How to Start a Business (14-Step Guide)

Published by Jon Morgan | Co-Founder & Chief Editor

Last updated: June 18, 2026

FACT CHECKED by Lou Viveros, Growth & Transition Advisor

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Starting a business has become realistic and worthwhile for many, with startup enthusiasm in the U.S. constantly on the rise.

Business applications through August 2025 total 3.57 million (up 3.15% compared to 2024), with March 2025 alone recording 507,222 formations, as reported by the U.S. Census Bureau in September 2025 [1].

However, 20.4% of new small businesses still fail because of money troubles, poor planning, or not understanding the market [2].

I've guided dozens of startups through this process. Here are the 14 steps that actually matter.

Quick Summary

The 14 steps to starting a business

These 14 steps are in order. The sequence matters, forming your business entity before you have a business plan and funding secured is putting the cart before the horse.

Step 1 - Understand the laws that apply to your business

As a prospective business owner, you must familiarize yourself with the business laws that apply to your company.

Categories of business law to be aware of as you start:

• Tax laws: Specific taxes apply to businesses, such as income tax, employment tax, and excise tax on specific goods and industries.
• Intellectual property laws: Regulate intangible assets like patents, trademarks, copyrights, and trade secrets.
• Privacy laws: Communicate your data use policies to consumers and employees, who care about how their personal information is handled.
• Finance laws: Regulate how businesses can spend money and expand.
• Employment laws: General regulations that apply to businesses with employees.
• Healthcare laws: Laws controlling medical care and employer-sponsored health insurance.
• Advertising laws: Prevent deceptive or unfair advertising acts and practices [3].

Check the SBA Business Guide for a current overview of federal regulations that apply to your business type.

Step 2 - Conduct market research

Market research helps you understand your target customer demographics and their needs, preferences, and behavior. It can also help you identify weaknesses in your product or service before investing time and money into it.

I recommend conducting market research through surveys, direct conversations, and census data. The U.S. Census Bureau's American Community Survey (census.gov/acs) provides free demographic data for any geographic area, useful for validating local market demand.

According to CIN7, consumers have higher expectations for small businesses than larger corporations, with 71% of them willing to pay for better-quality services offered by small entrepreneurs [4]. That's a useful signal for how your offer should be positioned.

Step 3 - Choose a business structure

Choosing your business structure, whether sole proprietor or corporation, has legal and tax implications. Because of that, the choice is crucial.

Some of the most popular business structures include:

• Sole proprietorship: The most typical business type if you want to run the business yourself.
• Partnership: Suitable if you begin a business with one or more people.
• Limited liability company: An LLC combines a corporation's limited liability protections with a partnership's tax benefits and operational flexibility.
• Corporation: More complex from a legal and tax perspective; best if you're aiming to open a larger business that may issue stock.

For most small business owners, an LLC is the best starting point, it combines liability protection with flexible taxation and minimal ongoing compliance. See our LLC formation guide for a full breakdown.

Step 4 - Select your business location

The physical or digital location of your business is one of the most important decisions you'll make as an entrepreneur. Your choice impacts tax obligations, regulatory compliance, operational costs, and revenue potential.

There are three primary business location models to consider:

• Brick-and-mortar locations: Physical storefronts are essential for retail businesses and foodservice establishments. They require an upfront investment, but provide customer touchpoints in return.
• Home-based business: Ideal for service providers, consultants, and online businesses, home-based operations minimize overhead costs and offer operational flexibility.
• Fully online business: E-commerce businesses - for example an online store, a digital service, or a SaaS business - operate under minimal location restrictions.

Each model carries different implications for licensing, tax filing, insurance needs, and employee management. Choose the location model that aligns with your business type and financial capacity.

Step 5 - Create a business plan

A business plan is an essential document that acts as a blueprint for starting a successful business.

In my experience, this document significantly aids potential investors and financial institutions in understanding the fundamental elements of your business. It acts as a crucial bridge between your vision and their decision-making processes.

Important sections a solid business plan should include:

Executive Summary

Establish the executive summary to begin the write-up. The executive summary describes the proposed new business idea and highlights the goals of the company and the steps to achieve them.

Market Analysis

This part of the business plan examines how a business stacks up to its competitors. It includes a target market analysis, market size, segmentation, growth rate, trends, and a competitive environment evaluation.

Products or Service

This section explains the operational procedures for your company. It outlines the products you'll provide to customers, how they compare to your competitors, how much they cost, who will be in charge of making them, where you'll get your raw materials, and the cost of production.

