Before you start: test the idea
The cheapest mistakes are the ones you make on paper. Before you spend money, check three things: that people actually want what you plan to sell, that they will pay a price that covers your costs, and that you can reach them. Talking to ten potential customers often tells you more than a week of reading.
The SBA suggests asking: Is there demand? How big is the market? Where do customers live and how can you reach them? How many similar options exist? What do people pay for those alternatives?
Step 1: Do market research
Market research tells you whether there is an opportunity and who you are competing with. Use free official data first: in the US, the Census Business Builder and the Bureau of Labor Statistics. Then go direct to people with short surveys or conversations.
Write down your main competitors, what they charge and what customers say about them. Your gap in the market is usually where customers complain.
Step 2: Write your business plan
A business plan is your roadmap. If your business is simple, a one-page lean plan is enough to start. If you will ask a bank or investor for money, use a full plan; the SBA notes that lenders and investors commonly request the traditional format.
Our free business plan template has both formats with prompts for every section, and saves to PDF or Word.
Step 3: Work out your costs and funding
List every one-time cost (equipment, registration, website, first stock) and every monthly cost (rent, software, insurance, marketing). The SBA suggests counting at least a year of monthly costs. Add a buffer for surprises.
Then decide how to pay: your own savings (“bootstrapping”), friends and family, a bank loan or SBA-guaranteed loan, investors, or crowdfunding. Each has trade-offs between control and risk.
Step 4: Pick your location
Online, from home or in premises: the SBA points out that this choice can affect your taxes, legal requirements and revenue. If you work from home, check local zoning rules, since some areas restrict business activity in residential property.
Step 5: Choose a business structure
Your structure affects registration, taxes and personal liability. In the US the common options are sole proprietorship, partnership, limited liability company (LLC) and corporation. Many one-person businesses start as sole proprietors because it is simplest, while an LLC can separate business debts from personal assets. If in doubt, a short session with an accountant or attorney is worth it.
Step 6: Choose your business name
Pick a name that is easy to say and spell, check that nobody else in your state is using it (the secretary of state’s website usually has a search) and see whether the website domain and social handles are free. A trademark can protect the name later.
Step 7: Register your business
In the US, registration is usually done with your state, and if you trade under a name that isn’t your own legal name you may need a “doing business as” (DBA) registration. LLCs and corporations register with the state when they are formed.
Step 8: Get federal and state tax IDs
An Employer Identification Number (EIN) works like a Social Security number for your business. You need one to hire staff, open many business bank accounts and run a partnership or corporation. The IRS issues EINs for free, and the SBA warns against websites that charge for it. Some states also require a state tax ID.
Step 9: Apply for licenses and permits
What you need depends on your industry, state and city: food, childcare, alcohol, construction and personal care are commonly regulated. Contact your local business license office and check zoning before you sign a lease.
Step 10: Open a business bank account
A separate account keeps your records clean and makes tax time much easier. Bring your registration documents and EIN. Then set up simple bookkeeping from day one; LedgerGuide compares accounting software and has a free invoice generator.
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Outside the US?
The order is similar almost everywhere: research, plan, fund, choose a structure, register and sort out tax. The details differ. See starting a business in the UK, Canada or Australia, or switch country in the launch checklist.
Sources: SBA: 10 steps to start your business · SBA: write your business plan · SBA: launch your business
Frequently asked questions
What is the first step to starting a small business?
Market research: check that people want what you plan to sell, who your competitors are and what customers pay. Then write a simple business plan.
Can I start a small business with no money?
Some service businesses can start with very little, using skills and equipment you already have. You will usually still face small costs such as registration, a website or insurance. List them in a startup cost calculator so nothing surprises you.
Do I need an LLC to start a business?
No. Many people start as sole proprietors, which is the simplest structure. An LLC can protect personal assets from business debts, but it involves state fees and paperwork. Get advice if you are unsure.
How long does it take to start a business?
A simple sole proprietorship can be set up quickly, but research, planning and licenses take longer. Many people start part time while keeping their job.
Last reviewed: October 2026. General information only — check providers' official sites for current features and pricing.