Things To Know Before Starting a Business

A good idea may inspire a business, but preparation turns it into reality. Make sure the essentials are covered — choose your legal structure, complete required registrations, set up HR and payroll, and secure funding. Putting these foundations in place early helps your business start strong and grow smoothly.

Essential Knowledge for New Business Owners

Understanding startup essentials before launching can save you from costly oversights. Business ownership demands readiness across operations, finances, and compliance — successful entrepreneurs prepare early and build systems that run smoothly.

Key Takeaways for New Business Owners include:

• Customer Service: Responding to client issues, maintaining relationships, and reaching new customers.
• Finances: Setting up business banking, merchant services for payments, and accounting systems.
• Human Resources and Payroll: Managing hiring, onboarding, and compliance if you have employees.
• Legal Matters: Securing business licenses, drafting contracts, and maintaining required agreements.
• Marketing: Building a brand, maintaining social media, and running advertising campaigns.
• Planning: Creating a business plan, forecasting growth, and setting long-term goals.
• Operations: Developing workflows, choosing software and tools, and managing daily logistics.
• Compliance: Keeping up with employment laws, safety requirements, and data privacy regulations.
• Risk Management: Obtaining business insurance coverage, developing recovery plans, and minimizing exposure to lawsuits.
• Taxes: Understanding federal, state, and local obligations, including income, payroll, sales, and business taxes.

Decide your business structure early — it defines your liability, tax responsibilities, and growth potential. Without incorporation or an LLC, you're personally liable for business debts, putting your assets at risk. Your structure also determines how you file taxes and what benefits you can take as an owner.

Common business structures include:

• Sole proprietorship
• Limited liability company (LLC)
• Partnership
• S corporation
• C corporation

Christine Trumble, owner of Trumble Physical Therapy in Ithaca, N.Y., found the process manageable: "It is good to consult with people with knowledge of these matters, but I actually set up my PLLC myself and I did it all online."

Once your business entity is in place, focus on protection. Smart financial and risk management decisions strengthen your foundation and maintain compliance as you grow.

Safeguard your operations through these core practices:

• Protect Your Investment With Insurance: Even if laws don’t require coverage, operating without business insurance leaves you exposed. Many small businesses rely on a Business Owners Policy (BOP) for liability and property protection. If you work from home, review your homeowners policy — most exclude business activity. Also, confirm your personal auto insurance covers business use.
• Separate Business and Personal Finances: Set up business bank and credit accounts, even if you’re the only owner. This makes it easier to see where your money goes, manage cash flow, and back up your deductions at tax time. It also shows lenders you’re serious and helps protect your personal assets.
• Keep Accurate Records: The IRS requires organized books and records. Use accounting software or cloud tools to track transactions and generate reports — handle it yourself or hire a professional for accuracy.

Understanding these financial, operational, legal, and compliance essentials is one of the most important things to know when starting a business. Putting this framework in place before you launch helps you make better decisions, stay compliant, and set your business up for steady growth.

First Steps: Legal and Compliance Foundation

Build a strong legal and compliance foundation first. These steps create the structure you need to operate, hire, and grow without regulatory setbacks.

1. Why Business Structure Choice Matters More Than You Think

Common business structures include sole proprietorships, LLCs, partnerships, S corporations, and C corporations — each with different liability protections, tax treatments, and administrative requirements. For detailed descriptions of each structure and filing instructions, see our step-by-step guide.

Resources such as the SBA Choose Your Business Structure guide can also help you compare options and understand filing requirements. Consult an attorney or tax advisor to determine the best fit for your situation — this decision shapes everything that follows.

2. What an EIN Protects (And Why You Need It Immediately)

Your EIN identifies your business for tax purposes, enables you to open a business bank account, and is required for hiring employees. Apply through the IRS EIN Application and keep your confirmation in permanent records.

3. Know Which State Tax Accounts You Actually Need

Before registering for state tax accounts, understand what your specific business actually requires. Not every business needs every account, and registering unnecessarily can create years of administrative headaches.