Financial Plan

The financial plan is the most important part of the business plan. Your financial plan should include a proposed budget and projected financial statements.

Management Structure

The management portion describes your organizational and legal structure. It also describes your leadership team and your anticipated staffing needs. If you plan to apply for funding, briefly describe your advisory board here.

The SBA's free business plan tool (sba.gov/business-guide/plan-your-business/write-your-business-plan) walks through each section with prompts.

Step 6 - Choose and register your business name

After choosing your business structure, it's time to choose how the public will recognize your company.

Your business name should:

• Reflect your brand and values
• Describe what you offer
• Be easy to remember and spell
• Work well as a logo and social media handle

Check whether your intended business name is already in use. Contact your state's filing office or look it up online to confirm availability.

We also recommend checking with the US Patent and Trademark Office (USPTO) to see if the name is protected by trademark law, even if it isn't currently used [5].

Note that some business structures require a doing business as (DBA) name, an assumed or fictitious name different from your business entity name. A DBA may sometimes be required to open a business bank account.

Step 7 - Legally form your business entity

To legally form your business entity, you must register with the state in which you intend to conduct business.

Registration documents differ by state, but the general requirement is:

• Business name and address
• Registered agent's name and address
• Management structure
• Number and value of shares (if you're a corporation)

If forming an LLC, you'll file Articles of Organization (called a Certificate of Formation in Texas and a Certificate of Organization in some other states) with your state's Secretary of State. Use our LLC formation guide or see our Best LLC Services comparison for help filing.

Step 8 - Apply for an EIN

Once you form your business, you should get an Employer Identification Number (EIN) from the IRS. This tax number is required to open a business bank account, file federal taxes, and hire employees [6]. The EIN application is free, takes about 5 minutes, and is done online at IRS.gov.

Additionally, certain states have tax ID numbers, so you may need to pay state income and unemployment taxes.

I recommend you visit your state's official Secretary of State website and consult Small Business Administration resources to find out the state-specific tax requirements and access startup guidance. Note: Virginia handles business filings through the State Corporation Commission (scc.virginia.gov), not a Secretary of State.

Step 9 - Get the required licenses and permits

Applying for licenses and permits varies by industry, location, and government regulations, requiring compliance at multiple levels.

In certain industries, such as agriculture and broadcasting, you may require a federal license. Other industries, like health care, usually need professional licenses. Even if you don't fit into one of these categories, your city or county may still require you to get a business license.

The SBA's Business License and Permit Search (sba.gov) helps you find federal requirements. For state and local requirements, contact your state's Secretary of State and your city or county clerk's office.

Step 10 - Open a business bank account

As you establish your business, you will receive and spend money. For example, if you have an LLC, opening an LLC bank account helps you mitigate risks. That's why separating your business bank account from your personal account is critical.

The three business bank accounts to consider opening:

• Business checking account
• Business savings account
• Business credit card account

Most banks require your EIN, formation documents (Articles of Organization), and a government-issued ID to open a business account. Some also require an operating agreement.

A small business checking account can help you handle legal, tax, and day-to-day issues.

Step 11 - Secure funding

Your business plan helps determine the funds you'll need to start your business. If you don't already have the funds, consider:

• Investors: Angel investors typically write checks of $25K-$500K for early-stage businesses. Venture capital is for businesses with proven traction and scalable models. Both expect equity or a board seat in return - a thorough business plan is essential.
• Business loans: The SBA's 7(a) loan program offers up to $5 million for qualified small businesses, with longer repayment terms than conventional bank loans. You'll need a solid business plan, estimated startup costs, and financial projections.
• Crowdfunding: Platforms like Kickstarter (product-based) and Indiegogo (flexible funding) don't dilute equity. Equity crowdfunding platforms like Wefunder and StartEngine do exchange capital for ownership. Either way, you're also testing your idea and building an audience.
• Grants: Grants.gov aggregates federal grant opportunities. SBIR (Small Business Innovation Research) grants are specifically for R&D-focused businesses. Grants are competitive and come with strict eligibility requirements.

Understanding your startup costs is critical, since many businesses fail simply because they run out of money before revenue becomes consistent.

Step 12 - Get business insurance

Unexpected events like property damage, theft, or customer lawsuits can be costly for businesses, that's why purchasing business insurance is an important step before launch. The specific insurance needs of a business depend on its location and industry.

