Starting a business isn’t just about having a great idea—it’s about laying a strong legal foundation so you don’t run into problems later. Too many entrepreneurs skip this part and end up paying for it when the IRS, a bank, or even a competitor challenges their legitimacy. Let’s break down the legal and financial steps you need to take to make your business real.

1. Choose Your Business Structure

Sole Proprietorship

• Easiest, lowest cost, no formal registration.
• Downside: No liability protection. If your business gets sued, your personal assets are on the line.

LLC (Limited Liability Company)

• The most common structure for small businesses.
• Protects your personal assets from business debts/lawsuits.
• Flexible taxation options (default is pass-through taxation).

S-Corp / C-Corp

• Better for businesses planning to raise outside investment.
• More paperwork, stricter compliance, but sometimes tax advantages at scale.

👉 Most first-time entrepreneurs start with an LLC. It balances simplicity with protection.

2. Register With Your State

• File Articles of Organization (LLC) or Articles of Incorporation (Corp) through your Secretary of State’s office.
• Cost: $50–$500 depending on your state.
• You’ll receive a Certificate of Formation—proof that your business legally exists.

⚠️ Don’t fall for “middleman” services charging $400+ for what your state website can do for $75.

3. Get Your EIN (Employer Identification Number)

• Free from the IRS at irs.gov.
• Required for: opening a business bank account, hiring employees, filing taxes.
• Even single-member LLCs should get one—it separates your identity from your business.

❌ Avoid websites that charge $200–$300 for an EIN. It takes 10 minutes and costs $0.

4. Open a Business Bank Account

• Keeps personal and business finances separate (critical for liability protection).
• Required if you ever want funding or business credit.

Banks to consider:

• Big banks (Chase, Bank of America) → wider services, higher fees.
• Online banks (Mercury, Novo, Bluevine) → no fees, modern integrations.

Pro tip: Get a business debit and credit card. Start building business credit early.

5. Set Up Bookkeeping & Accounting

• Use software from day one—even if you have zero sales yet.

Options:

• Wave → free, great for pre-revenue startups.
• QuickBooks → most popular, integrates with banks and payroll.
• Xero → user-friendly, scalable for growing businesses.

👉 Decide if you’ll manage books yourself or hire a part-time bookkeeper. Messy books = IRS nightmares later.

6. Secure Your Digital Identity

• Domain name: Buy through Google Domains or Namecheap.
• Business email: Use Google Workspace or Zoho for professional email.
• Social handles: Secure your brand name across Instagram, TikTok, LinkedIn, and X before someone else does.

⚠️ Consistency matters. If your brand name is taken, rethink before launching—confusing branding costs you in the long run.

7. Protect Your Brand

• Trademark → Protects your name, logo, slogan. File with USPTO ($250–$350 per class).
• Copyright → Protects original content (photos, designs, videos). Automatically granted when created, but registering strengthens your rights.
• Patent → If you invented something new (less common, but worth noting).

Pro tip: Start with trademarks. That’s what competitors will challenge first.

8. Register for Sales Tax (If Applicable)

• If you sell physical products, apply for a Sales Tax Permit in your state.
• Some states require you to collect tax even if you only sell online and live elsewhere (economic nexus laws).
• If you buy wholesale, you’ll need a resale certificate to avoid paying sales tax twice.

⚠️ Sales tax compliance is one of the most common small business mistakes—get this right early.

9. Prepare for Taxes

• Business owners must pay quarterly estimated taxes (federal + state).
• Rule of thumb: Set aside 25–30% of every dollar you earn into a separate tax savings account.
• Decide if you’ll hire an accountant or DIY with software (TurboTax Business, TaxAct, etc.).

❌ Don’t wait until April 15 to “see what happens.” Penalties for late/underpaid taxes add up fast.

10. Ongoing Compliance

• File your annual report with your state (usually $25–$200).
• Keep a registered agent if your state requires it.
• Renew your LLC/corp on time—falling inactive erases your protections.

Final Word

Starting a business legally isn’t glamorous—but it’s the backbone of success. These steps protect you, separate your business from your personal life, and make sure you’re building on solid ground. Once you’ve done this, you’re no longer just dreaming—you’re running a business.

In Part 2 (Insider Exclusive), we’ll dive into the fun but challenging part: actually building your business model, sourcing products or services, setting up your website, and launching your first marketing campaigns. Check It Out:

Part 2: I Want to Start a Business But I Don’t Know Where to Start - Building the Business Model

From idea to income: the insider blueprint for building a business that sells.

OVIDIAKhila James