Starting a company is one of the most common ways people turn skills, ideas, or experience into an independent livelihood. The U.S. Small Business Administration (SBA), the federal agency that supports small businesses, presents starting a business as a sequence of ten connected steps, from research and planning to the practical setup of banking. Those steps provide the backbone of this guide, which explains the choices every founder faces: how to test an idea before committing money to it, how to compare legal structures, where funding comes from at a general level, and which registrations and licenses the government actually requires.

A note on terminology: in everyday speech, “starting a company” and “starting a business” are used interchangeably, and this article treats them the same way. What matters legally and for tax is the business structure you choose and the state where you operate. Rules differ from state to state and sometimes by county, so wherever a step varies by location, this guide says so and points you to the relevant official source.

The 10 steps at a glance

The SBA’s start-your-business guidance is organized around these ten steps:

  1. Conduct market research
  2. Write your business plan
  3. Fund your business
  4. Pick your business location
  5. Choose a business structure
  6. Choose your business name
  7. Register your business
  8. Get federal and state tax IDs
  9. Apply for licenses and permits
  10. Open a business bank account

The rest of this article walks through each step, explains the reasoning behind it, and notes where the official rules live so you can verify them for your own state and situation.

Step 1: Conduct market research

Market research is the step that answers the most important question first: is there a real opportunity to turn this idea into a working business? The SBA describes market research as gathering information about potential customers and about businesses already operating in your area, and then using that information to find a competitive advantage.

In practice, market research has two halves. The first half is customer research: who would buy what you plan to sell, what problem it solves for them, and what they are willing to pay. The second half is competitive analysis: who already serves these customers, what they do well, and where they leave gaps. Combining the two is what reveals a market advantage: a clear reason a customer would choose you over existing alternatives.

You do not need an expensive study to do this well. Read competitor reviews to find recurring complaints, search forums and social media for the questions people ask about the category, and, if you can, talk directly to potential customers about how they currently solve the problem your business would address. Free small-business data and trends published by government agencies can fill in the broader picture. The point of this step is discipline: commit serious money only after you have evidence, not just enthusiasm, that someone will pay.

Step 2: Write your business plan

Your business plan is the foundation of your business. The SBA calls it a roadmap for how to structure, run, and grow the company, and notes that lenders and investors commonly request it before discussing funding.

The SBA recognizes two common formats. A traditional business plan uses a standard structure and goes into detail in each section; it takes more work upfront and can run to dozens of pages. A lean startup business plan summarizes only the most important points and can be as short as one page, sometimes taking as little as an hour to prepare. Lenders and investors commonly request the traditional format, so the choice depends partly on how you plan to fund the business.

A traditional business plan typically includes these sections, based on the SBA’s outline:

  • Executive summary. Briefly state what your company is and why it will be successful: your mission, your product or service, basic information about your leadership team and location, and financial information plus high-level growth plans if you plan to ask for financing.
  • Company description. Detail the problems your business solves, the specific customers or markets you plan to serve, and the competitive advantages that will make the business succeed.
  • Market analysis. Show your understanding of your industry’s outlook and your target market. Your competitive research should show what other businesses are doing, what works for them, and how you can do it better.
  • Organization and management. Explain how the company will be structured and who will run it. State your legal structure and use an organizational chart to show who is responsible for what.
  • Service or product line. Describe what you sell or the service you offer, how it benefits customers, and what the product lifecycle looks like. Include plans for intellectual property, such as copyright or patent filings, and describe any research and development.
  • Marketing and sales. Describe how you will attract and retain customers and how a sale will actually happen. This section later feeds into your financial projections.
  • Funding request. If you are asking for funding, clearly explain how much you need over the next five years and what you will use it for. Specify whether you want debt or equity, the terms you are seeking, and how the funds will be used.
  • Financial projections. Supplement the funding request with projections that support your case. Established businesses include income statements, balance sheets, and cash flow statements for the last three to five years; new businesses provide a prospective five-year outlook, with quarterly or monthly detail for the first year.

A lean startup plan compresses the same thinking into a chart of key elements: your value proposition, customers, channels, cost structure, and revenue streams, among others. It suits businesses that want to explain or start quickly, and plans that will be refined often. Either format works; what matters is that the plan forces you to make your assumptions explicit before money is on the line.

