Seven Steps for Starting a Company in Just One Day
If you want to start a new business, you can do so right now in just seven easy steps, all in one day.
A few months ago, I got an email from a family member who asked me “If I wanted to quit my own job and start my own business, where would I start? What are the steps I would need to take?”
I was delighted to hear such a profoundly simple question since it’s always good to review the basics and also because most people act first and ask questions later. In other words, they make rash decisions like quitting their jobs first and then figuring out what it would take for them to start a business.
I thought about his question for a while, then wrote out a list of the steps he should take in order to set up a legal business as quickly as possible and sent it to him via email. I’ve decided to slightly modify that list and share it here because other people who are also considering starting their own business might find it helpful. (Note: this is only for people in the USA. In other countries, the details may vary, but the basics are probably similar).
Here is a very simple list of steps to take if you want to start your own business.
Disclaimer: none of this is legal or financial advice. I highly recommend you speak with a CPA (Certified Public Accountant) or attorney if you can.
Step #1: Choose Your Company’s Name
If you can, pick a really strong name that is specific enough that it tells people what you do, but is broad enough that you don’t paint yourself into a corner.
For example: “Apple, Inc.” is extremely broad and only works today because basically everybody on earth has heard of Apple and knows what they do. But when Apple was first started, it was originally called “Apple Computer, Inc.,” and that was a good choice. It tells you who they are and what they do.
But if they had just called the company “Apple” (which is a word for a fruit, which has literally nothing to do with computers), this would not have been a good idea starting out.
But you don’t want to be too specific, either. If you’re starting a website development company, “Nevada PHP Developers” is extremely specific. That might make sense if you’re located in Nevada, and if you only offer PHP development.
But if you wanted to branch out into another state, or if you wanted to offer more than just PHP, that’s not a very good name and would confuse people.
Step #2: File the Paperwork to Form a Legal Entity
Find the website for your Secretary of State and figure out how to create a legal entity. In almost every circumstance, freelancers and solopreneurs should create an LLC (Limited Liability Company). Do not work as a sole proprietor—there are legal and financial ramifications for this. (Ask an attorney or CPA if you really want to know why this is a bad idea).
In Arizona, where I live, creating a single-member LLC costs $50. It’s just that simple. Other states charge different amounts, and some states are extremely expensive and require huge annual fees (like California, which charges $800 every year), so read the regulations carefully and know what your state requires.
When you fill out the application, make sure you cross all the t’s and dot all the lower-case j’s perfectly since they’ll charge you to fix it or make changes. For example, if your company is “Smith Graphic Design,” and you’re forming an LLC, make sure you spell it out all the way as “Smith Graphic Design, LLC.”
I made a mistake years ago when I started my first company: I forgot to put the acronym “LLC” in the company name. An attorney told me that wasn’t good enough, so I had to re-file and pay the same initial fee all over again to fix it — just to add those three dumb letters to the end of the company name!
Don’t make the same mistake I did. It was a waste of time and money.
Step #3: Get an EIN From the IRS
Once you have your official LLC paperwork (called “Articles of Organization”), go to the IRS website and apply for an EIN (employer identification number).
Having an EIN helps create a wall of separation between yourself and your company. It can protect you in a few ways: one big way is that you can give your clients a W9 with your EIN for tax purposes instead of having to share your actual social security number, which is a big opportunity for fraud or identity theft.
Step #4: Open a New Business Bank Account
Now, take your limited liability company’s articles of organization and your IRS employer identification number and go to a bank (or, even better, a credit union). Open a business checking and savings account, and ask for a checkbook and a company debit card.
Do everything you can to keep all your business purchases and deposits completely separate from your personal finances. In other words, make sure you don’t deposit business checks into your personal account, or pay for personal expenses with your business account. Draw a line between the two and be very careful not to cross it.
If you do mix your personal and business finances, you can get into a lot of hot water for something called “commingling funds” which is illegal. So just don’t do it: make sure business transactions are strictly business, and keep personal transactions out of your business.
Also, keep all your receipts and track every dollar you spend and earn. You can start out extremely simply, by using Google Docs for generating invoices, and using Google Sheets for tracking your finances to start. Eventually, your company will grow into needing something more powerful like QuickBooks to truly give you a picture of your business finances but this is fine to start.
At some point, you’ll want to hire a bookkeeper, but for now, at least in the beginning, track all that stuff yourself. You’ll want to get good at understanding how money works and you have to become very familiar with how much you’re spending, and how much revenue you’re taking in.
Step #5: Get a Website Domain
Even if you never have a website, you’ll want to get a domain name. This is important because you’ll want to use that domain for your email.
For example: “sean@theweldingking.com” or something like that is a really strong, professional email if your name is Sean and you are the king of welding.
On the other hand, “slcwelder_188@hotmail.com” is just lame. Don’t do that. You want people to be able to know who you are and what you do just by looking at your email address.
Find a domain that’s available, that ideally ends“in a ”.com," you’reyou're forming a for-profit business. The domain registrar I currently use most often is NameCheap, but you can also use GoDaddy, Google Domains, etc.
Step #6: Pick a Solid Business Model
The MOST important decision you have to make is figuring out exactly what your business will do and won’t do.
Are you going to create things to sell, or will you be providing a service? In other words, will people buy products you make, or will they pay you for your time and skills?
Map out everything on paper and rehash it a few times, answering questions like:
What am I willing / not willing to do?
Where am I willing / not willing to go?
How much will I charge people for my products or services?
What does my ideal client look like?
Where will I find my ideal client?
Do I have everything I need to get started?
Am I lacking in equipment or skills? If so, how can I fix this?
The more specific you can be with all of these, the better won’t be married to your answers, and you can tweak them over time if needed, but the more decisive you can be in the beginning, the better your chances are at putting your,r best foot forward without having to waste time or money making a pivot in the future.
Note: If you end up selling prodit’s, it's highly lyou’llyou'll need a sales tax license. Contact your state, county, and city to learn more about that.
Step #7: Get Serious About Money
Finhere’shere's the number one most urgent task you have: finding out exactly what you need to do in order to get one paying client or one product sold.
How quickly can you get that first dollar? Will it take you three months until you can actually get paid? Or can you find a way to get at least some cash in your pocket by the end of this week?
If you can, figure out the fastest way to deposit that very first check, then work backward, thinking about all the steps needed to do that. Then go do them.
Once you get one client or one sale, do the same thing again, and again, and again, and then 15 years lyou’llyou'll look back and wo“der: "How did I get here, with this business and all these clients and all this wonderful, consistent i”come?"
.you’llyou'll realize the secret was just starting with one client and then repeating the process.
Or at that’sthat's how it worked for me.
I hope that helps for a start. Let me know how I can help.