Starting a business checklist for new business owners

Published Monday 30 March 2026

Table of contents

• Why you need a starting a business checklist
• Validate your business idea
• Create your business foundation
• Set up your legal structure
• Manage your startup finances
• Protect your business
• Build your online presence
• Plan your marketing strategy
• Set up operations and technology
• Build your team
• Launch your business with confidence
• FAQs on starting a business

Key takeaways

• Validate your business idea with real customers before investing time and money by conducting interviews, surveys, or pre-sales to confirm people will actually pay for your product or service.
• Complete legal setup steps in the correct order by choosing your business structure first, then registering your business name and getting an EIN before opening bank accounts or signing contracts.
• Separate your personal and business finances immediately by opening a dedicated business bank account and using cloud-based accounting software to track income, expenses, and cash flow automatically.
• Protect your business from unexpected losses by securing appropriate insurance coverage and implementing basic data security measures like strong passwords, two-factor authentication, and regular backups before you launch.

Why you need a starting a business checklist

A business startup checklist prevents costly mistakes by ensuring you complete every legal, financial, and operational step in the right order. Without a structured approach, new business owners often miss critical requirements or waste money on steps they're not ready for.

Starting a business typically involves five phases:

• Planning: validating your idea and creating a business plan
• Legal setup: choosing a structure, registering your business, and getting licenses
• Financial foundation: opening accounts, securing funding, and setting up accounting
• Operations: arranging insurance, technology, and your workspace
• Launch preparation: building your online presence, marketing, and hiring

Use this checklist as your roadmap. Work through each section in order, and check off items as you complete them.

Validate your business idea

Business idea validation confirms that customers will pay for your product or service before you invest time and money. Skipping this step is one of the most common reasons new businesses fail.

Validate your idea before registering your business or spending on setup costs.

Research your market and competitors

Understand who your customers are and what alternatives they currently use. Look for gaps in the market that your business can fill.

Research these areas:

• Target customers: who needs your product and why
• Market size: how many potential customers exist in your area or niche (one way to gauge this is with search data; for example, the term "foam mattress" gets more than 11,500 monthly searches, which helped validate the market for companies like Casper)
• Competitors: who else serves this market and what they charge
• Trends: whether demand is growing or shrinking

Test your idea with potential customers

Talk to real people who might buy from you. Ask what problems they face and whether your solution would help.

Ways to test your idea:

• Conversations: interview 10 to 20 potential customers about their needs
• Surveys: gather feedback on pricing, features, and interest
• Pre-sales: offer your product before launch to gauge demand
• Minimum viable product: create a simple version to test with early customers

Define your unique selling point

Your unique selling point (USP) explains what makes your business different from competitors. Sum it up in one or two sentences that you can use when pitching to investors and customers.

A strong USP answers: why should someone buy from you instead of the competition?

Create your business foundation

Your business foundation includes the planning documents and support network that guide your decisions. Complete these steps before moving to legal and financial setup.

Write a business plan

A business plan documents your business goals, target market, competitive advantage, and financial projections. It serves as your roadmap and is often required when applying for loans or seeking investors.

Your business plan should include:

• Executive summary: a brief overview of your business concept
• Market analysis: research on your customers and competitors
• Products or services: what you sell and how it meets customer needs
• Marketing strategy: how you'll attract and retain customers
• Financial projections: expected revenue, costs, and profitability
• Funding requirements: how much capital you need and how you'll use it

Keep your plan concise. You can always expand it later as your business grows. For more guidance, see the complete guide to starting a business.

Find a business mentor

A business mentor provides honest feedback, shares experience, and helps you avoid common mistakes. Look for someone who has built a business similar to yours or has expertise in areas where you need guidance.

Where to find mentors:

• Small business development centres: free advice from experienced advisors
• Industry associations: connections with established business owners
• Local business groups: networking events and peer support
• Online communities: forums and groups for entrepreneurs in your field

Set up your legal structure

Your legal structure determines how your business is taxed, your personal liability, and how you can raise funding. Complete these legal steps before opening bank accounts or signing contracts.

Choose your business structure

Business structure refers to the legal form your business takes. Each structure has different tax implications and liability protections.

Common structures include:

• Sole proprietorship: simplest to set up, but you're personally liable for business debts
• Partnership: shared ownership with one or more partners, with shared liability
• Limited liability company (LLC): separates personal and business liability while offering tax flexibility
• Corporation: more complex structure with the strongest liability protection, often used when seeking investors

Consult an accountant or lawyer to choose the structure that fits your situation. You can change your structure later, but it's easier to start with the right one.

Register your business name and get your EIN

Business registration makes your business official with state and local authorities. An Employer Identification Number (EIN) is a tax ID from the Internal Revenue Service (IRS) that you need for hiring employees, opening business bank accounts, and filing taxes.

Steps to register:

1. Check that your business name is available in your state
2. Register your business name with your state's business filing office
3. Apply for an EIN through the IRS website (it's free and takes minutes)
4. Register for state and local taxes if required

Obtain necessary licenses and permits

Business licenses and permits authorise you to operate legally in your location and industry. Requirements vary widely based on your business type, industry, and location.

