Step 1: Choose what kind of business entity you want to use

Your first important legal decision is to select what legal entity you will use to operate the business.

You generally have the following choices:

  • Sole proprietorship (if you will be the sole owner)
  • Partnership (for two or more owners)
  • Limited partnership
  • Corporation
  • Limited liability company

Each of these has certain advantages and disadvantages and you must absolutely understand the risks and benefits of choosing one over the others. It is critical to understand that your choice will affect the extent of your personal liability for the debts of the business. So, if you are new to running a business or have not previously considered these options, you should most certainly seek professional advice about which of these is the best choice for you.

Step 2: Write a business plan

Your first step should be to write a business plan. A business plan is important because it:

  1. Allows you set forth the nature of your business and your goals for that business; and
  2. Serves as your “business resume” when you seek financing and other assistance

Many books have been written about writing successful business plans and are available at public libraries and bookstores. Help is also available from lawyers and other professionals such as CPAs, and the Small Business Administration (SBA) is also a good source of help and information: SBA | Write your business plan.