Step 3: Fund your business

Your business plan helps you figure out how much money you will need to start. If you do not have that amount on hand, you will need to raise or borrow the capital. There are more ways than ever to find funding, but it helps to understand the broad categories and how they differ.

Personal savings and revenue. Many small businesses start with the founder’s own money, reinvested earnings from early sales, or contributions from family and friends. This avoids debt and keeps full control, but it puts personal finances at risk, which is one reason the choice of legal structure in step 5 matters.

Loans. Banks, credit unions, and other lenders all make small business loans, and eligibility requirements vary by lender. One official channel worth knowing is the SBA’s loan programs. The SBA does not generally lend money directly; instead, it guarantees portions of loans made by approved lenders through programs such as 7(a) loans, the agency’s primary program for long-term financing, and 504 loans, long-term fixed-rate financing available through SBA Certified Development Companies. Microloans, delivered through intermediary lenders, are loans of $50,000 or less aimed at smaller borrowing needs. Because the SBA backs part of the loan, participating lenders can offer terms that some borrowers could not get on their own.

Equity investors. Angel investors and venture capital firms provide money in exchange for an ownership share of the company. This is common for startups that need significant capital to grow quickly, but it means giving up some ownership and, usually, some control over decisions.

Grants and other sources. Some federal, state, and local programs offer grants or other assistance for specific types of businesses or founders. These are competitive and usually narrow in scope. Crowdfunding, in which many people contribute small amounts, is another route that doubles as a test of customer interest.

Whichever mix you consider, the SBA’s advice applies: calculate your startup costs before you launch, identify your startup expenses, estimate what each will cost, and use the full picture to request funding and estimate when the business might turn a profit. Be wary of any source that promises funding outcomes; treat projections as estimates, not guarantees.

Step 4: Pick your business location

Your business location is one of the most important decisions you will make, and the SBA flags it as such for a concrete reason: whether you set up a physical storefront or launch an online business, the choice can affect your taxes, your legal requirements, and your revenue.

For a physical business, the obvious factors apply: customer traffic, rent, proximity to suppliers, local zoning rules, and the local labor market. For an online business, the “location” question does not disappear; the state where you register and operate still determines many of your tax and legal obligations. Home-based businesses add another layer, since homeowners’ association rules and local zoning can apply even with no storefront.

The practical takeaway is to check the rules where you will actually operate. State and local government websites, and the SBA’s guidance for your state, are the places to confirm what applies to you.

Step 5: Choose a business structure

The legal structure you choose affects your registration requirements, how much you pay in taxes, and your personal liability. The IRS names the most common forms of business entity as the sole proprietorship, partnership, corporation, and S corporation, and notes that the limited liability company (LLC) is a structure allowed by state statute. Here is how they compare at a general level.

Sole proprietorship. The simplest structure, and the default: if you do business activities but do not register as any other kind of business, you are automatically considered a sole proprietor. It is easy to form and gives you complete control. The tradeoff is that a sole proprietorship does not create a separate business entity, so business assets and liabilities are not separate from your personal ones, and you can be held personally liable for the business’s debts. It can also be harder to raise money, since you cannot sell stock. Sole proprietors can still operate under a trade name.

Partnership. The simplest structure for two or more people to own a business together. The two common kinds are limited partnerships (LP), with one general partner carrying unlimited liability while other partners have limited liability, and limited liability partnerships (LLP), which give limited liability to every owner. In a limited partnership, profits are passed through to personal tax returns, and the general partner must also pay self-employment taxes. A partnership agreement documents how the partners share control, profits, and responsibilities.

Limited liability company (LLC). An LLC combines features of corporations and partnerships. In most instances it protects owners from personal liability, so personal assets such as a house, vehicle, or savings accounts are not at risk if the LLC faces bankruptcy or lawsuits. Profits and losses can pass through to the owners’ personal income without facing corporate taxes, but LLC members are considered self-employed and must pay self-employment tax contributions toward Medicare and Social Security. LLCs are formed under state law, and state rules differ; in many states, an LLC can have a limited life, and changes in membership may require dissolving and re-forming the LLC unless an agreement already covers buying, selling, and transferring ownership.

Corporation (C corp). A corporation is a legal entity separate from its owners. It can make a profit, be taxed, and be held legally liable. Corporations offer the strongest protection to owners from personal liability, but they cost more to form and require more extensive record-keeping, operational processes, and reporting. Unlike the other structures, corporations pay income tax on their profits, and in some cases profits are taxed twice: once when the company earns them and again when dividends are paid to shareholders. The advantage is longevity and fundraising power: a C corp has an independent life separate from its shareholders, and it can raise capital by selling stock, which also helps attract employees.

