How to Start a Business? (Step-by-Step Guide & Expert Tips)

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 have decades of hands-on expertise in running my own business, supporting startups, and staying up to date with the latest business trends and regulations. In this article, I’ve put together the key steps for starting a business to make the process easier for you.

Quick Summary

14 Steps to Start a Business

To start a business, you need to set your goals, develop a detailed business plan, and, ultimately, form your business legally.

These fourteen steps outline what to do and what to expect when starting a business:

1. Understand Business Laws

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

To assist you in understanding these business laws, Venture Smarter compiled a list of the type of business laws you need to be aware of as you're starting:

• Tax laws: Specific taxes apply to businesses, such as income tax, employment tax, and excise tax on specific goods and industries.
• Intellectual property laws: These regulate intangible assets like patents, trademarks, copyrights, and trade secrets that help businesses separate from one another.
• Privacy laws: It's important to communicate your data use policies to consumers and employees since they care about protecting their personal information.
• Finance laws: These regulate how businesses can spend money and expand.
• Employment laws: These are general sets of regulations that apply to businesses with employees known.
• Healthcare laws: Laws controlling medical care and employer-sponsored health insurance.
• Advertising laws: The purpose of advertising laws is to prevent deceptive or unfair advertising acts and practices [3].

"Business laws such as contracts, property rights, taxation, and other general business law safeguard various entrepreneur rights. Understanding business law helps you avoid mistakes that could hold you legally liable."

- Delina Yasmeh, J.D./Tax LL.M, Expert in Mergers and Acquisitions

2. Conduct Market Research

Market research helps you understand your target customer demographics and their needs, preferences, and behavior.

Market research can also help you identify weaknesses in your product or service before investing time and money into it.

Conducting market research allows you to gauge your audience's interest in your business idea.

I recommend conducting market research through surveys, direct conversations, and census data.

3. Choose a Business Structure

Choosing your business structure, whether sole proprietor or corporation, will often have legal and tax implications. Because of it, this choice is crucial.

According to a review by 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].

Some of the most well-liked business structures include:

• Sole proprietorship: The most typical business type if you want to run the business yourself.
• Partnership: A partnership structure may suit you 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: It's more complex from a legal and tax perspective; thus, it's best if you are looking to open a big business.

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.

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, I've seen how 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.

Here are the 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

Anyone looking at this section should be able to understand 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.

6. Choose a Suitable Business Name

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

Your business name should be:

• Show off your principles and brand.
• Describe the products or services you offer.
• Effortlessly serve as a logo and be memorable on social media and other marketing channels.

You should also check if your intended business name is already used. 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 is not used [5].

Note that some business structures require a doing business as (DBA) name, which is an assumed or fictitious name different from your business entity name.

Sometimes, a DBA may be required to open a business bank account.

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 here is the general requirement:

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

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].

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.

9. Get 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.

10. Set Up Business Bank Accounts

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.

Below are the three important business bank accounts you should consider opening:

• Business checking account

• Business savings account

• Business credit card account

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

11. Fund Your Business

Your business plan helps determine the funds you'll need to start your business. You must consider other funding options if you don't have the funds:

• Investors typically a seat on your board of directors or ownership in the business. To obtain a capital investment, you require a thorough business plan. 
• Business loans require a solid business plan, your estimated startup costs, and financial projections.
• Crowdfunding is a great way to raise money from everyday people through online platforms—plus you get to test your business idea and build social media presence at the same time.
• Grants are basically free money from government agencies or organizations, though they're competitive to get 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.

12. Apply for 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 an official launch. The specific insurance needs of a business depend on its location and industry.

Core business insurance policies typically include:

• Workers' compensation: This mandatory insurance offers job-related injury or illness coverage.
• General liability insurance: It typically 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: This property insurance typically covers losses and damages to property triggered by fire, smoke, storms, vandalism, and other occurrences.
• Product liability insurance: It protects against financial loss from a faulty product that causes injury or bodily harm and is frequently crucial for firms engaged in production or distribution.
• Business owner policy (BOP): A Business Owner's Policy can combine multiple types of insurance coverage for small businesses.
• Health insurance: Offering health insurance improves employee retention and satisfaction. Explore options like Small Business Health Options Program (SHOP) plans designed specifically for startups.

13. Choose a Retirement Plan for Employees and Owners

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 (\$69,000+ in 2024) if income supports it.

14. Finalize Other Business Setups

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 is still one of the most cost-effective ways to promote your business.

• E-commerce and payment processing are a must if you want to handle online transactions.
• Online reputation management through customer reviews and social media helps engage your target audience and provides valuable 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.

Related articles:

• How to Form a Candle Business
• How to Create a Makeup Line
• Opening a Sticker Business
• How to Start a Business as Black American

Plan for Growth After Starting a Business

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 - Custom State Guides

Committed to your own small business idea? Then use our state-specific guide on how to start a business:

1. Alabama
2. Alaska
3. Arizona
4. Arkansas
5. California
6. Colorado
7. Florida
8. Georgia
9. Hawaii
10. New York
11. Tennessee
12. Texas

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.

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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