Business setup 101: Steps to starting an actual business


You're past the point of an idea and now need to go through the legal steps of actually setting up a proper business. This guide will show you how.
When does a business really “start”, anyway? When you get the idea or when you make your first sale? In official terms, it might be when your business becomes a legal entity. Let’s walk through how to get your business set up properly.

In this guide, we’ll go over:
  • When and how to legally register your business
  • Determining the legal structure of your business 
  • The things you need to get set up as a business
  • Common questions to sort through when setting up your business 

Registering your business 

In the startup world, where testing ideas and pivoting is a common and accepted practice, at what point does it make sense to legally register your business? You don’t want to go through the work too early, and end up having to shut something down before it even takes off.

Do you have an idea or do you have a business?

First things first: an idea does not make a business, and in the initial phases, where you’re still just testing ideas, it may not make sense to go through the time, effort, and money to get registered if your idea is going to change.

You should go through the steps of validating your market and learning about your customer before you declare your business a legal entity.

From there, you can make the decision of whether to set up your business before you launch your MVP or after, and that may depend on a variety of factors such as the industry you’re in, the potential legal complexity, and your own comfort level. But at this point, you should have a pretty solid idea of what your business is, even if the features, roadmap, and business strategy may change over time.

If you decide that a corporation is right for you (more on that below), some experts suggest incorporating once net business income reaches $100,000 as proof of concept and as a general threshold to take advantage of potential tax liability reductions. That being said, you may need to register your business before you start making sales and taking money as online payment providers often will require legal business information. 

What’s your business’s legal structure?

Your business’s location and legal structure determines how complex registering your business is and what you’ll need to do. For example, in some geographic locations, you’ll only need to register your business name and if you’re operating a business as yourself (for example, if you’re a sole proprietor selling consulting services under your own name), then you may not need to register at all. In those cases, your business starts when you start. But, if you’re operating as yourself, you miss out on many of the benefits of registering as a separate business entity such as a corporation. 

Aside from determining whether or not you should register your business, and the degree of registration that’s required, choosing your business’s legal structure also determines what taxes you’ll pay and how, your business’s liability, the amount of paperwork that’s involved in filing and maintenance, fundraising options, and business hierarchy. There’s a lot riding on this! However, keep in mind that it’s easy to go from sole proprietorship to corporation, and not as easy the other way around as you’ll need to then formally dissolve the company.

So that’s the first determination you should make, since you already know where you’re located: what’s your business’s legal structure?

Sole proprietorship or partnership

In this business structure, one person is the business. There is no separation between personal and professional assets, and it’s easy to set up, low cost, and easy to exit (you’re not “exiting” yourself, just that you usually don’t have to file paperwork or make a formal declaration to end your business). This is generally referred to as a sole proprietorship, but can vary depending on the country. For example, in the UK, this is called a sole trader.

A partnership is similar, just with two or more people. It’s a bit more costly and slightly more complicated than a sole proprietorship as you’ll most likely want to have a partnership agreement in place but otherwise, it’s easy to set up.


A limited liability company is a hybrid between a corporation and a sole proprietorship or partnership. The main difference is that while taxes operate similarly to a sole proprietorship or partnership, liability is separate from personal ownership like in a corporation. LLCs are a bit less common around the world, but they exist in countries such as the U.S., the UK, Switzerland, and Japan.


You’ll recognize a corporation by the “Corporation”, “Incorporated”, “Company”, or “Limited”, or their abbreviations, in a business’s legal name. Corporations are business entities that exist outside of personal ownership. They’re more complicated to set up and operate, and when a corporation is formed, shares are created which creates legal and tax separation between the company and its shareholders. You as the business owner become a shareholder and employee of the corporation.

There can also be different types of corporations. In the U.S., you have C/S/B corporations. Make sure you look up the specifics in your country and the differences between each. 

Why incorporate? Incorporating is a must if you plan on seeking outside investment. They also provide credibility and can come with tax benefits, especially at higher revenues. In other words, most but not all scalable businesses will likely be corporations—although many initially started as sole proprietors or partnerships, such as eBay (former sole proprietorship) and Microsoft (former partnership). So keep that in mind: you may choose to incorporate later on while you work on your business plan, MVP, and acquiring customers.