If you plan to hire employees, you'll typically need to register with your state's departments of revenue and labor for:

• Withholding Taxes: Required to remit employee income taxes to the state.
• Unemployment Insurance: Provides required coverage for terminated employees.

Understand what you actually need:

• Withholding Tax Account: Only if you have W-2 employees.
• Sales Tax Permit: Only if you sell taxable goods or services.
• Unemployment Insurance: Only if you have employees.

Most states allow online registration and provide confirmation numbers you'll use when setting up payroll. Consult with an accountant familiar with your specific business type and state requirements before registering. Trumble highlights the value of professional support: "This is where working with a company like Paychex is helpful. Trying to do payroll while running my business would have been crazy."

4. Why New-Hire Reporting Can't Be Ignored

Federal law requires all employers to report newly hired and rehired employees to their state within 20 days (or sooner in some states). Register with your state’s new-hire reporting system to stay compliant.

5. Why Separate Business Banking Protects You Legally and Financially

Separate business banking protects your personal assets and maintains your liability shield. Commingling funds can pierce your corporate veil, expose you to personal liability, and create tax nightmares. Use your EIN to open a business checking account and run all business transactions through it — this separation simplifies payroll, taxes, and accounting while protecting your legal status.

6. When To Establish Payroll and HR Systems

Before hiring, set up payroll processing that handles taxes, deductions, and reporting accurately. If you want compliance support from day one, consider professional services such as Paychex PEO Services.

Setting up your legal entity, tax accounts, and payroll systems early is one of the most crucial steps when starting a business. With these foundations in place, you can hire confidently, pay employees correctly, and avoid costly compliance penalties.

Employer Readiness: People and Payroll Setup

With your legal foundation in place, the next step is preparing for your first hire. Understanding what to do when starting a business means building systems that help you manage people, pay, and ensure compliance from day one.

Follow these steps to set up your HR and payroll infrastructure:

• Establish your payroll schedule. Decide how often you’ll run payroll — weekly, biweekly, or semi-monthly — and confirm that your schedule complies with state requirements. Document your pay cycle and communicate it to every new hire.
• Select a timekeeping system. Accurate time tracking supports wage and hour compliance. Use dependable software to record hours, manage overtime, and automate payroll calculations.
• Create an onboarding workflow. Keep employee onboarding consistent and compliant by including:
  • Form I-9: Complete the federal Form I-9, Employment Eligibility Verification, for every new hire. The U.S. Citizenship and Immigration Services (USCIS) requires this form to confirm each employee’s identity and authorization to work in the United States. Employers must complete and keep it on file within three business days of the hire date.
  • Form W-4: Collect federal income tax withholding information.
  • Direct Deposit Authorization: Set up and offer employees electronic pay delivery.
  • Employee Information Form: Record personal and emergency contact details.
  • Employee Handbook Acknowledgment: Confirm receipt of company policies.
• Draft your employee handbook and policies. Define attendance policies, standards of conduct, safety, leave rules, and more to help set expectations and protect your business.
• Understand worker classification. Review IRS and DOL guidelines for W-2 employees versus 1099 contractors to avoid misclassification penalties.
• Evaluate benefits and compliance requirements. Identify when health insurance, workers’ compensation, or paid leave apply, and plan for future offerings as your business grows.
• Leverage HR technology. Use connected HR and payroll platforms to integrate onboarding, time tracking, and pay processing in support of accuracy and compliance.

Proactive setup pays off — HR teams lose 7.3 to 12.1 hours every week to administrative tasks, and payroll alone eats up 17% of their time according to the Paychex 2026 Business Leaders Priorities report. That’s time not spent on strategy, retention, or growth. Preparing your HR infrastructure early helps prevent payroll errors, misclassification issues, and onboarding confusion. Automating payroll and HR processes reduces manual inefficiencies, minimizes compliance risk, and keeps operations running smoothly from day one.

