Introduction
Starting a small business can be exciting, but ensuring it’s done legally is crucial to avoid future complications. Whether you’re launching an online store, a home-based service, or a brick-and-mortar shop, legal compliance not only protects you from penalties but also builds trust with customers and investors.
In this guide, we’ll walk you through the exact steps to start a small business legally—from registering your company to protecting your intellectual property—so you can focus on growth without worrying about legal roadblocks.
Step 1: Choose the Right Business Structure
Your business structure affects your legal responsibilities, taxes, and even personal liability.
Common types include:
- Sole Proprietorship – Easy to set up but offers no personal liability protection.
- Partnership – Suitable for businesses with multiple owners, but partners share liability.
- Limited Liability Company (LLC) – Offers liability protection and flexibility.
- Corporation – More complex but ideal for businesses planning to scale and attract investors.
💡 Tip: If you’re unsure which structure to choose, consult a business attorney or accountant for advice.

Step 2: Register Your Business Name
Your business name is part of your brand identity and needs to be legally registered to prevent others from using it.
Steps to register your name:
- Check name availability with your state’s business registry.
- File a “Doing Business As” (DBA) if operating under a name different from your legal one.
- Secure a domain name for your website to match your business name.
Step 3: Obtain an Employer Identification Number (EIN)
An EIN from the IRS acts like a Social Security number for your business. It’s required for hiring employees, opening a business bank account, and filing taxes.
- You can apply for an EIN online for free through the IRS website.
Step 4: Get the Necessary Business Licenses and Permits
Depending on your industry and location, you may need local, state, or federal licenses.
Common examples include:
- Health permits (restaurants, food services)
- Professional licenses (lawyers, accountants)
- Sales tax permits (retail businesses)
Check your local city hall or state business website to see what applies to you.

Step 5: Understand Zoning Laws
If you operate from a physical location, verify that the property complies with zoning regulations. For home-based businesses, some neighborhoods have restrictions on signage, parking, or operating hours.
Step 6: Set Up a Business Bank Account
Separating your business and personal finances is not just good practice—it’s often a legal requirement for certain structures like LLCs and corporations.
Benefits include:
- Simplified accounting
- Easier tax filing
- Professional image when accepting payments
Step 7: Protect Your Intellectual Property (IP)
If your business involves unique branding, inventions, or creative works, protect them legally.
Options include:
- Trademark – Protects business names, logos, and slogans.
- Copyright – Protects original creative works like books, designs, or software.
- Patent – Protects inventions or unique processes.
Step 8: Meet Tax Obligations
Stay compliant with tax laws by:
- Registering for state and local taxes (sales tax, payroll tax, etc.).
- Keeping accurate financial records.
- Filing taxes on time to avoid penalties.
Internal Link: Read our guide on How to File Small Business Taxes for more details.
Step 9: Get Business Insurance
Even if your business is legally registered, you’re still at risk without proper insurance.
Common types of business insurance:
- General liability insurance
- Professional liability insurance
- Workers’ compensation insurance
Step 10: Create Legal Contracts and Policies
When dealing with clients, employees, or partners, having written agreements protects your business legally.
Examples:
- Employment contracts
- Service agreements
- Privacy policies (especially for online businesses)