How to Start a Business: A Step-by-Step Guide for Entrepreneurs
Starting a business is an exciting journey, but it requires careful planning especially when it comes to legal, financial, and tax considerations. As an accounting professional, I’ve seen many entrepreneurs succeed by following the right steps from the beginning. If you're ready to turn your idea into a profitable business, this guide will walk you through the key stages, with a focus on U.S. regulations and tax-smart strategies.
Step 1: Validate Your Business Idea
Before investing time and money, make sure your business idea is viable:
Market Research – Use tools like Google Trends, industry reports, and competitor analysis to assess demand.
Target Audience – Identify who will buy your product/service and how you’ll reach them.
Profit Potential – Estimate startup costs, pricing, and projected revenue.
Tip: The U.S. Small Business Administration (SBA) offers free market research tools to help.
Step 2: Choose a Business Structure
Your business structure affects taxes, liability, and paperwork. The most common options in the U.S. are:
Sole Proprietorship
Personal tax return (Schedule C)
Freelancers, low-risk businesses
LLC
Flexible (can be taxed as sole prop or corporation)
Small businesses wanting liability protection
S Corporation
Avoids double taxation (profits pass through to owners)
Businesses with consistent profits
C Corporation
Corporate tax rate (potential double taxation)
Startups planning to raise investor capital
Key Consideration: An LLC is often the best choice for small businesses due to liability protection and tax flexibility. *Please note an LLC is not a tax election and setting up an LLC means you will still be taxed as a sole proprietorship.
Step 3: Register Your Business Legally
Once you’ve chosen a structure, take these steps:
Pick a Business Name – Check for trademarks (USPTO.gov) and state availability.
Register with Your State – File formation documents (e.g., Articles of Organization for an LLC).
Get an EIN (Employer Identification Number) – Free from the IRS for tax and banking purposes.
Local Licenses & Permits – Check city/county requirements (e.g., health permits for food businesses).
Step 4: Set Up Your Finances & Taxes
Proper financial setup prevents headaches later:
Open a Business Bank Account – Never mix personal and business funds.
Choose an Accounting Method – Cash basis (simpler) vs. accrual (required for some businesses).
Understand Tax Obligations –
Income Tax – Filed annually (or quarterly for some).
Self-Employment Tax – 15.3% for sole proprietors/LLCs.
Sales Tax – If selling products, check state requirements.
Payroll Tax – If hiring employees, register with state labor departments.
Pro Tip: Use an accounting software to keep track of all expenses and income. Consult a professional for payroll, income and sales tax filings.
Step 5: Fund Your Business
Common funding options for U.S. startups:
Bootstrapping – Using personal savings or revenue.
Small Business Loans – SBA loans offer competitive rates.
Investors – Angel investors or venture capital (best for high-growth startups).
Grants – Some states and organizations offer small business grants.
Step 6: Launch & Grow Strategically
Once everything is set up:
Build an Online Presence – Website, social media, and Google My Business.
Start Marketing – Use SEO, paid ads, or local networking.
Track Performance – Monitor cash flow, profit margins, and tax deadlines.
Final Thoughts: Start Smart, Scale Faster
Launching a business is just the beginning. Staying compliant with tax laws and managing finances well will help you avoid costly mistakes. If you need help structuring your business for tax efficiency, an accountant can save you time and money in the long run.
When becoming self employed for all matters it is very important to have a lawyer and an accountant to help you navigate starting a new business.