Starting a company requires completing a series of legal, financial, and operational steps in the right order. This checklist covers the 12 essential actions most new business owners must take, from validating the idea to opening the doors.
Why a Checklist Matters
A startup checklist prevents costly mistakes like missing a filing deadline, mixing personal and business funds, or signing a lease before forming a legal entity. New businesses fail more often from avoidable administrative errors than from bad products. A structured list keeps the founder focused on what must happen before launch, rather than reacting to problems later. It also helps when working with lawyers, accountants, or mentors because you can show exactly where you are in the process.
The Core Steps
- Validate the idea – Talk to at least 20 potential customers to confirm they have the problem you solve and would pay for your solution. Skip this step and you risk building something nobody wants.
- Write a business plan – A one-page plan is enough at first: describe the problem, solution, target customer, revenue model, and key metrics. This is not a 40-page document; it is a working guide.
- Choose a business name – Pick a name that is not already trademarked or used by another company in your state. Check the U.S. Patent and Trademark Office database and your state’s business registry.
- Select a legal structure – Most small businesses choose an LLC, S-corp, or C-corp. An LLC is simple and protects personal assets; an S-corp may save on self-employment taxes; a C-corp is needed if you plan to raise venture capital.
- Register the business – File formation documents with your state (e.g., Articles of Organization for an LLC) and pay the filing fee, usually between $50 and $200.
- Get an EIN – Apply for a free Employer Identification Number from the IRS. You need it to open a bank account, hire employees, and file taxes.
- Open a business bank account – Use the EIN and formation documents to open a checking account in the business name. Never mix personal and business funds – it breaks the liability protection.
- Set up accounting – Choose a simple method (cash or accrual) and a tool to track income and expenses. Even a spreadsheet works at first, but you must separate business transactions.
- Get licenses and permits – Check federal, state, and local requirements. Common ones include a general business license, sales tax permit, and health department permits if you sell food.
- Protect intellectual property – If you have a unique product name, apply for a trademark. If you invented a process, consider a patent. Copyright protects written and creative work automatically.
- Get insurance – General liability insurance is a minimum. If you have employees, you must carry workers’ compensation in most states. Professional liability (errors and omissions) is wise for service businesses.
- Create a launch plan – Set a date, prepare marketing materials, and line up your first customers. A soft launch to friends and family can help you fix issues before going public.
Before You Start: Legal and Tax Setup
Forming a legal entity is not optional if you want to protect personal assets. An LLC or corporation creates a separate legal person that can sign contracts, own property, and be sued. Without it, creditors can come after your house and savings. For taxes, you must decide whether the business will be taxed as a sole proprietorship, partnership, S-corp, or C-corp. Each has different forms and deadlines. For example, an LLC with one member files Schedule C with the owner’s personal tax return; a C-corp files its own corporate return. If you hire employees, you need to register for state unemployment insurance and withhold payroll taxes. Many founders hire a CPA for the first year to avoid penalties.
Common Problems and How to Avoid Them
The most frequent mistakes are skipping customer validation, underfunding, and ignoring cash flow. Founders often spend months building a product without checking if anyone will buy it. A simple fix is to sell a pre-order or a minimum viable version before full development. Cash flow problems arise when you spend on fixed costs (rent, salaries) before revenue is steady. Keep startup costs variable: work from home, use freelance help, and avoid long-term leases. Another issue is mixing personal and business expenses, which complicates taxes and can pierce the corporate veil. Always pay business costs from the business account. Finally, many founders forget to renew licenses or file annual reports, leading to fines or losing the right to operate. Put all renewal dates in a calendar.
Costs: What to Expect
Startup costs vary widely by industry, but here are typical ranges for a U.S. online or service business: state filing fee ($50–$200), EIN (free), business license ($50–$400 depending on city), website domain and hosting ($50–$300/year), accounting software ($15–$50/month), and general liability insurance ($300–$1,000/year). A physical retail store adds rent, utilities, and inventory. You should have at least six months of personal living expenses saved, because most businesses do not turn a profit in the first year. Use a simple spreadsheet to list one-time setup costs and monthly recurring costs, then multiply the monthly costs by six to get your minimum runway.
Choosing the Right Legal Structure
Your choice of entity affects taxes, paperwork, and your ability to raise money. A sole proprietorship is the simplest but offers no liability protection. An LLC is the most popular for small businesses because it is flexible and protects personal assets. An S-corp can reduce self-employment taxes but requires you to pay yourself a reasonable salary and file more forms. A C-corp is best if you plan to take outside investment or go public, but it faces double taxation on profits. If you are unsure, consult a business attorney or accountant – do not guess. Many founders start as an LLC and convert later if needed.
Template: Startup Checklist
| Step | Task | Status | Due Date |
|---|---|---|---|
| 1 | Validate idea with 20 potential customers | ||
| 2 | Write one-page business plan | ||
| 3 | Check name availability (trademark + state) | ||
| 4 | Choose legal structure | ||
| 5 | Register with state | ||
| 6 | Apply for EIN (free from IRS) | ||
| 7 | Open business bank account | ||
| 8 | Set up accounting system | ||
| 9 | Obtain licenses and permits | ||
| 10 | Protect intellectual property | ||
| 11 | Purchase insurance | ||
| 12 | Plan launch |
Sample (fictional): “Jane’s Bakery” – Step 1: talked to 25 local coffee shops; Step 2: plan written; Step 3: name “Jane’s Bakery” available; Step 4: LLC; Step 5: filed in California (fee $70); Step 6: EIN received; Step 7: opened account at a local credit union; Step 8: using spreadsheets; Step 9: got business license and food handler permit; Step 10: trademark applied for; Step 11: general liability policy; Step 12: launch date set for March 1.
Frequently Asked Questions
How much does it cost to start a company?
For a simple online or service business, you can start for under $1,000 if you work from home and use free tools. State filing fees, licenses, and insurance are the main costs. A physical store or restaurant will need tens of thousands for rent, equipment, and inventory.
Do I need a lawyer to start a company?
Not always. Many founders file their own LLC online in under an hour. However, if you have partners, are raising investment, or have a complex product, a lawyer can help you draft agreements and avoid disputes. A one-time consultation is often worth the fee.
Can I start a company while working a full-time job?
Yes, but check your employment contract for non-compete or intellectual property clauses. Many people start on the side and launch when revenue replaces their salary. Keep business activities separate from your employer’s time and resources.
What is the difference between an LLC and a sole proprietorship?
A sole proprietorship has no formal registration and no liability protection – you are personally responsible for all debts. An LLC is a registered entity that shields your personal assets from business liabilities. The LLC costs money to form and requires annual filings.
When should I get an EIN?
Get an EIN as soon as you form your company, even if you have no employees. You need it to open a bank account, file taxes, and hire anyone later. It is free from the IRS and takes about 10 minutes online.
Do I need a business plan before starting?
You need a short plan, but not a formal one. A one-page document with your value proposition, target customer, pricing, and key metrics is enough to guide you. You can expand it later if you seek funding.