Over 5 million new business applications were filed in the U.S. in 2021—proof that the entrepreneurial spirit is alive and thriving. Yet behind each of those numbers is a person facing the same question: Where do I begin?
Starting a business in the United States can feel exhilarating and overwhelming. From securing funding to navigating red tape, the journey is full of decisions that can shape your success for years to come.
That’s why it’s essential to build your foundation carefully. Whether you’re launching a small online store or opening a brick-and-mortar shop, understanding the legal and structural requirements is key. And when challenges arise, having legal assistance for business disputes and litigation can make the difference between staying afloat and shutting down.
In this guide, we’ll walk you through the essential steps to start your own business in the U.S., helping you move forward with confidence and clarity.
What It Takes to Start a Business in the U.S. Legally and Successfully
1. Choose the Right Business Structure
One of your first and most important decisions is choosing your business entity. Your structure will affect everything—from taxes and liability to how much paperwork you’ll deal with.
Common U.S. Business Structures
- Sole Proprietorship: Simple and inexpensive, but offers no liability protection.
- Partnership: Shared ownership and responsibilities, ideal for co-founders.
- Limited Liability Company (LLC): A popular choice due to its flexible taxation and limited liability protection.
- Corporation (C-Corp or S-Corp): Better for raising capital, but comes with more regulations and formalities.
Each option has legal and tax implications. For example, under the Internal Revenue Code, LLCs are considered pass-through entities by default, meaning business income is taxed at the owner’s personal rate.
2. Register Your Business Legally
After deciding on your structure, the next step is registration. This makes your business official and compliant.
Steps to Register
- Choose a Unique Business Name: Check availability through your state’s Secretary of State website.
- File Articles of Organization or Incorporation: Required for LLCs and corporations.
- Apply for an EIN: The Employer Identification Number from the IRS is like a Social Security number for your business.
- Obtain Business Licenses and Permits: These vary by state, industry, and locality.
Make sure to consult your state’s specific requirements. For example, California’s Business and Professions Code Section 6068 emphasizes legal compliance and due diligence, especially in regulated industries.
3. Understand Federal, State, and Local Tax Obligations
Business taxes in the U.S. can be complex, and they vary by state. You may be responsible for:
- Income Tax
- Self-Employment Tax
- Sales Tax
- Payroll Tax (if you have employees)
The IRS Small Business and Self-Employed Tax Center is a valuable resource to help you navigate your federal obligations.
4. Open a Business Bank Account
Keeping your personal and business finances separate is critical. A business bank account not only simplifies accounting and taxes but also helps protect your limited liability status.
You’ll generally need:
- Your EIN
- Business formation documents
- Ownership agreements
- Business license (if applicable)
5. Set Up Accounting and Bookkeeping
Accurate financial tracking is essential. You’ll need a system for managing expenses, invoicing, payroll, and taxes.
Popular Accounting Tools:
- QuickBooks
- Xero
- FreshBooks
Alternatively, consider hiring a bookkeeper or accountant familiar with your industry and state laws.
6. Protect Your Business with Insurance
Even small businesses face risks. Business insurance helps protect your assets and future growth.
Common types include:
- General Liability Insurance
- Professional Liability Insurance
- Workers’ Compensation Insurance (required in most states if you have employees)
Check with your state’s Department of Insurance to determine what’s required.
7. Create a Business Plan
Your business plan isn’t just for investors. It’s a roadmap for sustainable growth. A strong business plan includes:
- Executive summary
- Market analysis
- Marketing and sales strategies
- Financial projections
- Legal structure and team overview
The Small Business Administration (SBA) offers free templates and tools for writing your plan.
8. Comply with Employment Laws
Hiring your first employee? You’ll need to comply with federal laws under the Fair Labor Standards Act (FLSA) and other labor regulations. That includes:
- Verifying work eligibility (Form I-9)
- Reporting new hires to your state
- Posting required labor law notices
- Withholding and paying employment taxes
Noncompliance can lead to penalties, so make sure you understand your responsibilities before onboarding staff.
9. Maintain Good Standing
Once your business is running, stay in good standing by:
- Filing annual reports
- Renewing licenses
- Keeping up with tax filings
- Updating any changes to your business (e.g., address, ownership)
Failing to do so can result in administrative dissolution or loss of legal protections.
Final Thoughts
Starting your own business in the United States is an exciting journey—but it’s also one that requires careful planning, legal awareness, and financial discipline. From choosing the right structure to maintaining compliance, every step plays a critical role in your company’s long-term success.
The legal and administrative groundwork you lay now will determine how well your business weathers challenges, scales for growth, and protects its interests. Many startups rush through early decisions only to face preventable obstacles later—be the exception.
Whether you’re launching a solo venture or building a company with partners, take the time to do it right. The U.S. market offers unmatched opportunity, but only to those who are prepared. Get the details straight early on, and your focus can shift from surviving to thriving.