S corporation (S corp). A special type of corporation designed to avoid the double-taxation drawback of C corps. S corps allow profits, and some losses, to pass through directly to the owners’ personal income without ever being subject to corporate tax rates. Getting S corp status means filing with the IRS, a different process from registering with your state, and there are eligibility limits, so the SBA directs readers to check the IRS website for the requirements. State treatment also varies: most states recognize S corps the way the federal government does, but some do not recognize the S corp election at all, treating the business as a C corp. S corps still follow the strict filing and operational processes of a C corp.

The SBA also describes benefit corporations, close corporations, nonprofit corporations, and cooperatives for businesses with specific purposes, such as mission-driven companies or member-owned organizations.

Because structure affects liability and taxes, this is one of the steps where professional input pays for itself: a qualified attorney or accountant, or a free SBA resource such as a Small Business Development Center, can help you weigh the tradeoffs for your situation. Nothing here is advice about which structure you should choose.

Step 6: Choose your business name

Picking a name involves two checks, not one. The first is branding: you want a name that reflects your business and captures its spirit. The second is availability: you must make sure the name is not already being used by someone else.

For most structures, availability is checked against your state’s business name database, since states generally will not let two registered businesses use the same or confusingly similar names in the same state. Sole proprietors operating under a trade name, often called a “doing business as” or DBA name, typically register that name with the state or county, depending on local rules. If you plan to operate nationally or build a brand around the name, checking federal trademark records is also a common step.

Secure the matching domain name and check social media handle availability early if an online presence matters, but treat these as practical steps, not legal protections: name registration, trademark rights, and domain ownership are three different things.

Step 7: Register your business

Once you have chosen a name and a structure, it is time to make the business legal. Whether and where you must register depends on your structure and your state. Corporations and LLCs are generally registered with the state, usually through the Secretary of State’s office, by filing formation documents and paying a filing fee that varies by state. Sole proprietorships and partnerships operating under the owners’ own names often have lighter requirements, but that changes the moment they use a trade name or operate in certain industries.

The SBA advises registering before applying for tax IDs, since agencies will ask for your legal business name and formation date, and the details should match exactly everywhere you file.

Step 8: Get federal and state tax IDs

Your Employer Identification Number (EIN) is your business’s federal tax ID number. It works like a Social Security number for your business, letting you pay federal taxes, hire employees, open a business bank account, and apply for business licenses and permits.

Applying for an EIN is free, and the IRS issues the nine-digit number immediately through its online assistance tool once your answers are verified. The application asks for your name, Social Security number or taxpayer ID number, and business structure. The SBA warns explicitly: do not apply on websites that charge a fee, because the EIN application costs nothing. Apply directly through the IRS.

Not every business is required to have one. Your business needs an EIN if it pays employees, operates as a corporation or partnership, or files tax returns for employment or excise taxes, among other triggers the SBA lists. That said, the SBA notes that you need an EIN to open a business bank account and apply for licenses and permits, so in practice most formal businesses get one. If your business’s ownership or structure changes later, check with the IRS about whether you need a new one.

State tax IDs are a separate matter. Whether you need one depends on whether your business must pay state taxes, and state tax obligations differ widely. Seven states have no income tax at all, and requirements for employment-related taxes vary as well. The process is similar to getting a federal tax ID but varies by state, so you will need to check your state government’s website for the specific steps.

Step 9: Apply for licenses and permits

Almost every business needs some combination of licenses and permits, and the requirements exist at the federal, state, and local levels. Which ones apply depends on your industry, your location, and what your business does.

Federal licenses and permits apply to businesses in regulated industries, such as broadcasting, aviation, or the sale of alcohol, tobacco, or firearms. State licenses cover a much wider range, from professional licenses for fields like healthcare or construction to sales tax permits for businesses that sell taxable goods. Cities and counties add their own layer: general business licenses, zoning permits, health department permits for food businesses, and sign permits are all common.

Because this step is so location-specific, there is no universal list. The reliable approach is to check with your state’s business licensing office and your city or county clerk, and to recheck whenever you expand into a new location or add a new line of business. Operating without a required license can lead to fines or shutdown orders, so treat this as a compliance step, not an optional one.

