Guide to Starting a Business in 2025

12 Steps to Starting a Business

Use our guide as a road map to follow to get your company off the ground. If you already know what kind of business you will be starting, begin at step 2. 

1. Find the right business idea to launch

The first step is to decide what kind of business to start. If you have skills and abilities that are in demand, that decision may be easy. But if you’re not sure what you want to do, there are hundreds of business ideas for you to consider.

As you look over various ideas, remember that your own likes, dislikes, skills, goals and personal finances will play a role in determining the best business to start for you. The idea you choose should be something you like to do, are good at doing, and something people will purchase at a price that will make a profit.

2. Research the market

Market research is important when you’re starting a business because it helps you determine if your idea can succeed. Researching the market for your business will give you insights into who your customers will be, what they are looking for, and how you’ll need to sell to them. Doing a conduct competitive analysis will help you see what you’ll need to do to stand out  and differentiate yourself from the competition.

A few of the market research questions you should investigate include:

• Who is your target market? What characteristics do they share such as age, location, income range, employment, gender, etc.?
• How big is the market? Is there enough demand for your product or service? How many customers can you reach who need and buy what you plan to sell? 
• How do those people learn about this kind of product or service now?
• Where are your customers, and where should your company be located so they can reach you?
• What will it take to promote your business to those people?
• Who will your competitors be and how many are in your selling area?
• What will you have to do to convince customers to buy from you instead of a competitor? (Tip: Undercutting the competitor’s pricing might not leave you enough profit to survive or grow.)

Here are a few ways to conduct market research:

• Do market research online. Search the web for competitors to your business. Look at their online presence, advertising, and product pricing. Conduct keyword searches to find your customers. Narrow your search down to the right location and find the most popular terms in your area.
• Run surveys. You can conduct surveys online or in person. Use your survey results to analyze your customer needs, get demographic information, learn what they buy from your competitors, and how they feel about the experience. Make sure you carefully craft your questions to get the best information possible. 
• Conduct focus groups. You can do informal focus group studies by asking people you know whether they’d use the type of product or service you’re planning, and how much they’d pay for it. If you will be investing a lot of money in your startup, you might want to hire a professional to conduct a formal focus group study.

The more you know about your potential customers and competitors, the better decisions you can make regarding your product or service. A marketing worksheet can be helpful to gather and review your data. 

Beyond helping you make good decisions, arming yourself with quality market research will help when looking for loans and investments for your startup. For additional information see our article on How to do market research and competitive analysis.

3. Create a Business Plan

A business plan is a document that describes your company, its products and services, its customers, its goals and what’s required to meet those goals. You’ll need a detailed business plan if you will be applying for a business loan or looking for a loan. But even if you are self-funding your business, writing a business plan is important because it makes you pay attention to all the details that will affect your business’s profitability and success.

When creating your business plan, there are some key elements to include in starting a business:

• Company description. Use this section to provide the details about your business, why consumers need your business, and who your consumers are. Include the advantages and strengths you have over competitors.
• Market analysis. This is the section where you distill your market research into usable data.  Describe your targeted customers, the size of the market, the competition, and market trends and your expected place in the market. 
• Business structure and management. Describe your plan to form a corporation, LLC, or sole proprietorship. If there are multiple people involved in your business, you should include each person’s role and responsibility.
• Marketing and sales plan. This section will be highly individualized for your specific business, but there are a few things to include. As thoroughly as possible, talk about how you will bring in customers and keep them returning to your business.
• Financial needs and projections. Discuss the funding you need to open and operate your business and what it will be used for. Follow that up with financial projections showing that your business can be successful.

For additional information on a business plan visit our business plan template.

4. Fund Your Business

Based on the data in your business plan, determine how much money you will need to open your business and operate it until it becomes profitable. 

Although there are ways to bootstrap your business, it usually takes money to get it off the ground. 

Among the startup expenses you should plan on are:

• Equipment and supplies
• Website design and hosting
• Fees for filing, licenses, and permits
• Insurance
• Marketing services/materials
• Utility costs
• Professional services like a lawyer or accountant

Depending on what you do, other possible expenses may include rent, inventory, vehicle expenses, and salaries. Here’s how to calculate startup costs.

