Starting a business in the United States is one of the most accessible entrepreneurial paths in the world. Whether you’re a first-time founder, a seasoned professional looking to go independent, or an international entrepreneur eyeing the American market, this guide walks you through everything you need to know—from initial concept to launch and beyond.
Why Start a Business in the US?
The United States remains one of the most favorable environments for new businesses. The country offers a large consumer market of over 330 million people, relatively straightforward business formation processes, strong legal protections for business owners, access to diverse funding sources, and a cultural attitude that celebrates entrepreneurship.
That said, starting a business requires careful planning. According to the U.S. Bureau of Labor Statistics, about 20% of new businesses fail within their first year, and roughly half don’t survive past five years. The difference between success and failure often comes down to preparation, understanding your market, and managing your finances wisely.
Step 1: Validate Your Business Idea
Before you file any paperwork or spend any money, you need to validate your business idea. This means confirming that people will actually pay for what you’re offering.
Start by identifying a problem worth solving. The best businesses address genuine pain points. Ask yourself what problem your business solves, who experiences this problem, how these people currently solve it, and why your solution is better than existing alternatives.
Conduct market research by talking to potential customers directly. Surveys and focus groups can help, but one-on-one conversations often reveal the most valuable insights. Look at your competitors—their existence proves there’s a market, but you need to understand how you’ll differentiate yourself.
Consider creating a minimum viable product, or MVP, before fully launching. This is a simplified version of your product or service that lets you test the market with minimal investment. The feedback you receive will be invaluable for refining your offering.
Step 2: Write a Business Plan
A business plan serves two purposes: it forces you to think through every aspect of your business, and it’s often required when seeking funding. Your plan doesn’t need to be hundreds of pages, but it should cover several essential components.
Your executive summary should provide a brief overview of your business, your mission, and your goals. The company description explains what your business does and what makes it unique. Your market analysis demonstrates your understanding of your industry, target market, and competitors.
You’ll also need to describe your organization and management structure, including who runs the company and their qualifications. Detail your products or services and explain what you’re selling and why customers will buy it. Your marketing and sales strategy outlines how you’ll attract and retain customers. Finally, your financial projections should include realistic forecasts for revenue, expenses, and profitability.
The U.S. Small Business Administration offers free templates and guides for writing a business plan. If you’re seeking outside funding, investors will scrutinize your business plan carefully. Even if you’re self-funding, the exercise of writing a plan will help you identify gaps in your thinking.
Step 3: Choose Your Business Structure
The legal structure you choose affects your taxes, personal liability, and administrative requirements. The United States offers several common options.
Sole Proprietorship
The simplest structure. You and your business are legally the same entity. This means easy setup and minimal paperwork, but you’re personally liable for all business debts and obligations. This works well for low-risk businesses and solo entrepreneurs testing an idea.
Limited Liability Company (LLC)
The most popular structure for small businesses. It separates your personal assets from your business liabilities, meaning if your business is sued or goes into debt, your personal savings and property are generally protected. LLCs offer flexibility in how you’re taxed—you can be taxed as a sole proprietor, partnership, or corporation.
Corporation
A more complex structure typically used by businesses that plan to seek outside investment or eventually go public. C-corporations are taxed separately from their owners, which can result in “double taxation” on profits—once at the corporate level and again when dividends are distributed to shareholders. S-corporations avoid this by passing income directly to shareholders, but they have restrictions on the number and type of shareholders.
Partnership
Appropriate if you’re starting a business with one or more partners. General partnerships are simple but offer no liability protection, while limited partnerships and limited liability partnerships provide varying degrees of protection.
For most small businesses, an LLC offers the best balance of liability protection, tax flexibility, and simplicity. The IRS provides a helpful comparison of how different structures affect your tax obligations. However, consulting with a business attorney or accountant can help you make the right choice for your specific situation.
Step 4: Register Your Business
Once you’ve chosen your structure, you need to make your business official.
Choose a Business Name
Your name should be memorable, easy to spell, and available. Check that the name isn’t already trademarked by searching the USPTO trademark database, verify that the domain name is available, and ensure the name isn’t already registered in your state.
Register with Your State
The process varies depending on your business structure and location. Sole proprietors often just need to file a “doing business as” (DBA) registration, while LLCs and corporations must file formation documents with the state—typically the Secretary of State’s office. Filing fees range from around $50 to several hundred dollars depending on the state.
Obtain an Employer Identification Number (EIN)
This is essentially a Social Security number for your business. You need an EIN if you have employees, operate as a corporation or partnership, or file certain tax returns. Even sole proprietors often get an EIN to keep their personal Social Security number private. You can obtain an EIN for free from the IRS—the process takes only a few minutes.
Get Licenses and Permits
Depending on your industry and location, you may need federal licenses (for businesses in regulated industries like aviation, agriculture, or alcohol), state licenses (for professionals like doctors, lawyers, or contractors), and local permits (such as health permits, signage permits, or home occupation permits). Your state’s business portal and local city hall can help you identify what’s required.