Step 10: Open a business bank account

Keeping business money separate from personal money is one of the most practical things a new founder can do. A dedicated business bank account makes it easier to track income and expenses, simplifies tax preparation, and creates a clear financial record if you ever apply for a loan or bring in a partner. For corporations and LLCs, separation also supports the legal distinction between the owner and the business, which is part of what liability protection rests on.

To open the account, banks typically ask for your EIN, your formation documents or business license, and identification for the owners. The SBA lists opening a business bank account as the final step in its sequence, which reflects the reality that banking depends on everything before it being in place.

After the paperwork: running the company

Taxes and recordkeeping. Businesses have ongoing tax obligations that depend on their structure and location, and the IRS maintains a dedicated Small Business and Self-Employed portal with the relevant forms and publications. Keep organized records of income, expenses, receipts, and payroll from day one; good records make tax filing straightforward and are essential if you ever need financing.

Insurance. General liability, professional liability, property, and workers’ compensation coverage are common types, and which ones matter depends on the business. An insurance agent familiar with your industry can explain the options. This is general information, not a recommendation about which policies to buy.

Free help exists. You do not have to figure everything out alone. SCORE, a nonprofit resource partner of the SBA, offers free counseling and workshops from volunteer business mentors. Small Business Development Centers provide one-on-one and low-cost training on contracting, market research, and program support. The SBA also runs a free online Learning Center with courses and videos. Using these resources is one of the simplest ways to get experienced eyes on your plan before you commit money.

A realistic word on expectations

Guides to starting a company sometimes imply a smooth path from idea to success. The honest version is that most new businesses face a difficult first year: finding customers, managing cash flow, and adjusting the original plan are normal parts of the process, not signs of failure. No guide, advisor, or funding source can guarantee a particular outcome, and you should treat anyone who promises one with skepticism.

What you can control is preparation. Market research done before spending, a written plan that states its assumptions, a legal structure chosen with professional input, registrations completed properly, and finances kept separate: these do not guarantee success, but they remove entire categories of avoidable problems.

This article is general information about starting a business in the United States. It is not legal advice, tax advice, or financial advice, and it does not recommend any product or service. Business formation, tax, and licensing rules vary by state and locality. For guidance about your specific situation, consult a qualified attorney or accountant, or contact an SBA resource such as your local Small Business Development Center.

Frequently asked questions

How much does it cost to start a company?

State filing fees for forming an LLC or corporation vary by state, and total startup costs depend on the type of business: a home-based service business may need little more than registration fees and basic equipment, while a restaurant or manufacturer needs far more. The SBA advises calculating your startup costs before launch by identifying and estimating each expense, then using that total to plan funding.

Do I need a lawyer to start a company?

Not necessarily for the basic filings, which many founders complete themselves using state resources. But because choosing a business structure affects liability and taxes, consulting a qualified attorney or accountant is commonly recommended, especially for partnerships, corporations, or businesses with significant risk. Free SBA resources such as Small Business Development Centers can also help you understand the options.

What is the simplest business structure?

The sole proprietorship. If you do business activities without registering as another kind of business, you are automatically considered a sole proprietor, and it gives you complete control. The tradeoff is that there is no legal separation between you and the business, so you are personally liable for its debts.

What is the difference between an LLC and a corporation?

Both create a separate legal entity that protects owners from personal liability in most instances, and both are formed under state law. The main differences are in taxation and formality: LLC profits and losses typically pass through to the owners’ personal income without corporate taxes, while C corporations pay income tax on profits and may face double taxation on dividends. Corporations also require more extensive record-keeping and formal processes, but they can raise capital by selling stock. S corporations are a special type of corporation that passes profits through to owners like an LLC while keeping the corporate form.

Do I need an EIN if I am a sole proprietor with no employees?

Not necessarily for tax purposes; the IRS allows eligible sole proprietors to use their Social Security number. However, the SBA notes that you need an EIN to open a business bank account and apply for business licenses and permits, so many sole proprietors get one anyway. It is free and issued immediately through the IRS online tool.

How long does it take to start a company?

It varies. The planning steps, research, the business plan, and funding, can take weeks or months. The administrative steps move faster: an EIN is issued immediately online, while state registration processing times range from days to weeks, and sometimes longer, depending on the state and filing method.

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Sources & references

Emma Hudson

Editor of Amberaisle — clear, thoughtful explainers for curious readers. More about the editor →