Know your product break-even point

In addition to knowing what it will cost to open and run your business, you need to know the break-even point for your goods and services. The break-even point tells you how much you have to sell and at what price to equal the cost of producing your goods and services. In other words, it indicates at what point you make a profit. 

Use the ZenBusiness break-even point calculator to determine your break-even point.  Just plug in your numbers and see the results on screen.

What will it take for your business to break even?

Start raising your company startup capital

Once you have determined how much funding you need, you need to determine how to get the money to start your business. There are three basic ways to fund your business startup: self-funding, loans, and investors.

• Self-funding. Choosing to self-fund your business means you will be using your own resources and/or those close to you. The advantage of self-funding is having full control over your business. The downside is that you are taking on all the risk. If you choose to self-fund, plan out how much you are willing to invest, and if you are considering using retirement income, consult with a financial adviser.
• Getting a loan from a bank or credit union. A loan, like self-investing, will allow you to maintain control over your company. If you decide to go this route for funding, put together your business plan, expense sheet, and financial projections. These documents need to look out over the next five years. Approach several banks about the loan, then compare and contrast the offers to get the best deal for your business. In most cases, you will be expected to guarantee the loan personally.
• Obtaining outside investment. Investors will provide funding for your business in exchange for a share of the ownership and, sometimes, a role within the organization. Initial investors for startups are often friends and family or other angel investors. To interest them, your business plan and research will need to show that there is a good potential for investors to profit from their investment. Here’s how to attract investors for your business. 

5. Name Your Business

Choosing the right business name for your new company is important. You want a name that helps you build and then protect your brand. You want it to be unique and may want it to be descriptive. But you don’t want it to be so descriptive that it limits your future growth. For instance, if your business name is Jill’s Pearl Jewelry, customers who want to buy silver or diamond, or gold jewelry may never think to visit your shop. 

There are a few requirements you will need to meet when selecting a name. If you have decided on an LLC for your business structure, all states require some form of “LLC” to be included in the name. You won’t be able to use a word that implies an illegal activity: For example, if fireworks aren’t legal in your state, don’t use “fireworks” in your name. Here are more tips on naming your business and launching your business.

6. Pick a Business Location

For most small companies, the best location to open a business is in the state in which they plan to operate. Many companies can be started from home to keep costs down. But if you need to rent space for your business, choose your location carefully. Before starting, sit down and make a list of the things your business needs or should avoid. Don’t begin unprepared because once you are locked into a location, it can be costly and time-consuming to correct the problem.

There are a few things to consider. Does the location meet the operational needs of your business and growth strategy? What will the location cost (think about rent, utilities, and any other costs you will incur from being in the space)? Some companies need to consider things like demographics. Retailers will want to consider the kinds of foot traffic and parking that a location affords. They also want to consider if the area allows their brand to fit — for example, is it an upscale area or a more relaxed environment?

Consider if the location has the right infrastructure for your business, like technology needs or accessibility. Understand the local environment. What kinds of regulations or ordinances will you be following, and what taxes do you need to pay?

7. Choose a Business Structure

Deciding on the structure of your business is an important decision for starting a business. Look at the pros and cons of each option before selecting one. The structure you choose will determine your tax liabilities, how you organize and run your business, and the amount of liability protection available to the owners.

Sole proprietorship

As the name implies, in a sole proprietorship, you are the only owner of the business. You reap all the profits and are responsible for all the business debts. In most cases, launching as a sole proprietor is quick and easy. However, as a sole proprietor, you are completely liable for any losses or debts incurred by the business. 

Partnership

If you have at least two people starting a company together, you can form a partnership. In a general partnership, each of the partners contributes funds to start the company, and they all share in the management, profits, and losses of the company. Among the disadvantages is that if one partner causes a loss or injury, all the partners are liable.

A limited liability partnership provides some liability protection to the partners by shielding them from the malpractice or wrongful actions of the other partners, though this liability protection can vary by state.

