The 7-step process
Each step is concrete, sourced, and skim-readable. Plain English, no jargon.
- 1
Validate the idea before you spend a dollar
Talk to potential customers before building anything — the goal is finding out whether people will actually pay for the thing now, not just say they'd be interested. The SBA's business planning guidance (sba.gov/business-guide) starts here for a reason: most early failures are a demand problem, not an execution problem.
- 2
Write a lean one-page business plan
You don't need a 40-page document to start — a one-pager covering the problem, your solution, target customer, how you'll make money, and your major costs is enough to clarify your own thinking and is what most lenders and the SBA's own template (sba.gov/business-guide/plan-your-business/write-your-business-plan) actually expect at this stage.
- 3
Choose your legal structure
Sole proprietorship is the default if you do nothing — no filing, no cost, but no liability protection. An LLC requires filing Articles of Organization with your state (typically a $50-$500 filing fee depending on the state) and shields your personal assets from business debts and lawsuits. The IRS's business-structures guide (irs.gov/businesses/small-businesses-self-employed) explains the tax treatment of each.
- 4
Register your business name and entity with your state
Check name availability with your state's secretary of state before filing. Sole proprietors operating under a name other than their own legal name typically file a DBA ('doing business as'); LLCs and corporations file formation documents directly with the state. Processing time varies by state — commonly 1-3 weeks, with expedited filing available for an extra fee in most states.
- 5
Get an EIN from the IRS
Apply free at IRS.gov/EIN — the online application takes about 15 minutes and issues your EIN immediately. Most businesses need one, including single-member LLCs that plan to hire or open a business bank account (many banks require it even when the IRS itself would technically accept your SSN).
- 6
Open a business bank account and secure licenses/permits
Separate business and personal money from day one — it's required to maintain LLC liability protection and makes taxes dramatically simpler. Use the SBA's license and permit tool (sba.gov/business-guide/launch-your-business/apply-licenses-permits) to check what your state, county, and industry require; requirements vary widely by business type and location.
- 7
Line up startup funding
Personal savings and friends/family rounds cover most very early costs. Once you have even a short operating history, SBA microloans and 7(a) loans, and business lines of credit, open up — lenders generally want to see a formed entity, an EIN, and a business bank account with some deposit history before extending credit.
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SBA loans, lines of credit, and working-capital options compared
Frequently asked questions
The most-asked follow-up questions — answered without the marketing spin.
Do I need an LLC to start a small business? +
No — a sole proprietorship is the default structure and requires no state filing. An LLC costs a state filing fee (typically $50-$500) but adds personal liability protection, which matters once you have contracts, clients, or any product/service liability exposure. Many owners start as a sole proprietor and convert to an LLC once the business has real traction.
How much does it cost to start a small business? +
It depends heavily on your state and industry — there's no single number. Expect a state filing fee if you form an LLC ($50-$500), possible licensing/permit fees (varies by industry and location), plus whatever equipment, inventory, or working capital your specific business needs. The IRS's EIN application is free; so is a sole proprietorship.
How long does it take to legally form a business? +
EIN issuance from the IRS is instant once you complete the online application. State entity formation (LLC or corporation) commonly takes 1-3 weeks depending on the state, with expedited processing available for an extra fee in most states. A sole proprietorship with no DBA filing can start immediately.
Are a lot of people actually starting businesses right now? +
Yes — the U.S. Census Bureau's Business Formation Statistics release (published August 12, 2026) recorded 578,926 business applications nationally in July 2026 (seasonally adjusted), up 8.1% from June's 531,423. That's the same national dataset the SBA and IRS guidance in this guide points back to: high formation volume nationally doesn't change the individual sequence above, but it does mean the validate-then-register order matters more, not less, when competition for a given local market is elevated.
More guides
https://clearvaluelending.com/guides/how-to-start-a-small-business