Top 10 Legal Steps to Start a Business

1. Choose a Legal Business Structure

Decide between a sole proprietorship, which needs no state filing but gives no liability protection, an LLC, which separates personal assets from business liabilities in most circumstances, or a corporation, which suits a business planning to raise outside investment. This decision determines nearly every legal step that follows, so make it deliberately rather than defaulting to whatever requires the least paperwork upfront.

2. Register Your Business With the State

If you choose an LLC or corporation, file Articles of Organization or Incorporation with your state's Secretary of State or equivalent agency. Filing fees vary significantly, from $35 in Montana to $500 in Massachusetts, and the filing itself is what legally creates the entity, separate from any later tax registration.

3. Appoint a Registered Agent

Every state requires an LLC or corporation to maintain a registered agent, an individual or company with a physical address in that state, available to accept legal notices and official state mail. You can serve as your own registered agent if you have a qualifying address, or pay a registered agent service, which is typically billed annually and continues as long as the business exists.

4. Get an EIN From the IRS

Apply for a free Employer Identification Number directly from the IRS once your state approves your formation filing. Most banks require an EIN to open a business account, and it's legally required if you have employees or operate as a partnership or corporation, regardless of whether a sole proprietorship would otherwise need one.

5. Write an Operating Agreement or Adopt Bylaws

An LLC's operating agreement, or a corporation's bylaws, sets out how the business is owned, managed, and how decisions get made. Not every state legally requires one, but it's one of the documents courts, banks, and co-owners rely on to settle disputes, and it helps establish the business as a genuinely separate legal entity if that protection is ever challenged.

6. Get Required Business Licenses and Permits

Forming an LLC or corporation with the state doesn't satisfy any federal, state, or local license or permit your business needs. Check for a general local business license, any industry-specific permit, like a health permit for food service, and federal licensing if your activity falls into a regulated category like alcohol sales or broadcasting.

7. Register for State and Local Taxes

If you'll sell taxable goods or services, register for a sales tax permit with your state's revenue agency. If you'll hire employees, register separately for state unemployment insurance and withholding. These registrations are legal prerequisites to operating, not optional administrative steps, and operating without them can carry penalties beyond just the unpaid tax itself.

8. Put Written Contracts in Place

A written contract with every client, customer, or vendor, specifying scope, payment terms, and what happens if either side doesn't perform, is a basic legal safeguard many new businesses skip early on. Verbal agreements are harder to enforce and create more room for disputes over what was actually promised, so put terms in writing before work begins, not after a disagreement arises.

9. Get the Right Business Insurance

An LLC or corporation's liability protection generally covers the business's own debts and obligations; it doesn't replace insurance for specific risks like property damage, a client's claim over your professional work, or an injury on your premises. General liability insurance, and professional liability insurance if your work involves giving advice or specialized services, fills that gap.

10. Protect Your Business Name and Trademarks

Registering your business name with the state doesn't give you trademark rights; it only confirms the name is distinguishable from other registered entities in that state. Search the USPTO's trademark database before committing to a name, and consider a federal trademark registration if your brand is central to the business, since a name that infringes an existing trademark carries legal risk regardless of state approval.

Keep These Steps in Order

Several of these steps depend on the one before: you need state approval before applying for an EIN, and an EIN before opening a bank account. Working through them in sequence, rather than skipping ahead to whichever feels most urgent, avoids the most common delays new business owners run into.

Not Every Step Applies to Every Structure

A sole proprietorship skips state registration and a registered agent entirely, while still needing licenses, contracts, and insurance like any other business. Match this list against your actual chosen structure rather than treating every item as universally required.

Legal Steps Don't End at Launch

Most of these steps repeat or continue after you open: licenses and permits often renew annually, an LLC or corporation needs an ongoing registered agent, and most states require a recurring annual report to stay in good standing. Build a compliance calendar rather than treating this as a one-time checklist.

Industry-Specific Legal Requirements Add to This List

A regulated industry, such as healthcare, financial services, or construction, carries additional legal requirements beyond this general list, including specific professional licenses and industry-specific contracts or disclosures. Research your specific industry's requirements in addition to these general steps.

Skipping a Step Rarely Shows Up Immediately

Operating without a required license, a signed contract, or adequate insurance often doesn't cause a problem right away, which is exactly why it's easy to deprioritize. The risk usually surfaces later, during a dispute, an audit, or a claim, when it's much harder and more expensive to fix retroactively.

This Is Not Legal Advice

Which legal steps apply, and in what order, depends on your specific structure, industry, and location. Talk to an attorney for anything involving significant liability exposure, multiple owners, or a regulated industry, and a tax professional for your specific tax registration requirements.