Core business insurance policies typically include:

• Workers' compensation: Mandatory insurance offering job-related injury or illness coverage.
• General liability insurance: Covers mishaps, injuries, and negligence claims.
• Professional liability insurance: If you provide a service, professional liability insurance can shield you from malpractice and carelessness claims.
• Commercial property insurance: Covers losses and damages to property triggered by fire, smoke, storms, vandalism, and other occurrences.
• Product liability insurance: Protects against financial loss from a faulty product that causes injury or bodily harm - frequently crucial for firms engaged in production or distribution.
• Business owner policy (BOP): Combines multiple types of insurance coverage for small businesses. A basic BOP typically costs $500-$2,000 per year, depending on industry and revenue.
• Health insurance: Offering health insurance improves employee retention and satisfaction. Explore options like Small Business Health Options Program (SHOP) plans designed specifically for startups.

Step 13 - Set up retirement plans

As your business grows and you hire employees, offering a retirement plan becomes an important recruitment and retention tool. For a business owner, establishing a retirement plan ensures long-term financial security.

Common options for small businesses include:

• SEP-IRA (Simplified Employee Pension): Easy to set up and administer; the owner and employees can contribute up to 25% of compensation, making it flexible for variable-income businesses.
• SIMPLE IRA: Designed for businesses with 100 or fewer employees; both employees and employers contribute, and setup costs are minimal.
• Solo 401(k): Ideal for self-employed individuals or single-owner LLCs; allows high contribution limits ($70,000+ in 2025) if income supports it.

Step 14 - Build your operations, digital presence, and team

Set Up Accounting

Accounting services or accounting software will help you track inventories, create financial statements, ledgers, and journal entries.

Establish Digital Presence

A strong digital presence is now a must for most businesses, online or offline. Your marketing plan should include digital infrastructure to support your brand:

• Website and SEO optimization: Helps potential customers find your products or services.
• Email marketing: Still one of the most cost-effective ways to promote your business.
• E-commerce and payment processing: A must if you want to handle online transactions.
• Online reputation management: Through customer reviews and social media - helps you engage your target audience and gives you feedback.

For online-first businesses, digital strategy is your primary revenue channel. For traditional businesses, digital presence drives foot traffic, credibility, and customer research.

Hire Staff

To successfully scale a business, you will need to hire qualified full-time employees, including managers, administrative officers, accountants, legal counsel, and, if applicable, a board of directors.

Scaling your business after launch

Scaling doesn't mean simply working harder; it involves systematic approaches that result in a profitable business without proportional cost increases.

Three key scaling strategies to consider as your business matures:

• Operational efficiency: Streamline processes, automate repetitive tasks, and eliminate bottlenecks. For example, implementing project management software frees your team to focus on revenue-generating activities.
• Market expansion: Enter new geographic markets, demographic segments, or distribution channels. For example, a local service business might expand to adjacent regions; an online retailer might launch in international markets.
• Partnerships and strategic alliances: Collaborate with complementary businesses to reach new audiences, share resources, and accelerate growth without bearing all costs alone.

Monitor your unit economics closely during scaling. Premature or poorly planned scaling is a common cause of business failure.

Pro Tip: Buying a Business

You don't have to start from scratch. Buying an existing business gives you an advantage from the start, but you must make sure you don't inherit a failing operation.

Things to check before buying an established business:

• Financial & Legal: Scrutinize three years of financial records, confirm asset inclusion, and ensure there are no hidden debts or legal liabilities.
• Operational Stability: Check if staff will stay, contracts are transferable, and the business isn't overly reliant on the owner's personal connections.
• Market Position: Verify customer satisfaction and marketing effectiveness to ensure steady future revenue.

Find listings through brokers or marketplaces. The IRS may allow a $5,000 deduction for acquisition costs if total startup expenses remain under $50,000 [7].

How to start a business in your state

Committed to your own small business idea? Use our state-specific guides:

• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Iowa
• New York

Each state guide covers essential requirements including business registration, LLC formation, registered agent selection, licensing, and compliance obligations specific to that jurisdiction.

FAQs

Ready to Start a Business?

You now have the roadmap to start your business the right way, with legal protection, financial planning, and operational clarity.

Don't wait, use our state-specific guides to learn about your local requirements and launch your business today.

References:

1. https://www.census.gov/newsroom/press-releases/2025/business-formation-statistics-sept11.html
2. https://www.bls.gov/bdm/
3. https://www.law.cornell.edu/wex/table_business/
4. https://cin7.com/blog/small-business-statistics/
5. https://www.uspto.gov/trademarks/basics/trademark-patent-copyright
6. https://www.sba.gov/business-guide/launch-your-business/get-federal-state-tax-id-numbers#
7. https://www.irs.gov/publications/p583