Step 5: Set Up Your Finances
Keeping your personal and business finances separate is essential for legal protection and tax purposes.
Open a Business Bank Account
Bring your EIN, formation documents, and identification to a bank. Many banks offer accounts specifically designed for small businesses with features like invoicing tools and expense tracking.
Consider a Business Credit Card
This helps you build business credit, track expenses, and manage cash flow. Many offer rewards or cash back on business purchases.
Set Up an Accounting System
From day one, use software like QuickBooks, Xero, or Wave to help you track income and expenses, generate invoices, and prepare for tax time. Even if you plan to hire an accountant, maintaining accurate records throughout the year will save you time and money.
Understand Your Tax Obligations
Depending on your structure and location, you may owe federal income tax, state income tax, self-employment tax (if you’re a sole proprietor or partnership), sales tax (if you sell taxable goods or services), and payroll taxes (if you have employees). Setting aside money for taxes throughout the year is crucial—many new business owners are caught off guard by their first tax bill.
Step 6: Build Your Team
As your business grows, you’ll likely need help. You have several options for building your team.
Hiring Employees
This gives you the most control over how work is done, but it also comes with significant responsibilities. You must verify employment eligibility using Form I-9, withhold and pay payroll taxes, provide workers’ compensation insurance, and comply with federal and state labor laws. Many small businesses work with payroll services to manage these obligations.
Working with Independent Contractors
This is often simpler—you pay them for specific work without the overhead of employment. However, the IRS has strict rules about who qualifies as a contractor versus an employee. Misclassifying workers can result in significant penalties. The Department of Labor provides guidance on determining worker classification.
Outsourcing
Certain functions like bookkeeping, marketing, or IT can be outsourced to give you access to expertise without the commitment of hiring. This is often cost-effective for small businesses that don’t need full-time help in every area.
Step 7: Establish Your Online Presence
In today’s market, an online presence is essential for nearly every business.
Your Website
This serves as your digital storefront. It should clearly communicate what you offer, how to contact you, and why customers should choose you. Platforms like Squarespace, Wix, or WordPress make it relatively easy to create a professional-looking site without coding knowledge.
Google Business Profile
Claim your Google Business Profile to appear in local search results and on Google Maps. This is especially important for businesses that serve local customers.
Social Media
Use social media strategically rather than trying to be everywhere. Focus on the platforms where your target customers spend time, whether that’s LinkedIn for B2B services, Instagram for visual products, or TikTok for reaching younger audiences.
Step 8: Protect Your Business
Risk management is an often-overlooked aspect of starting a business.
Business Insurance
This can protect you from various risks:
- General liability insurance covers accidents and injuries
- Professional liability insurance (errors and omissions) protects against claims of negligence or mistakes
- Property insurance covers your physical assets
- Cyber liability insurance protects against data breaches and cyber attacks
Intellectual Property
Consider protecting your intellectual property by filing for trademarks to protect your brand name, logo, and slogans; patents to protect inventions and unique processes; and copyrights to protect creative works.
Contracts
Use contracts in your business relationships. Written agreements with customers, vendors, partners, and employees help prevent misunderstandings and protect you if disputes arise. Templates can help, but having an attorney review important contracts is a worthwhile investment.
Common Mistakes to Avoid
Learning from others’ mistakes can save you significant time, money, and stress.
Underestimating startup costs leads many businesses to run out of money before they become profitable. Create realistic financial projections and have more runway than you think you need.
Skipping market research means you might build something nobody wants. Talk to potential customers before investing heavily in product development.
Ignoring legal requirements can result in fines, penalties, or even having to shut down your business. Take the time to understand and comply with regulations from the start.
Trying to do everything yourself leads to burnout and often means important tasks don’t get the attention they deserve. Know when to delegate or outsource.
Neglecting marketing is a mistake even if you have a great product—people need to know about it. Budget time and money for marketing from the beginning.
Funding Your Business
Different businesses require different amounts of startup capital. Common funding sources include:
- Bootstrapping — using personal savings and revenue from early customers
- Friends and family — investment from people who know and trust you
- Small business loans — from banks or credit unions
- SBA loans — government-backed loans with favorable terms
- Angel investors — individuals who invest in early-stage companies
- Venture capital — firms that invest larger amounts in high-growth potential businesses
The SBA Lender Match tool can help connect you with lenders offering government-backed loans with competitive rates.
The right funding source depends on your business type, growth plans, and how much control you want to maintain.
Taking the First Step
Starting a business can feel overwhelming, but remember that every successful company started somewhere. The key is to take it one step at a time. Begin by validating your idea, then work through the legal and financial setup. Don’t wait until everything is perfect—launch when you’re ready enough, and refine as you go.
The US offers tremendous opportunities for entrepreneurs willing to put in the work. With careful planning, persistence, and adaptability, your business idea can become a reality.