How to start a business in the US
Last reviewed . General information, not legal or tax advice.
To start a business in the US, test your idea with real customers, write a short plan, work out what it costs, choose a structure such as a sole proprietorship or LLC, register with your state if needed, get a free EIN from the IRS, apply for licenses and permits, and open a business bank account.
What are the steps to start a business?
The SBA's own checklist has ten steps. The order matters less than finishing each one, but this sequence avoids most rework, because later steps (an EIN, a bank account, licenses) ask for answers from earlier ones.
Test the idea
Find out who would buy, what they pay for alternatives and how many of them you can reach. Talk to likely customers before you spend on inventory or a brand.
Write a simple plan
A one-page lean plan is enough to start: who you serve, what you sell, how you reach customers, your main costs and how you make money.
Work out your startup costs and funding
List one-time costs and at least a year of monthly costs, then decide how you will pay for them: savings, a loan, investors or early sales.
Pick a location
Your location decides which state and local taxes, zoning rules and licenses apply. Zoning can apply even to a business run from home.
Choose a business structure
A sole proprietorship needs no filing, while an LLC or corporation separates business debts from your personal assets and is registered with your state.
Choose and protect a name
Check that the name is free in your state and in the federal trademark database, and register a DBA if you will trade under a name that is not your own or your entity's.
Register the business
An LLC, corporation or partnership files formation documents with the state, typically the Secretary of State. A sole proprietor using their own legal name usually does not need to register.
Get federal and state tax ID numbers
Apply for an EIN directly from the IRS, which is free, then check with your state's revenue department for any state tax accounts you need.
Apply for licenses and permits
Check federal, state, county and city requirements for your activity and location, including a seller's permit if you sell taxable goods.
Open a business bank account
Keep business money separate from personal money from the first sale. Banks typically ask for your EIN, formation documents and any business license.
Do I need a business plan before I start?
You need a plan, but not necessarily a long one. The SBA describes two formats. A traditional plan runs many pages and covers the market, management, products, marketing, a funding request and five years of projections; lenders and investors usually expect it. A lean startup plan fits on one page and can take about an hour.
If you are paying for the start yourself, a lean plan is usually enough. Write the traditional version when you apply for a loan or talk to investors, and reuse the research you did when testing the idea. See how to fund a small business for what lenders look at.
Should I form an LLC or stay a sole proprietor?
If you do business on your own and never register anything, the law treats you as a sole proprietor. That is the simplest way to start, but your personal assets stay exposed to the business's debts and lawsuits. An LLC is a separate legal entity, so in most cases a claim against the business does not reach your house or savings.
Many people start as sole proprietors to test an idea and form an LLC once they have real sales, customers on premises, employees or products that could hurt someone. The trade-offs are covered in LLC vs. sole proprietorship and the filing itself in how to start an LLC.
How long does it take to start a business?
The paperwork can be quick. The IRS issues an EIN online immediately once the application is approved, and some states let you register an LLC online. Licenses and permits take longer: Texas, for example, tells new sales tax permit applicants to allow two to three weeks for the permit to arrive.
The slow part is usually the business itself: testing the idea, sourcing a product, setting a price and finding first customers. Budget weeks to months for that, and start the paperwork once you are confident you will actually sell.
Where can I get free help?
The SBA funds a network of free or low-cost advisors you can meet in person or online:
- Small Business Development Centers (SBDCs) for one-on-one advice and training.
- SCORE for business mentoring.
- Women's Business Centers and Veterans Business Outreach Centers.
- Your local SBA district office.
The SBA's local assistance page finds the nearest one by ZIP code. Bring your lean plan and your cost list; advisors can help you check the numbers, the licenses your activity needs and whether a loan makes sense.
Frequently asked questions
How much does it cost to start a business?
It depends on what you sell. Registration is usually the small part: the SBA says the total cost to register a business is in most cases under $300, though state fees vary. Inventory, equipment, insurance, a website and marketing usually cost more, so list them before you commit.
Can I start a business with no money?
You can start some businesses for very little, especially services you already have the skills and tools for. A sole proprietor using their own name may not need to register, and an EIN is free. Plan for licenses, insurance and basic marketing, and avoid inventory until customers have shown they will buy.
Do I need an EIN to start a business?
Not always. The IRS requires an EIN if you have employees, operate as a corporation or partnership, or file certain tax returns such as employment or excise returns. Many sole proprietors without employees can use their Social Security number, though banks and suppliers often ask for an EIN anyway, and it is free.
Do I have to register my business with the state?
An LLC, corporation or partnership registers with the state where it is formed, usually through the Secretary of State. A sole proprietor doing business under their own legal name generally does not register to form the business, but may still need a DBA, local licenses and state tax accounts.
What is the first step to starting a business?
Test the idea before you spend. Talk to the people you want to sell to, check what they pay for alternatives and how many of them you can reach. Market research and a lean plan come first in the SBA's checklist, before structure, registration and licenses.
Sources
- 10 steps to start your business, U.S. Small Business Administration. https://www.sba.gov/business-guide/10-steps-start-your-business
- Write your business plan, U.S. Small Business Administration. https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan
- Choose a business structure, U.S. Small Business Administration. https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
- Register your business, U.S. Small Business Administration. https://www.sba.gov/business-guide/launch-your-business/register-your-business
- Get federal and state tax ID numbers, U.S. Small Business Administration. https://www.sba.gov/business-guide/launch-your-business/get-federal-state-tax-id-numbers
- Open a business bank account, U.S. Small Business Administration. https://www.sba.gov/business-guide/launch-your-business/open-business-bank-account
- Get an employer identification number, Internal Revenue Service. https://www.irs.gov/businesses/small-businesses-self-employed/get-an-employer-identification-number
- Do you need an EIN?, Internal Revenue Service. https://www.irs.gov/businesses/small-businesses-self-employed/do-you-need-an-ein
- Texas Online Tax Registration Application, Texas Comptroller of Public Accounts. https://comptroller.texas.gov/taxes/permit/
- Local assistance, U.S. Small Business Administration. https://www.sba.gov/local-assistance
This guide is general information, not legal or tax advice. Rules differ by state and city and change over time, so confirm the details with the official sources above or a licensed professional.