Factors To Consider Before Starting a Business: Making Plans

Strategic planning centers on finding market gaps and differentiating from competitors. Focus your business plan on unique strengths and invest in areas positioned for long-term success.

Things to consider when starting a business:

• Conduct a market analysis. Study available data such as customer satisfaction surveys, social media feedback, and industry reports. Listen to what customers need and set measurable goals to meet those needs. For example, extending hours or offering flexible services can help you capture more market share.
• Benchmark your competition. Compare your business model, pricing, and service quality against leading competitors. Use these insights to find areas where you can outperform others and target investments that drive growth.
• Identify your niche. Successful businesses fill a clear gap in the market. Identify unmet needs and develop strategies that align with your company’s strengths.
• Set measurable goals and financial projections. Define short- and long-term objectives that guide your funding, hiring, and operational decisions.
• Document your plan. Use trusted tools like the SBA’s Write Your Business Plan to formalize your roadmap.

Trumble reflects on her planning process: "All of these things are going through your head before you start, but you aren't thinking about them in these terms — benchmarking your competition, conducting market analysis, set measurable goals and financial projections. It took me a year to plan my business and I probably touched upon most of these. I think what helped me most was I had a niche service to provide within the physical therapy field."

Effective strategic planning turns ideas into action. By analyzing market opportunities, refining your competitive position, and setting financial goals, you can move from concept to execution with clarity and purpose.

What To Include in Your New Startup List

Knowing what to do to start a business means addressing the core elements that legitimize your company and protect your investment from the start. Here are key elements every would-be business owner should address:

• Establish bylaws or an operating agreement. Create clear terms for your business, including how money is invested and the roles of owners. Put everything in writing. When partners and investors know their roles and understand the revenue opportunities of profits and losses, it’s easier to avoid confusion when questions arise.
• Safeguard your company’s ideas and brand. Trademarks, copyrights, and patents can be some of your most valuable assets, and protecting them takes time and investment. Visit the United States Patent and Trademark Office (USPTO) for guidance on how to register and secure your intellectual property rights.
• Assess the need for a business license. Research what licenses your business needs before you start operating. Depending on the type of business, licensing requirements can vary. Even if a business does not incorporate, most states and counties require a “DBA” (doing business as) or a business license to show that the company is operating.

Formal documentation, intellectual property protection, and proper licensing establish a business’s legitimacy and protect founders’ investments from day one.

How To Estimate Your True Startup Costs

Funding is one of the key factors to consider when starting a business. Small business financing continues to evolve, and new founders — especially those learning how to start a business with no experience — now have more ways to access capital than ever before.

Build a comprehensive startup budget that includes:

• One-Time Costs: Business formation, licenses, equipment, initial inventory, website development.
• Recurring Monthly Costs: Rent, utilities, insurance, payroll, software subscriptions.
• Emergency Reserves: At least 6 months of operating expenses.
• Personal Living Expenses: Owners may not pay themselves at the start of their business.
• Calculate Your Total Funding Gap: Account for all startup costs, ongoing expenses during the runway period, and a buffer for unexpected costs.

Once you know your number, you can choose the right funding mix. Diverse funding options exist beyond traditional banks — from SBA-backed loans to crowdfunding — but realistic cost estimation remains essential for any approach. Solid planning helps new business owners fund their vision strategically and avoid unnecessary financial stress.

Common Mistakes to Avoid When Starting a Business

Even the most prepared entrepreneurs make missteps early on. Knowing what not to do when starting a business can save you from costly penalties and unnecessary setbacks. Most small business problems stem from preventable errors — issues that planning and professional guidance can help you avoid.

