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Learning how to start a business is a lot like learning a new language:

At first, everything feels foreign and new.

After a while, though, you start to get the hang of it. It starts to be comprehensible.

The only problem?

When that starts to become comprehensible to you depends entirely on your own work ethic.

You could get there sooner, learning the right steps to take in advance and being smart about each next stage and decision that can move your business forward.

Or, you could get there later, making costly mistakes that cause you to be set back.

Or, worse, cause the business to go under for good.

Business isn’t a race. It’s a marathon, and the better you are at collecting information, considering your options and validating your actions the better results you’ll get. 

To that end, this guide is intended to help you get the information you need to start your business the smart way.

We’ll cover:

  1. Step 1: Do market research
  2. Step 2: Write your business plan
  3. Step 3: Choose your business’s structure
  4. Step 4: Register your business
  5. Step 5: Obtain business documents
  6. Step 6: Get small business funding
  7. Step 7: Open a business bank account
  8. Step 8: Create your marketing plan

Let’s start with step 1, the most important step to take before starting your business. 

Step 1: Do market research

Before officially starting your business, it’s important to understand something we touched on a moment ago:

Validation is key to business success. 

Many business owners make the mistake of thinking they can simply act on a business idea and it will work out.

But there are a few things you need to consider first before you should jump.

That includes:

  1. What problem does my product/service solve? 
  2. Are people looking for a solution to the problem?
  3. Would they pay for my solution? And how much

Another point to consider is whether to do the same thing better or strike out and do something new.

There are valid arguments both ways, but ultimately, you have to choose either to:

  1. Do what other businesses have done before, but different
  2. OR do something entirely different (typically by identifying a need that doesn’t yet offer a solution)

The difference might seem inconsequential right now, but it could make a big difference later as you work to gain traction for your product or service.

Doing something proven to work, just a bit differently, requires less skill and knowledge of business and marketing in general. 

Launching a business with a totally unique product or service has a sharper potential growth curve, with a much higher risk and chance of failure. 

Step 2: Write your business plan

A business plan can be 1-page or ten pages, it mostly depends on how extensive you want it to be (and why you’re crafting it).

A business plan is important because it helps establish a gameplan for your business.

  • What kind of product or service do you offer? 
  • Who is your target customer? 
  • You competitors?
  • What is your financial strategy?
  • And your marketing strategy? 
  • Also, what is your unique selling proposition (USP)?

These are all questions you should have an answer to before you officially “open your doors” because they determine your success. 

Not creating a thorough business plan is one of the single greatest mistakes of a large percentage of business owners. 

And, sure, you can just figure it out along the way.

The problem is, that’s a costly mindset that will bite you eventually.

Instead, take some time to craft a good business plan so that those critical details are made clear before pulling the trigger and investing your time and money.

To learn more about crafting an effective business plan, read: How to Write a Business Plan: A Step-by-Step Guide.

Step 3: Choose your business’s structure

Choosing a business structure is one of the more technical steps you’ll need to take in starting up your business.

However, it’s vitally important that you do the proper amount of research here.

That’s because the business structure you choose can affect things like your:

  • Business tax strategy
  • Structure
  • Operating costs
  • Liability protection
  • And more

Pick the wrong business structure and you could end up costing yourself a good chunk of change, or worse. 

There are 5 basic types of business entities in the U.S.:

1. Sole proprietorship

The most basic business structure, a sole proprietorship is what most business owners start as.

That’s because it’s designed for a sole employee (you) operating the business in its entirety, the way most businesses start out.

It’s important to mention that you have no liability protection as a sole proprietor, which may or may not be important for your industry and product or service.

If that’s the case, you’ll probably want to consider starting out as an LLC.

2. Partnership

A partnership is very similar to a sole proprietorship, except the business has more than one owner.

Those owners don’t necessarily need to have equal responsibility or ownership, but you’re likely a partnership if you’re starting your business with a partner.

A partnership also offers no liability protection. 

3. C-Corporation

A C-corp is what most people think of when they hear the word “corporation”.

When a C-corp is taxed, it gets hit twice: once at the corp level and another at the individual level.

However, it does have its benefits, particularly for very large companies, such as making it easier to generate investment capital. 

4. C-Corporation

A popular business structure for larger businesses, an S-corp is a “pass-through entity”, meaning it bypasses taxation at the corporate level.

