Ten Mostly Free Steps to Formalizing Your Business

I have owned more than twenty businesses. Some of the most common questions I get involved the formalization of a business. Formalizing your business is a critical step in turning an idea into a legally recognized and scalable operation. Whether you're a solopreneur, launching a service-based startup or building a product, going through a structured setup process gives your business legitimacy and a better chance of surviving. It also protects your personal assets. Each of the following step plays a role in laying a solid foundation and most have very little cost. Despite the misconception that starting and formalizing a business is very expensive.

People often want help formalizing their business. People often pay exorbitant fees to professionals to formalize their business. However, it’s not necessary to spend a lot of money to formalize your business. Most of the things needed to formalize a business are free or inexpensive. The following list outlines the first ten critical steps to starting a business. Half are free and most are less than $200.

The following ten steps walk you through the essentials every entrepreneur should follow to make their business official and ready to operate with confidence. The steps include some details, as well as the associated cost. Note that the steps are in the specific order for a reason. It is ideal to follow these steps if your a developing a business in the United States. This order of steps minimizes the expense to starting a business.

1. Define Your Business Model: Clarify what you're selling, to whom, and how you’ll make money. This step ensures focus and sets the foundation for operational and legal decisions.

   • Key questions:

     • Who are your potential customers?

     • Are you developing a product or service?

     • Is this direct-to-consumer (B2C) or business to business (B2B)

   • Key actions:

     • Use artificial intelligence and Google searches to help

     • Ask potential customers for feedback about your idea

   • Cost: $0

     
     

2. Choose a Business Name: Identify the name for your business. Get feedback, but ultimately you must choose the name that best reflects your business.

   • Key questions:

     • What words adequately reflect the business?

     • What words adequately reflect your values?

   • Key actions:

     • Use artificial intelligence to help ideate names

     • Narrow a list to five names and poll people on the name they like best

   • Cost: $0

3. Register a Domain Name: After identifying your business name, register a domain name that closely reflects the business name. Use a domain name registration company such as Name Cheap or Go Daddy to register your name. This step is early in the process because the value of a domain name is important to a business. Additionally, this is a very inexpensive initial expense and does not require further action. You can develop a website at a later point.

   • Key actions:

     • Check a variety of variations of the business name to get the shortest possible domain name

     • Use one of the primary domains, such as .com, .org, or .ai

   • Cost: $10

4. Register your Google, Yelp, and Social Presence Pages: These are the most critical online presences for businesses with a physical location today.

   • Key actions:

     • Register your Google page

     • Register your Yelp page

     • Register your Facebook page

     • Register your Instagram page

     • Register your X (formerly Twitter) profile

     • Optimize both similarly, adding your address, phone, and photos of your location

   • Cost: $0

5. Obtain an EIN (Employer Identification Number): An EIN is the first important technical step to formalizing a business. This initial registration is complete with the federal government. You must complete IRS form SS-4, which can be completed online. This number is needed for hiring employees, opening a business bank account, and filing taxes. While business formation occurs at the state level, all states require an EIN prior to registering a business.

   • Key actions:

     • Go to the following website to complete the EIN application:
       https://www.irs.gov/charities-non-profits/employer-identification-number

     • Allow for a few days for the EIN to be issued prior to registering a business with your state

   • Cost: $0

6. Business Formation (Registering Your Business Name): Registering your business entity with your state legally protects your brand and allows you to operate under a trade name. It also add a layer of liability protection for you.

   • Key questions:

     • What type of entity do you want to form?

       • Sole Proprietor

       • Partnership

       • Limited Liability Company (LLC)

       • S Corporation (S-Corp)

       • Corporation (C-Corp)

     • Which entity offers the best liability protection for you?

     • Which entity offers the most favorable tax situation for you?

   • Key actions:

     • Go to your state website to register. You can find this with a Google search

     • Allow for a few days for the EIN to be issued prior to registering a business with your state

     • The website in Pennsylvania for registering a business is: https://file.dos.pa.gov/

   • Cost: Anywhere from $50 to $500, depending on your state. It is $125 to register an LLC in Pennsylvania

7. Open a Business Bank Account: It is critical to separate personal and business finances as early as possible. This is critical for accounting, taxes, and to avoid personal liability. The easiest way to do this is to open a separate bank account. Note that you cannot open an business banking account in your business name until steps 4 and 5 are complete.

   • Key actions:

     • Take your EIN and business formation paperwork

     • Order checks for your business account at VistaPrint or Deluxe

   • Cost: Approximately $75 to order checks for your bank account

8. Business Licenses and Permits: Depending on your location and industry, such as food service, construction, or healthcare, you may be legally required to operate and avoid fines or shutdowns.

   • Key actions:

     • Call your local municipality to ask about local license and permit requirements

     • Research your industry to see if state or federal regulations require licensing to operate

   • Cost: $0 if no licensing or permitting is required. Otherwise, licensing and permitting is variable by industry

9. Set Up Accounting and Bookkeeping: Use software like QuickBooks, Xero, or Wave. Also, consider hiring a CPA if your business has large expenditures for the business or large amounts of income. This keeps finances organized, simplifies taxes, and supports better decision-making.

   • Cost: Approximately $50 per month for QuickBooks and approximately $100 per month for a CPA

10. Purchase Business Insurance: Consider general liability, professional liability, workers’ comp, and/or cyber insurance.Protects against lawsuits, property damage, and employee-related risks.

    • Cost: Approximately $100 per month