Limited Liability Company (LLC)

An LLC is a form of business that combines the ease of operation of a sole proprietorship with the liability protection of a corporation. Legally, the LLC is a separate entity from the person or people who own it (the members.). The only businesses that might not be eligible in some states are professional partnerships, which would form a limited liability partnership or a professional limited liability company. Professional partnerships are businesses like a doctor’s office or law firm.

S Corporation

An S corporation is not really a separate kind of business structure, but a tax election status. A C corporation or an LLC can apply for S corporation status with the IRS. S corporation status is often a way for C corporations to avoid double taxation because they’re taxed like a general partnership or sole proprietorship.

One reason an LLC might opt for S corporation status is that it can save the owners money on Social Security and Medicare taxes (self-employment tax) by splitting income into two groups, salary and distribution. The IRS only requires the owners of an S corporation to pay the-Social Security and Medicare tax on their salary. Distributions of profits are not subject to self-employment tax.

You don’t have to make this decision alone. We have information and resources to help you make the best decision to set up a business. Here’s more information to help your business structure.

C Corporation

C corporations are owned by shareholders who elect a board of directors. The board leads the decision-making. C-corps are a separate entity from the owners, protecting their liability. However, with a C corporation, the business will be taxed, and then the individual shareholders will be taxed on the income they receive (known as “double taxation”).

8. Get a DBA

The business structure you choose, the type of work you do, and business location will determine how and where you have to register your business and what licenses and permits are required. 

If you are a sole proprietorship or partnership, in most cases you will have to register and get a DBA certificate for your business name. DBA is an acronym that means Doing Business As.It’s also referred to as a fictitious name certificate. Banks usually require it to open a bank account in the business name. If you already have an LLC or corporation and want to do business under a different name than the company’s legal name, the company will also have to apply for a DBA. For example, “ABC Corporation” would need a DBA to operate under the names “ABC Puzzles” or “ABC Toys.”

Filing for your DBA will take a few weeks, and each state, county, and city will have different rules. Generally, though, you may need to provide proof of good standing and have a unique name. You might need to make public announcements that follow the rules of your area and have a reliable payment method. You will also need a Social Security number or a federal tax ID (EIN).

9. Register Your Business

Once you’ve chosen your business structure, if you will be operating as an LLC or corporation, the next step is to register your business with the state. (If you have a sole proprietorship or general partnership, you don’t need to take this step).

For most states, this will require visiting the Secretary of State website, but before you do, there are a few decisions you need to make.

Appoint a Registered Agent for Your Business

First, get a registered agent. A registered agent is a person or entity who is the point of contact between your business and the state. They accept legal notices on behalf of your company and make sure you get them in a timely manner.

All states allow you to serve as your own registered agent. That may seem like a simple solution, but there are disadvantages. A registered agent must be available during business hours. Running your business and being in one location all day can be difficult. It can also be inconvenient to be served with legal documents while meeting with a potential client.

Hiring an outside registered agent service relieves you of the burden and can make your life a lot easier. A few advantages include:

• Avoiding potential embarrassment if served at your place of business
• Allowing you to travel more flexibly during normal business hours
• Meeting the requirement to have a physical office
• Preventing the need to update your listing with every move
• Helping maintain and organize your legal documents so that you can access them when you need them

Create a Business Operating Agreement (for LLCs)

If you are creating an LLC, your next step will be creating an Operating Agreement. Only a few states require the document, but it is important for your business to have one. This document is where you will set in writing the way your business will be run, managed, and governed.

Benefits of a Business Operating Agreement

An Operating Agreement gives your LLC and its members several advantages, including:

• Additional legal protection in the eyes of many courts
• Preventing conflict among partners
• Creating clear and customized rules for control of the business
• Providing clear procedures for adding or removing owners of the business
• Spelling out what will happen to your business if you are no longer able to run it
• Useful in securing funding for your startup or expansion

How to Make a Business Operating Agreement

Operating Agreements should be customized to your particular business; however, there are some standard items to include. When it’s time for you to create your business’s Operating Agreement, you could hire an attorney. However, that option is expensive and takes time.[/callout]

File Articles of Organization for Your Business

To register with the state, you need to file the Articles of Organization. Visit your Secretary of State’s website and find the correct form and information on filing fees, which can vary by state. Most states allow for online filing.