Unlike C-corps, where you’re taxed twice, with S-corps you’re only taxed once, at the individual (owner) level. 

This has made S-corps a popular structure for many larger businesses where the owner still wants to maintain control of its taxation. 

5. Limited Liability Corporation (LLC)

An LLC combines aspects of the corporation, namely the liability and some of the tax savings, with the flexibility of a sole proprietorship.

With an LLC you get, as it says, limited liability protection. It’s not quite what you get as a full corporation, but depending on your type of business, it might be all you need.

Along with a sole proprietorship, this has quickly become one of the most popular “starter” structures available for new business owners.

That’s because it’s typically best to start as this or a sole proprietor and then shift to a full corporation later as your business grows (something an LLC makes even easier than a sole proprietorship). 

Step 4: Register your business

Once you’ve decided what your business structure will be, it’s time to register your business

That involves a couple of different steps:

1. Register your business name

If you’re opening either a sole proprietorship or partnership, and you won’t be using your legal name, you’ll need to register a DBA, or “doing business as”.

The best way to do that is to contact your local state center or use an online filing service, in which case you’ll typically have to wait about 30 days for everything to be completed. 

2. Get a tax ID

The SSN of businesses, a tax ID or EIN (employer identification number) is an important form of identification that most business entities need.

The only exception is a sole proprietorship or LLC without any employees, which don’t require a tax ID so long as you’re the only member of the company. 

3. Register local taxes

This final step isn’t required for everyone, but in most states, you’ll need to register your business for taxation due to things like unemployment insurance and workers’ compensation. 

In some states, additional steps are required on top of this. 

Because every state is different, it’s important to find out what requirements you’re responsible for. 

To that end, use this guide from the USA.gov to find out what your state-specific requirements are. 

Step 5: Obtain business documents

Once you’ve submitted all your business registration requests, it’s waiting time!

Jokes aside, you don’t have to wait around and do nothing during this time.

In fact, you still have work to do. Namely, documents to submit.

For the most part this really just comes down to getting a business license.

1. Get a business license

Why do you need a business license

In short, a business license is like a driver’s license, just without the test. You need one to operate a business– simple as it gets.

Keep in mind that, depending on your region/state and type of business/offerings (such as if you offer food and/or alcohol), you might also need additional licenses to operate. 

Check with your local state offices (found easily by typing “[state] business license filing” into Google), to be sure what’s required of you.

2. Obtain patents and similar documents

Also make sure at this point to take care of any patents, trademarks, or copyrights you need to apply for.

While this doesn’t apply to everyone, if it does apply to you, it’s important to start on the process now.

Reason being: it can take months or even years to get final approval (which is why you see “patent pending” or “registered trademark” so often).

Step 6: Get small business funding 

How much does it cost to start a business? 

Every business is different, from a startup with billion-dollar dreams to a sole proprietor just looking to build a business that gets them freedom.

But all small businesses need funding.

How much it costs for you to start up your business could be anywhere from a few hundred to tens of thousands of dollars. It all depends on what you need to get started. 

Funding is an essential ingredient of business success and a step that keeps many businesses from ever getting off the ground. 

Whether it’s marketing, business registration, to payroll, you need to have the cash flow to run a business.

The challenge, in the beginning, is getting the money you need to launch before you have that cash flow. 

There are a few ways you can go about it, depending on your available resources:

1. Borrow from friends and family

The first and simplest (and oldest) way to go about it is to just borrow from friends and family. 

If you’re lucky enough to have a relative that believes in you and your business idea and wants to fund it, you could go that route.

2. Use credit cards

Another common option, you could tap into your available credit to fund your business.

This is particularly effective if you don’t need much to get started.

Some types of businesses online nowadays only require the cost of a website, some marketing tools, and maybe a bit of initial funding for ads to get started (if that).

However, if you need a large sum of cash, you could be running a huge risk by inadvertently affecting your credit. 

3. Venture capital

The go-to option for Silicon Valley startups, venture capital involves obtaining cash from an investor.

This can be time-consuming but offers a huge potential payoff, so if you’re in need of a large quantity of cash and you don’t mind answering to investors, this is a good way to go.

4. Use a personal loan 

If you have good credit and can get a personal loan, you could also apply for one use that to start your business up as well. 

