Michelle Adams
Lawyer, Entrepreneur and Coach
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The Legal Seller Blog

The Legal Seller blog is a resource for Entrepreneurs & Professionals

Seven Practical Steps to Legally Starting a Business

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You've decided to open a business. . .Congratulations!  

When the ideas about starting a new business begin flowing we typically think about the fun parts of the business---you know, the thing that you have decided to create and sell.  Maybe you're selling pretty photos, beautiful flowers, or stunning cakes.  You may be a drop shipper with an ecommerce business.  Perhaps you're selling legal or medical services.  Essentially, we are all "selling" something when we own a business.  

No matter what you are selling, you need to set up a business so you can start selling it.  So what comes next after the business idea?

Here's a short run down on the technical aspects of your business that you need to think about and 7 steps to get you started on the right foot:

1.  Organize your business.

First, you need to officially organize a business.  You do that through the Secretary of State's office in the state where your business will have its primary operation.  Typically, this is where you are located.  For instance, I live in Illinois and therefore, I would contact the Illinois Secretary of State's office to organize my business.  

To organize your business you need to have a business name and consider the type of business you want, including your goals for the business and whether you will have any partners.  Options for organization include:

Sole Propritorship




Joint Venture

Non-Profit Organization

While it is possible to organize a simple company (like a Sole Proprietorship) simply (without an attorney), I suggest you speak to your accountant about how your taxes will be implicated with the different options presented to you.  Also, if you are organizing anything more than a Sole Proprietorship, an experienced attorney can ease the burden of you wondering if you did it correctly, and also save you a lot of time in the process.

2.  Get a FEIN and State tax ID number for your business.  

Typically the next step after organizing an official business is to apply for your business ID numbers.  The Federal Tax ID number issued by the IRS is a way to identify your business, just like your own social security number.  You will be asked for this number often---by your accountant, by your vendors, and by your bank.  The state tax id number is the number issued by your state (and often taken care of during the organization with the secretary of state).  You won't use this as often as the FEIN, but it is necessary as well.

3.  Open a business checking account.

In order to open a business checking account you will need to first organize your business and have your FEIN.  Opening a business checking is an important step so that you can begin to keep your business and personal funds separated.  Later you may consider opening a business savings account, an equity line and a business credit card.  It's important to start establishing a credit history for your business.

4.  Get business insurance.

Just promise me not to operate without insurance, ok?  I know I stress this a lot, but the fact is that we are a litigious society that keeps lawyers very busy.

5.  Set up how you will be paid.

When I read other people's steps to opening a business, I rarely see a step that mentions payment processing.  Back at my old firm we didn't accept credit cards because our typical clients were companies that paid us monthly with actual checks.  But if you're a seller that sells to the general public you will need a way to accept payment, whether by cash, check, charge, Bitcoin, Apple Pay, etc.  Spend some time getting to know your options and what will work best for your customers.

6.  Immediately put into place an accounting system.

Putting into place an accounting system at the very beginning of your business will save you time and money.  It is a terrible feeling to have a year's worth (or more) of receipts thrown into a box and have absolutely no idea how you're going to organize it all.  We're human, we forget things.  You're going to miss a lot of expenses that could be tax deductible if you don't keep track of your expenses monthly and it's going to be more difficult to get your accountant the necessary information to file your tax returns.  One of the biggest reasons to employ a system?  The only way you objectively know how your business is doing is to see how it's doing on paper.  Take my word for it.  You can guess at those numbers. . . but having those numbers right in front of you at all times will make all the difference in the world.

7.  Obtain necessary licenses and permits.

There are often licenses and permits that are necessary to obtain when you start a business.  Perhaps you're an attorney and need to register with the State Board?  If you're a food business you need to both register with the local municipality as well as obtain a permit to sell from the County.  If you're doing a build-out you need a building permit just to get going and then a number of different inspections to open your doors to the public.  Do your research and don't get into trouble by not having what you need to legally operate your business.

In the future I will be debuting some products for all you new business owners. . .check back soon!