How to register your business

Business registration is usually done within your state/province, although a tax expert can recommend registration in other geographic locations where you may be conducting business. 

Again, if you’re operating as a sole proprietor using your own name, you may not need to register (though check to make sure, and note too that while you may not need to register your business, you may need to register for other things such as tax accounts). 

If you’re incorporating, you have a few options:
  • Do it yourself.
  • Hire an incorporation lawyer.
  • Use an online incorporation service such as ZenBusiness or Incfile.

Business registration can cost anywhere from free to less than $100 (for a sole proprietorship) to a few hundred to upwards of thousands of dollars (for corporations). It’s the least costly to do it yourself, but if this is not your area of expertise, it may not be the best use of your time, and all-inclusive online services are usually a relatively low-cost way to get the best of both worlds. 

Done? Not so fast. Registering your business is just one step of setting up your business legally.

What you need to get set up

Note that none of this is legal advice, just general guidelines to consider. Your most trusted source will be a business accounting professional or your local business governing agency.

A business name

One thing you’ll need to settle on to get your business set up is a business name. In some locations, this is the very first step before you do anything else, since you’ll want to check to make sure that your business name is available for use. 

Here are some tips for choosing a business name:
  • Consider available domains and social media handles. It’s not the biggest consideration as you can now get away with variations of domain names (such as helloyourname.com or yourname.io) but a quick look on a domain registration platform such as Namecheap can help you determine if there’s a competitor using the same or similar name.
  • Don’t get too stuck on your legal business name. You can always use a trade name. This is what many companies do. See: Walmart, which is technically Wal-mart Stores, Inc., or Facebook, a product now under the Meta Platforms, Inc. corporation.
  • Make up a word. Many successful brands combine existing words to come up with their business names, such as Zapier or Lululemon. Zapier actually was once called Snapier until they discovered that there was another company in the same industry with that name.

Final tip: Finding a great name is challenging, but don’t let it stop you from building. You can always change your business name when you’re successful, a practice that seems almost common in the fast-paced world we live in: Burbn to Instagram, Relentless to Amazon, Sound of Music to BestBuy.

A business bank account

Keeping your personal finances separate from business finances is a must to help make your life a lot easier come tax time.

You can usually go with your current banking provider and set up a separate business bank account, or do your research to find a business banking solution that best suits your needs. Tip: get a business credit card too while you’re at it. Most tools and services you’ll be using to run your business will only take payment via credit card, so it’s best to keep those separate from your personal credit. If you plan on taking payments online, you should also sign up for a payment solution such as Stripe. 

Business permits, licenses, and insurance

Obtaining the proper licensing is important to avoid fines or worse, having to shut down. What permits, licenses, and insurance will your business need to operate? This will depend on your business structure, industry, and operational requirements. 

  • Building permit
  • Workplace insurance 
  • Employment insurance
  • Health permits

Make sure to check for municipal requirements, as business permits and licenses are granted at this level, too.

Tip: Figure out taxes and accounting early

It’s a very good idea to hire a business accountant, if not full-time then at least in an advisory capacity, to help you make sense of tax laws and accounting basics and help get your business running smoothly from a financial and legal perspective. Since these vary geographically, you should work with someone who works with businesses in your area.

Some questions to ask:
  • Will you need to set up a payroll account?
  • When will you need to file and pay corporate taxes?
  • Will you need to set up a sales tax account?
  • Are there any tax credits or benefits you can take advantage of?
  • Who will do your bookkeeping, and how?

Now you’re all set up. Time to build? One more thing: don’t forget about protecting your business IP.
Going from an idea to an actual legal business is a big step; congrats! Here's your checklist to make sure you're doing everything right:
  • Are you definitely at the point of registering a legal business, or is it still just an idea?
  • What's the legal structure of your business? LLC? Sole proprietor? 
  • Do you have all the things you need to register, including a bank account, a business name, and the proper permits and insurance?
  • How will you manage accounting and tax implications?
  • Lastly; protect your business IP! 
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