Top 10 Financial Steps to Start a Business

1. Estimate Your Startup Costs

List every one-time expense, like a state filing fee or equipment, separately from every ongoing monthly expense, like rent, following the SBA's two-category approach, then add roughly 10% as a buffer for the unexpected. See how to calculate startup costs for the full method.

2. Decide How You'll Fund the Business

Personal savings, a small business loan, or outside investors each come with different trade-offs in cost, speed, and how much control you give up. Make this decision only after you know your real cost estimate, not before.

3. Get a Free EIN From the IRS

An Employer Identification Number is required to open most business bank accounts and to register for state employer taxes, and the IRS states plainly that it's always free, typically issued immediately through the online application once your business is registered with the state, if a state filing applies.

4. Open a Dedicated Business Bank Account

Keep every business transaction in an account separate from personal finances. This is one of the practical factors a court weighs when deciding whether an LLC's or corporation's liability protection should apply, beyond simply being easier to track.

5. Set Up a Bookkeeping System

Choose a recordkeeping method, cash or accrual, and set up categories that match what you'll need at tax time. The IRS allows any system that "clearly shows your income and expenses," so a spreadsheet is enough to start for a low-transaction business.

6. Build a Working Budget

Turn your cost estimate into an ongoing budget that includes a realistic revenue projection, then compare actual income and expenses against it on a regular schedule, monthly at minimum, once you're operating.

7. Register for State Taxes

Most businesses register with their state's revenue agency for sales tax if they sell taxable goods or services, and separately register as an employer if they plan to hire staff. This registration is distinct from any state formation filing you completed earlier.

8. Price Out Business Insurance

General liability insurance and any industry-specific coverage protect the business itself from a claim, fire, or injury, in a way that a legal structure's liability protection does not. Treat this as a recurring line item in your budget, not a one-time cost.

9. Set Up Payroll if You're Hiring

If you'll have employees, payroll involves its own withholding calculations, state and federal filing deadlines, and recordkeeping, separate from your general bookkeeping. Set this up before your first payroll date, not after.

10. Plan for Recurring Compliance Costs

Most states require a recurring annual report, biennial statement, or similar filing to keep a registered business in good standing, with fees from $0 to $500 a year. Build this into your ongoing budget from day one so it isn't a surprise at renewal time.

Bonus: Revisit Every Estimate Once You Have Real Numbers

Every estimate on this list, your costs, your budget, and your funding needs, becomes more accurate once you replace it with real operating data a few months into running the business. Treat the initial numbers as a starting point, not a fixed plan.

These Steps Overlap, Not a Strict Sequence

Several of these steps happen close together rather than one at a time. You might open your bank account and set up bookkeeping in the same week, for example, since both depend on having your EIN first.

Not Every Business Needs Every Step

A solo freelancer with no employees skips payroll setup and employer tax registration entirely. Match this checklist to your actual business rather than treating every step as universally required.

Underestimating Costs Is the Most Common Financial Mistake

New owners consistently underestimate at least one cost category, which is exactly why the SBA recommends a buffer on top of your initial estimate. Build in that cushion rather than assuming your first pass at the numbers will be exactly right.

Talk to a Tax Professional Before, Not After

Decisions about funding structure, tax classification, and how to categorize startup expenses are easier to get right before you've made them than to unwind afterward. A short conversation early can prevent a costly correction later.

This Is Not Financial, Tax, or Legal Advice

Funding options, tax registration requirements, and recordkeeping rules vary by state, industry, and your specific situation. Confirm current requirements with your state's agencies, and talk to a tax professional about your particular numbers.