How to start a business: a checklist

This is the roadmap page. Each step below links to a deeper CobaltProsper guide where the details live.

What are the steps to start a business?

There are ten, and they split into two halves. The first half is thinking work: research, a plan, and a rough budget. The second half is the paperwork that actually creates the business: structure, registration, tax ID, bank account, licenses, and insurance. The U.S. Small Business Administration lays out the same arc in its "10 steps to start your business" and "Launch your business" guides. What follows keeps that order but tells you what each step really costs you in time and attention.

What order should I do them in?

Top to bottom, mostly. A few steps have a hard dependency: you have to register with your state before some states will let you finish, and you need your EIN and your registration paperwork in hand before a bank will open a business account. Licenses can happen in parallel with the bank account. Insurance and bookkeeping you can stand up the week you start taking money. Here is the full checklist.

The step-by-step checklist

1. Nail down the idea and write a lightweight plan. Before any paperwork, get honest about who pays you and why. Do quick market research: who else does this, what they charge, and where the gap is. Your first business plan can be two pages, not fifty. The point is to force yourself to answer how the thing makes money before you spend on it.
2. Estimate your startup costs. Add up what it takes to open the doors and cover the first few months: equipment, deposits, software, and your own runway. This number tells you whether you need funding or can bootstrap, and it feeds directly into your tax and bookkeeping setup later. Underestimating here is the most common early mistake.
3. Choose your business structure. This is the first real fork in the road, and it affects your taxes, your paperwork, and your personal liability. Most solo founders start as a sole proprietorship (nothing to file) or form an LLC for liability protection. An S-corp is a tax election you can add later once profit is high enough to justify it, not usually a day-one move. Read the honest breakdown at LLC vs S-corp vs sole proprietorship before you decide.
4. Register your business with your state. If you formed an LLC, corporation, partnership, or nonprofit, you register with the state, usually through the Secretary of State's office. You will file formation documents (articles of organization for an LLC, articles of incorporation for a corporation) and name a registered agent, which is just the person or service that receives official mail. The SBA notes the total cost to register is usually under $300. A sole proprietor with no employees can often skip this, though you may still file a "doing business as" name locally.
5. Get an EIN from the IRS, free. An EIN (Employer Identification Number) is your business's tax ID, the business version of a Social Security number. You apply online at IRS.gov, you get the number immediately, and it costs nothing. Do not pay one of the middleman sites for this. The IRS itself says plainly you never have to pay a fee for an EIN. You will need it to open a bank account, hire anyone, or file business taxes. Full walkthrough at How to get an EIN for free from the IRS.
6. Open a business bank account. Once you have your registration paperwork and your EIN, open a dedicated business checking account. Keep business and personal money completely separate from day one. Mixing them is a headache at tax time and, for an LLC, it can weaken the liability protection you just paid to set up. Most banks want your EIN and your formation documents to open the account.
7. Get any required licenses and permits. Most small businesses need some combination of federal, state, and local licenses. Federal ones are narrow (things like alcohol, firearms, aviation, agriculture). Far more common are state and local permits for regulated activities: restaurants, construction, retail sales tax permits, plumbing, and the like. Check your Secretary of State's website and your city or county to see what applies to your specific work. This step is easy to overlook and expensive to skip.
8. Set up bookkeeping and accounting. Pick a system before the receipts pile up. That can be simple accounting software or a spreadsheet at first, plus a habit of logging income and expenses weekly. Good books are not busywork: they are what let you see if you are actually profitable, and they make taxes a data-entry task instead of an archaeology dig. This is also where separating your bank accounts in step 6 pays off.
9. Understand your taxes. Once you are earning, you owe tax, and as your own boss you owe more of it directly. If your net self-employment earnings are $400 or more, you owe self-employment tax, which the IRS sets at 15.3% (12.4% for Social Security plus 2.9% for Medicare), reported on Schedule SE with your Form 1040. That is on top of income tax, and you generally pay both through quarterly estimated payments rather than once a year. If you sell taxable goods, you may also need to collect and remit state sales tax, which ties back to the permit in step 7.
10. Get business insurance. Protect the business before something goes wrong, not after. What you need depends on the work: general liability is common for most, professional liability for advice-based services, and you will need workers' compensation once you have employees in most states. Insurance and personal-liability protection are related but not the same, which is one more reason your structure choice in step 3 matters.

What do I legally need?

Stripped to the legal minimum, most businesses need three things: a registered legal identity (either you as a sole proprietor or a registered entity), a tax ID (your EIN, or your SSN for a bare-bones sole proprietorship), and any licenses or permits your specific activity requires. Everything else on this list (a plan, a bank account, bookkeeping, insurance) is strongly advisable and often practically necessary, but it is not the government stopping you. The legally required pieces are structure, tax ID, and licenses.

A few flat opinions

Get the EIN free from the IRS. There is a whole industry built on charging you for a number the government hands out at no cost in about ten minutes.

Open the separate bank account earlier than feels necessary. It is the single cheapest thing you can do to make the next year easier.

Do not over-engineer the structure on day one. Plenty of successful businesses start as a sole proprietorship or a simple LLC and add complexity (like an S-corp election) only when the numbers clearly call for it. Read LLC vs S-corp vs sole proprietorship rather than guessing.

Set aside money for taxes as it comes in. The self-employment tax surprises new founders because no employer is withholding it for you. Park a rough share of every payment so the quarterly bill is boring instead of scary.