Seven common mistakes to avoid:

• Underestimating Startup Costs: Many new owners assume revenue will arrive before expenses. Build a realistic budget that covers at least six months of operating costs, including payroll, rent, insurance, and technology. Trumble emphasizes realistic budgeting and her experience: "No matter how much you prepare for whatever the cost is, it's always going to be more."
• Operating Without Adequate Insurance: Skipping coverage exposes your business to major financial risk. Review your general liability, property, and workers’ compensation policies to make sure they meet your industry’s requirements.
• Misclassifying Workers: Treating employees as independent contractors can trigger back taxes and penalties. Review IRS and DOL guidance to classify workers correctly and document every engagement.
• Missing Tax Deadlines: Late or missed filings can lead to fines and interest. Create a calendar to track federal, state, and local tax obligations, including estimated payments, payroll filings, and annual returns. Use IRS small business resources to confirm specific due dates and filing requirements.
• Skipping Formal Agreements: Verbal deals often lead to misunderstandings. Put all business partnerships, client contracts, and vendor relationships in writing to define rights, duties, and deliverables.
• Mixing Personal and Business Finances: Combining accounts creates accounting chaos and risks your liability protection. Open dedicated business banking and credit accounts to separate finances completely.
• Attempting Manual HR and Payroll Management: Handling payroll and compliance manually may work for one or two employees, but it quickly becomes unmanageable. Automate HR systems or partner with a payroll provider to reduce errors and stay compliant as your team grows.

Most of these mistakes are preventable with systematic preparation. Reviewing costs, securing insurance, using proper classifications, and keeping clean records protect your business from avoidable losses. With strong planning and the right partners, you can focus on growth instead of recovery.

When To Get Help: The Case for Outsourcing Early

Starting a business comes with extensive responsibilities, and knowing when to get help is critical. Outsourcing HR and payroll prevents you from getting mired in administrative work, letting you focus on growth while experts handle compliance.

Many startups turn to working with a professional employer organization (PEO) as they grow. A PEO helps with HR and administrative duties — streamlining benefits administration management, helping you reduce risk, and keeping insurance costs in check. With support from Paychex PEO Services, you get help handling payroll, HR compliance, and safety programs from day one.

Common PEO services include:

• Creating an employee handbook
• Building job descriptions
• Guidance on employment law compliance
• Maintaining Affordable Care Act documentation
• Providing online HR resources
• Offering onsite employee training
• Supporting risk assessment and safety programs

How To Learn More and Tools for Starting a Business

Starting a company takes more than a great idea. Knowing where to find reliable help makes the process faster, easier, and less expensive.

• Government Resources
  • SBA Learning Center: Access online courses, templates, and local SBA offices for personalized guidance.
  • Service Corps of Retired Executives (SCORE) mentors: Connect with more than 10,000 volunteer business mentors nationwide for free one-on-one advice.
  • Small Business Development Centers (SBDC): Get hands-on training and local business support through regional centers.
  • IRS Small Business Tax Resources: Find tools and forms to understand your tax responsibilities as a new employer.
• Professional Advisors
  • Attorneys: Consult a lawyer for entity formation, contract drafting, and risk management.
  • CPAs: Work with a certified public accountant for tax planning, bookkeeping setup, and financial reporting.
  • HR Consultants: Partner with an HR professional to develop policies, handbooks, and HR compliance processes.
• Educational Content and Tools
  • Paychex WORX Blog: Explore articles and guides for ongoing HR, payroll, and compliance insights.
  • Paychex State Resources: Review state-specific rules for payroll, taxes, and some employment laws.
  • Industry Associations: Join professional groups to stay informed on trends in your field.
  • Online Learning: Take foundational business courses through Coursera or LinkedIn Learning.
• Technology Solutions
  • All-in-One Platforms: Simplify payroll, HR, and benefits with integrated tools.
  • Software vs. Outsourcing: Decide whether to manage key functions in-house or through a trusted provider.
  • Integrated Systems: Streamline processes to reduce errors, improve compliance, and save time.

Understanding how to get help starting a business means taking advantage of these tools early. From government mentoring to professional guidance and integrated HR solutions, you can build a strong foundation without doing everything alone.