Business Setup

Setting up a business properly protects you from avoidable fines, tax problems and personal liability. Most new owners work through the same short list below; the order can vary, and some steps depend on your state and trade.

Choose a business structure

A sole proprietorship is the default when you work for yourself without registering a separate entity. It is simple, but you are personally responsible for the business’s debts. A limited liability company (LLC) is formed with your state, usually through the Secretary of State, and keeps business liabilities separate from your personal assets when you run it properly. State filing and annual fees vary widely.

Register your name and get a tax ID

  • If you operate under a name other than your own (or your LLC’s legal name), you may need to register a “doing business as” (DBA) name with your state or county.
  • An Employer Identification Number (EIN) is free from the IRS. You need one to hire employees, and most banks ask for one to open a business account; some sole proprietors without employees use their Social Security number instead.

Licenses, permits and insurance

  • State licenses: trades such as electrical, plumbing and HVAC, and care businesses such as daycare and home care, usually need a state license.
  • Local permits: many cities and counties require a general business license, and home-based businesses may need a home-occupation permit or zoning approval.
  • Insurance: general liability insurance is the usual starting point; most states require workers’ compensation once you have employees, and a vehicle used for work generally needs commercial auto coverage.

Guides in this section

Buying or selling a business

Buying an existing business or a franchise can be faster than starting from scratch, but it needs careful checks of the books, contracts and licenses.

For the official federal checklist, see the U.S. Small Business Administration business guide.

This page is general information, not legal, tax or financial advice. Rules vary by state and change over time; confirm details with the agency named or a licensed professional.

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