Starting a small business or freelancing in the U.S.: the basics

Step 1 — Plan before you spend

The U.S. Small Business Administration (SBA) describes two kinds of business plan: a detailed traditional plan, and a lean plan that can take as little as one hour and is typically one page. When you list startup costs, SBA suggests counting at least one year of monthly expenses (SBA — Plan your business).

Location decides which taxes, zoning rules and regulations apply, and zoning can apply even to a business run from home; ask your city planning office (SBA — Launch your business).

Step 2 — Learn the main business structures

Your structure affects your taxes, paperwork, ability to raise money and personal liability, meaning whether your own savings are at risk for business debts. SBA describes the common options this way (SBA):

• Sole proprietorship: you are one automatically if you do business without registering as anything else. It’s easy, but you can be held personally liable for business debts.
• Limited liability company (LLC): in most cases, it protects your personal assets if the LLC faces bankruptcy or lawsuits. Members are considered self-employed.
• Corporation: a legal entity separate from its owners, with the strongest liability protection, but higher costs and more record-keeping. An “S corp” passes profits to its owners, but SBA’s comparison table shows it can’t have owners who are nonresidents for tax purposes.

Rules differ by state, and switching structures later can have tax consequences; SBA says business counselors, attorneys and accountants can help (SBA). 4Livo doesn’t recommend one structure over another.

Step 3 — Choose a name and register with your state

A business name can be registered as an entity name with your state, a trademark that protects it nationally, a “doing business as” (DBA) trade name, which most states require you to register if you use one, and a website domain name (SBA).

If you do business under your own legal name, SBA says you don’t need to register anywhere, though you could miss out on liability protection. An LLC, corporation or partnership usually registers in each state where it does business, often with the Secretary of State. It needs a registered agent there: a person or service that receives official legal papers. Some states also want an initial report, most often within 30 to 90 days (SBA). SBA’s state registration lookup links to each state’s office.

You may see offers to file a “beneficial ownership information” (BOI) report. FinCEN, a Treasury bureau, says U.S. companies are now exempt (alert updated August 11, 2026) (FinCEN).

Step 4 — Get a free EIN from the IRS

An Employer Identification Number (EIN) is a 9-digit federal tax number for a business (IRS — Form SS-4 instructions). You generally need one to hire employees, run a partnership or corporation, or pay sales and excise taxes. Form an LLC or corporation with the state first, or your application may be delayed (IRS — Get an EIN).

• It’s free. The IRS warns against websites that charge for an EIN (IRS).
• Online: if your business is based in the U.S. and the person in control (the “responsible party”) has an SSN or ITIN, you get the number right away (IRS).
• Otherwise: Form SS-4 by fax or mail. Applying by phone, at 267-941-1099 (not toll-free), is only for applicants with no legal residence or place of business in the U.S. The instructions say what to enter if the responsible party can’t get an SSN or ITIN, and not to use an EIN in place of your SSN or ITIN (IRS — Form SS-4 instructions).

Your state may require its own tax ID; check its revenue department (SBA). See our guide to state income taxes.

Step 5 — Get the licenses and permits you need

Federal licenses cover activities regulated by a federal agency, such as alcohol, aviation, firearms or broadcasting. States regulate more, including construction, plumbing, restaurants and retail, and your county or city may require licenses too. SBA suggests starting with your Secretary of State’s website and tracking renewal dates (SBA).

Step 6 — Understand self-employment taxes

You’re generally self-employed if you run a business as a sole proprietor or independent contractor, are a partner in a business, or otherwise work for yourself, including part-time or gig work. You generally pay income tax and self-employment tax (IRS — Self-employed tax center).

• Self-employment tax is Social Security and Medicare tax for people who work for themselves. The IRS lists the rate as 15.3%. You must pay it and file Schedule SE if your net earnings from self-employment were $400 or more (IRS — Self-employment tax).
• Tax residency matters. The IRS says nonresidents for tax purposes are not subject to self-employment tax, but become liable once they are residents; a Social Security agreement between countries can change this (IRS). See our tax residency guide.
• You need an SSN or ITIN to pay it (IRS). See our guides to the Social Security number and the ITIN.
• Pay during the year. No employer withholds these taxes for you, so you generally make quarterly estimated tax payments with Form 1040-ES (IRS — Self-employed tax center). Individuals generally must pay if they expect to owe $1,000 or more when they file. Late payments can bring a penalty even if you’re due a refund. Nonresidents use Form 1040-ES (NR) (IRS — Estimated taxes). For 2026, the last payment is due January 15, 2027 (IRS — Form 1040-ES).
• Keep records that clearly show your income and expenses; except in a few cases, no special system is required (IRS — Recordkeeping).

A sole proprietor reports business income or loss on Schedule C (IRS). For filing basics, see our first tax return guide.

Step 7 — Get paid safely and understand 1099 forms

• Put each deal in writing: the work, the price and when you’ll be paid.
• Form W-9. Clients may ask for it to get your taxpayer number. The IRS says to use it only if you are a U.S. person, which includes a resident for tax purposes; foreign persons use a Form W-8 or Form 8233 (IRS — Form W-9).
• Form 1099-NEC. A client generally reports payments to an independent contractor on this form (IRS). If a client controls how you work, you may really be an employee; see our paycheck guide.
• Form 1099-K reports payments for goods or services by card, payment app or online marketplace. Apps and marketplaces must send one above a reporting threshold, but may send one for less (IRS — Form 1099-K).
• Report all your income, with or without a form, even if you were paid in cash or virtual currency (IRS — Gig economy tax center).
• Keep business money separate. SBA suggests a business bank account once you start accepting or spending money as a business (SBA). See opening a bank account.