A lean plan is a reasonable choice for a simple business or one you expect to revise often. The SBA also offers plan templates and a startup-cost calculator that you can use alongside your own notes.
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Step 2: Estimate startup costs and decide how to fund them
Once the plan describes what you will sell and to whom, estimate what it takes to open the doors. Costs vary by industry and location. The SBA points to several line items that change by geography, including wages and minimum wage rules, property values and rent, insurance, utilities, and government fees.
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Only after you have that estimate should you decide how much to raise or borrow. The SBA planning resources cover funding options and how to establish business credit. There is no reliable universal figure for startup capital, because the number depends entirely on the business and where it operates, so avoid relying on a generic benchmark.
Step 3: Choose a location and legal structure
Location affects the taxes, zoning rules, and regulations that apply to you, as well as the costs listed above. The SBA advises weighing your target market, your potential partners, and location-specific costs and restrictions. A home-based business, a storefront, and an online business can face very different local rules.
Your legal structure affects your taxes, how you can raise money, how much paperwork you carry, and how exposed your personal assets are to business debts and lawsuits. The SBA compares sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. When you evaluate options, compare these factors:
- Ownership eligibility: who may own the business, and whether there are limits on the number or type of owners.
- Personal liability: whether the owners’ personal assets can be reached for business obligations.
- Tax treatment: how profits and losses are taxed at the business and owner level.
- Filing burden: the required formation documents, ongoing reports, and recordkeeping.
- Ability to raise money: whether the structure suits the investors or lenders you expect to approach.
The SBA treats its comparison as general guidance, and ownership, liability, tax, and filing rules can differ by state. It says the structure should be chosen before state registration, and it suggests that a business counselor, attorney, or accountant can help you decide. Confirm the details for your state before you file.
Step 4: Choose and protect your business name
A business name can carry several separate kinds of protection, and they do not automatically connect to one another:
- Entity name: the name registered with your state when you form an LLC, corporation, or similar entity.
- Federal trademark: a federal registration that protects a name or mark used to identify your goods or services.
- Doing-business-as (DBA) name: an alternate name you use in public. A DBA does not by itself give you legal protection, and its filing requirements depend on your structure and location.
- Domain name: your web address, which is a separate registration from all of the above.
Checking one of these does not clear the others, so search each one before you commit to a name.
Step 5: Register your business with the state and local government
Registration depends on your structure and location. According to the SBA, many LLCs, corporations, partnerships, and nonprofit corporations must register in each state where they conduct business. Some businesses that operate under the owner’s legal name may not need an entity registration at all. Local governments may separately require a permit or a DBA filing, and some states require an initial report or a filing with the state tax board after registration.
Because these requirements vary, find your state’s business filing office and your city or county licensing office, and confirm each filing there rather than relying on a general checklist.
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Step 6: Get your federal EIN and any state tax IDs
An Employer Identification Number (EIN) is the federal tax ID the IRS uses for federal tax purposes and other business tasks. The SBA notes that you may need one to hire employees, open a bank account, or apply for certain licenses and permits. Applying for an EIN is free, and the number is issued after the IRS verifies your application through its online assistance tool.
Warning: several websites charge fees to “file” an EIN on your behalf. The SBA cautions applicants against fee-charging EIN sites. Apply directly through the IRS.
Whether you also need a state tax ID, such as a state tax registration or a state employer number, depends on your state and your business activities. Those requirements differ by state, so check your state revenue or tax agency.
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License and permit requirements depend on what your business does, where it operates, and which agency regulates the activity. Some federally regulated activities require a federal license or permit in addition to state and local requirements. The SBA gives examples including certain agricultural activities and the manufacture, wholesale, import, or retail sale of alcohol. Those examples are illustrations, not a complete list, so identify the agency that regulates your specific activity and ask it directly what applies.
Step 8: Open a business bank account
Keeping business and personal money separate makes bookkeeping, tax filing, and liability protection easier to maintain. Most founders open the account after they have an EIN, because banks typically ask for that number and the formation documents. Choose a bank based on the fees, transaction limits, and services that match your expected volume.
Step 9: Arrange business insurance
The SBA lists business insurance among the launch items to review. The right coverage depends on your industry, your location, whether you have employees, and whether you use vehicles or hold client property, so ask an insurance professional to recommend policies for your situation rather than buying a generic package.
Before you open for business: a checklist
- Market research and a written plan are complete, and you have compared competitors.
- Startup costs are estimated and your funding source is confirmed.
- Your legal structure is chosen and matches your state’s rules.
- Your entity name, DBA, trademark, and domain have each been checked.
- State and local registrations, and any required post-registration reports, are filed.
- Your federal EIN is issued, and any state tax ID is obtained through official channels.
- Licenses and permits for your specific activity have been confirmed with the responsible agency.
- A business bank account is open and kept separate from personal funds.
- Insurance has been reviewed for your industry and location.
Where to get help
For questions about planning, funding, and structure, the SBA and its local counseling network are a free starting point. For the legal and tax details of your particular structure and state, an attorney or accountant who works with small businesses can verify what applies to you. Because the steps above change with business type and jurisdiction, always confirm requirements with the official agency before you sign documents, hire staff, or begin selling.
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