Make sure you have all the information needed for the form. Each state has a different application, but most of them include:

• The name of your business
• The address of your business
• Your registered agent and their contact information
• The starting date of your business
• Signature

10. Get Required Tax IDs

Businesses — or, in the case of sole proprietors and an LLC, the individual owners — must know and follow the laws around federal, state, and local taxes. To make sure you are collecting and paying the right taxes, begin by obtaining your identifying numbers.

Get a Business Employer Identification Number (EIN)

The first number you need is your federal Employer Identification Number (EIN). This number is assigned to your business by the IRS. Most businesses need to obtain this number. You can determine if your business requires an EIN by looking at the following requirements:

• Operating as a corporation or partnership
• Having partners in your business
• Having employees
• If you file employment, excise, alcohol, tobacco, and firearms taxes
• If you are involved with organizations like trusts, estates, real estate mortgage investments, or nonprofits

Even if your business is not required to obtain an EIN, you should get one anyway. EINs are helpful for a few reasons. Your bank may require you to provide your EIN before opening a business bank account. It also prevents you from needing to use your Social Security number for business purposes, which helps prevent fraud.

Get a State Tax ID Number

What taxes apply to your business and the tax system will vary from state to state. You need to register with your state. Your state’s Department of Revenue is a good place to look since many states maintain the system they use. Don’t forget about local taxes, as well. You’ll need to investigate and sign up for the tax system in your business’s home city and/or county.

Identifying State Taxes That Apply to Your Business

Different types of companies may be required to pay different taxes. Some of the most common taxes include:

• Income tax
• Sales tax
• Property tax
• Excise tax
• Industry-specific taxes
• Environmental-impact taxes
• Employment taxes, such as unemployment insurance and employee withholding tax
• Self-employment tax on business shares for sole proprietors, partners, and LLCs

To learn more about the taxes your business is subject to, reach out to your state Department of Revenue or its equivalent.

11. Apply for Business Licenses and Permits

Just because you have formed your business does not mean you are ready to operate legally. You may need additional licenses or permits in your state or local area. Whether it’s a general business license or an industry-specific license, it’s important to obtain the right permits to stay in compliance and keep your business running smoothly.

Some of the most common types of business licenses you may need include:

• General business license
• Restaurant licenses
• Alcohol licenses
• Retail licenses
• Trade licenses
• Professional licenses

Researching Permits and Licenses for Your Business

Ensuring you obtain the licenses and permits you need can be time-consuming, but it’s an essential step. Once you have them, make sure you know if they expire and when you need to reapply. Without them, you may find yourself with fines or having to stop doing business.

12. Open a Small Business Bank Account

Even if you will be operating as a sole proprietor under your own given name, you should have a separate bank account for your business. Having a separate bank account for your business makes it easy to separate business and personal expenses at tax time. It also gives more legitimacy to your business and makes it easier to accept credit cards, get financing and do business in general. Here are guidelines for choosing a small business bank account. 

ZenBusiness Simplifies Starting a Business

The excitement of starting a business can fade when faced with the daunting steps of actually getting that business up and running. There are a lot of details to consider, choices to make, and paperwork to fill out.

Don’t let the process slow you down. We can help you in starting a business in no time. Our experts can assist you at each of the stages we’ve discussed in this “How to Start a Business” guide.

We won’t stop there, either. Once you are up and running, it’s time to begin looking at how to grow. We’ve put together a Run Your Business guide to provide expert advice on operating and expanding your business.

We will work with you to make it easy in starting, running, and tips to improve and grow your business. Our plans include business formation, registered agent, name registration services, and more. Our experts are ready to get started today, so you can focus on your business’s business.

Related Article: 10 Smart and Savvy Small Business Questions for 2023