Handbook / Starting out on your own

Starting a business checklist: the steps in a sensible order

Starting a business involves a lot of small steps, and the order matters. Open a bank account before you have registered and you may have to do it again; print materials before you check the name and you may have to reprint. This checklist puts the steps in a sensible sequence for a solo owner or small business in the US.

1. Test the idea

• Describe who you serve, what problem you solve and why they would pay you.
• Talk to potential customers and, ideally, get a first paid order or a firm commitment.

The guide on how to validate a business idea explains simple tests.

2. Write a short plan

• Services or products and prices
• How customers will find you
• Startup costs and monthly running costs
• Income needed to cover costs and pay yourself

A one-page business plan is enough for most solo businesses.

3. Choose a structure

Most solo owners choose between a sole proprietorship and an LLC. The difference is mainly legal separation, paperwork and cost; tax treatment can be the same by default. See LLC vs sole proprietorship.

4. Choose and check a name

• Search your state's business name database.
• Check trademarks and whether a matching domain and social handles are available.
• If you trade under a name other than your legal name, you may need a DBA filing.

5. Register

The SBA explains that how you register depends on your business structure and location. LLCs and corporations register with the state. Sole proprietors may only need local registration or a DBA. Note any annual report or renewal deadlines.

6. Get tax IDs

• EIN: the SBA says you need an EIN to pay federal taxes, hire employees, open a bank account and apply for business licenses and permits in many cases. The IRS issues them free.
• State tax IDs: needed if you will collect sales tax, have employees or owe certain state taxes.

7. Licenses and permits

The SBA notes that most small businesses need a combination of licenses and permits from federal, state and local agencies, depending on activity and location. Check:

• a general business license from your city or county
• occupational or professional licenses
• home occupation permits if working from home
• a sales tax permit if selling taxable goods or services

8. Banking

• Open a business checking account.
• Consider a separate savings account for taxes.
• Set up payment methods for customers.

9. Insurance

Consider general liability, professional liability, property and any coverage required by clients or licenses. The guide to business insurance types gives an overview.

10. Contracts and terms

• A service agreement or terms of sale
• Payment terms and a late payment policy
• A privacy notice if you collect personal data online

11. Bookkeeping and invoicing

• Choose software or a spreadsheet.
• Set up a simple chart of accounts.
• Decide how you will store receipts.

The guide to bookkeeping for the self-employed explains the routine.

12. Taxes

• Understand self-employment tax and estimated payments.
• Diary estimated tax dates.
• Decide whether to use a tax professional.

13. Launch

• A simple website or business profile
• Tell your network
• Ask early customers for feedback and reviews

14. Keep it current

Create a compliance calendar: license renewals, annual reports, insurance renewals and tax dates. Review it quarterly.

Common mistakes to avoid

• Registering before testing the idea. Talk to potential customers first.
• Mixing personal and business money. Open a separate account early.
• Skipping licenses. Check city, county and state requirements before your first sale.
• No written agreements. Even simple work benefits from a short contract.
• Forgetting taxes. Set aside part of every payment from the start.
• Trying to do everything at once. Launch with the essentials and improve as you go.

Order matters

Some steps depend on others. Choose your structure before registering a name with the state, get your tax ID before opening a business bank account, and check licensing before your first sale. Working in order avoids paying twice for filings or reprinting materials.

Get help where it counts

A short session with an accountant or attorney before you choose a structure or sign a lease can prevent costly mistakes.

Validate, plan, choose a structure and name, register, get tax IDs, check licenses, open banking, insure, set up contracts and books, plan for taxes, then launch and keep a compliance calendar.