This is a decent option if, again, you don’t need much funding but your needs are greater than what you could get out of your credit cards or from friends and family. 

The only thing to watch out for is the effect it could have on your personal credit if things go south.

Then you won’t only have to pay back the loan, but your personal credit could get shot in the process. 

5. Get a startup business loan

Another option is to get a startup business loan, a loan designed for new businesses that need funding to start their business. 

If you don’t like the idea of getting a personal loan, or you need more funding than you could get personally, this is another potential option to consider. 

Step 7: Open a business bank account

An often-overlooked step in the early stages of any business, a business bank account is an essential element of any well-run business in terms of basic financial organization.

That’s because many businesses start out as sole proprietors. As they grow, they might become an LLC but continue to operate like they’re an individual.

That’s a big mistake as it starts to muddy your personal and business financials, which isn’t just bad accounting but can get you in trouble with the IRS. 

That’s because you don’t just want your finances separate, you’re required by law to do so. 

Choosing a business checking account is important for other reasons as well.

After all, it’s where your cash flow will pass in and out of. You want to know that you’ve chosen a bank, and an account, that provides you with what you need to operate smoothly.


  • Which bank you’re choosing (if you’re happy with your bank, going with a business checking option of theirs might be most convenient, but still shop around)
  • Account features
  • Number of physical locations and ATMs
  • Digital banking and app ease of use
  • And other factors 

For more on choosing a business checking account, read our guide: Top 7 Best Small Business Checking Accounts.

Step 8: Create your marketing plan

The eighth and final step, this is something that many business owners are unaware of when they first get started.

It’s easy to get excited about registering your business, choosing a name, and building your first website.

However, once all that is done, it’s time to get to work. 

That’s when marketing comes in.

If you don’t have any customers, you’re out of business.

And how do you get customers? Marketing.

So, what should include in your marketing plan and what do you need to craft it?

Here’s a quick rundown:

1. Where are your customers?

You need to know where your customers are located, whether that means where they physically hang out or what websites they visit in the digital world. 

Knowing this allows you to collect vital information you can use to market to them later.

2. What kind of challenges do your customers face?

Like this information.

Knowing your customer’s main challenges as they relate to your product and the problem it fixes will tell you how to angle your marketing in a way that your customers will respond to. 

3. What are your most effective marketing channels?

This is something that you might require a little testing first to find out.

However, it’s essential as not every marketing channel will be equal in terms of your product (and what works for one company/product might not work for you).

Both before and as you market, you should be keeping an eye out on which marketing channels convert the best for you and your product.

Once you find that out, you can ease off of channels that aren’t converting well and double down on those that are.

4. Free vs. paid marketing

No form of marketing is free per se. 

However, while you always need to pay for the time it takes to create marketing material, some forms of marketing have additional costs to run the said advertisement. 

In the digital world, where marketing and advertising is now king, that typically comes down to content marketing vs. paid advertising. 

It’s important to consider how much money you’re willing to invest in marketing, but also how much of each of these types of marketing you’re investing in.

One important factor that could influence your decision is understanding the “return curve” on different forms of marketing.

With content marketing, which typically comes in the form of blogging, publishing videos on YouTube, and social media marketing, you’re investing manpower up front for a long-term result.

However, that result tends to have a much higher long-term ROI and offers a much more long-term return, one which once built requires a low time and monetary investment.

Paid advertising is fast– lightning-fast, in fact, about as fast as you can pay for and produce an ad that converts– but it’s also much more expensive and leaves you susceptible to the constantly changing guidelines of those advertising platforms (such as Facebook).

Another drawback to look out for with regards to paid advertising is that it’s easy to become dependent upon it. 

Why is that bad? Because, eventually, every ad stops working and you have to iterate. The problem is the next ad might not convert as well, which means your entire source of leads is depends on your ad conversion rate, instead of a consistent flow of leads through content marketing.

Again, though, content marketing takes time to build (6+ months, often 1-2 years before seeing decent results). So, keep that in mind. 

Start your business the smart way

Many business owners start their businesses without much more than an idea and figure it out along the way.

And while that can work out fine, it’s not the smartest way to go about it and could contribute to an early closure.

Instead, you’ve taken the time to learn what you need to get started right, which will give you the greatest chance of success.

So move forward knowing you’ve taken a step in the right direction and let your business grow.

As they say, the sky is the limit.