Common licenses and permits include:

• General business license: required by most cities and counties
• Professional licenses: needed for regulated professions like accounting, real estate, or healthcare
• Health permits: required for food service and certain retail businesses
• Zoning permits: confirm your business location is approved for commercial use
• Industry-specific permits: required for construction, transportation, alcohol sales, and other regulated industries

Check with your city, county, and state offices to identify which licenses you need.

Register web domains and trademarks

Secure your business name online before someone else does. Register domain names that match your business name and consider trademark protection for your brand.

Steps to protect your brand:

• Domain registration: purchase your business name as a .com and other relevant extensions
• Social media handles: claim your business name on platforms you plan to use
• Trademark search: check if your name conflicts with existing trademarks
• Trademark registration: file with the relevant authority to protect your brand nationally

Manage your startup finances

Startup finances include your initial funding, banking setup, accounting systems, and tax obligations. Getting these right from the start saves time and prevents costly mistakes later.

Estimate startup costs and secure funding

Startup costs are the expenses you'll incur before your business generates revenue. Knowing your costs helps you determine how much funding you need.

Common startup costs include:

• Legal and registration fees: business registration, licenses, permits
• Equipment and supplies: computers, tools, inventory, office furniture
• Location costs: deposits, rent, renovations, utilities
• Marketing: website, branding, initial advertising
• Professional services: accountant, lawyer, consultant fees
• Working capital: cash to cover expenses until revenue starts

Funding options for small businesses:

• Personal savings: the most common source for new businesses
• Friends and family: informal loans or investments
• Bank loans: traditional financing with fixed repayment terms
• Government-backed loans: loans with favourable terms for small businesses
• Investors: equity funding in exchange for ownership share
• Crowdfunding: raising small amounts from many supporters

Need help budgeting? Review the guide to startup business costs to estimate your expenses.

Open a business bank account

A business bank account keeps your personal and business finances separate. This simplifies accounting, protects your personal assets, and looks more professional to customers.

What you need to open a business account:

• EIN or tax ID: your business identification number
• Business registration documents: proof your business is registered
• Ownership documents: partnership agreement or articles of incorporation if applicable
• Personal identification: driver's license or passport

Consider also setting up a business credit card and payment processing account for customer transactions.

Choose accounting software

Accounting software tracks your income, expenses, invoices, and financial reports automatically. Cloud-based software lets you access your finances from anywhere and simplifies tax preparation.

Features to look for:

• Bank feed integration: automatically imports transactions from your bank account
• Invoicing: creates and sends professional invoices to customers
• Expense tracking: categorises spending and stores receipts
• Financial reports: generates profit and loss statements, balance sheets, and cash flow reports
• Tax preparation: organises data for easy tax filing

Xero offers all these features and connects with over 1,000 business apps to streamline your operations.

Create financial projections

Financial projections estimate your future revenue, expenses, and profitability. They help you plan cash flow, set pricing, and identify when you'll break even.

Create projections for:

• Revenue forecast: expected sales based on your market research and pricing
• Expense budget: anticipated costs for operations, marketing, and growth
• Cash flow projection: when money comes in and goes out each month
• Break-even analysis: how much you need to sell to cover your costs
• Profit and loss forecast: expected profitability over 12 to 36 months

Review your projections monthly and adjust as you learn more about your actual performance.

Understand your tax obligations

Business tax obligations vary based on your structure, location, and industry. Register for all required taxes before you start operating.

Common business taxes:

• Income tax: federal and state taxes on business profits
• Self-employment tax: Social Security and Medicare taxes for sole proprietors and partners
• Payroll tax: taxes withheld from employee wages plus employer contributions
• Sales tax: collected from customers on taxable goods and services
• Excise tax: applies to specific products like fuel, alcohol, and tobacco

Tax-deductible expenses reduce your taxable income. Common deductions include:

• Office rent and utilities
• Equipment and supplies
• Business insurance
• Professional services
• Marketing and advertising
• Travel and vehicle expenses

Work with an accountant to identify all deductions you qualify for and set up a system to track them throughout the year.

Protect your business

Business protection includes insurance coverage and data security measures that safeguard your operations from unexpected events. Set up these protections before you launch.

Get business insurance

Business insurance protects you from financial losses due to accidents, lawsuits, property damage, and other risks, with costs that can range from $30 to over $100 per month. The coverage you need depends on your industry, location, and business activities.

Common types of business insurance:

• General liability insurance: covers injuries, property damage, and advertising claims
• Professional liability insurance: protects against claims of negligence or mistakes in your services
• Property insurance: covers damage to your equipment, inventory, and workspace
• Workers' compensation: required in most states if you have employees (the federal government requires all businesses with employees to carry workers' compensation, unemployment, and disability insurance)
• Business interruption insurance: replaces lost income if you can't operate due to a covered event
• Cyber liability insurance: covers data breaches and cyberattacks

Talk to an insurance broker who specialises in small businesses. They can help you find the right coverage at competitive rates.

Set up data security and backups

Data security protects your business information from loss, theft, and cyberattacks. Losing customer data or financial records can damage your reputation and result in legal liability, yet many entrepreneurs underestimate this risk; a Hiscox survey found that nearly four in 10 owners believe cyber coverage isn't needed, trusting their existing systems to be secure.

Essential data protection steps:

• Use cloud-based software: stores data securely with automatic backups
• Enable two-factor authentication: adds an extra layer of login security
• Create strong passwords: use unique passwords for each business account
• Install security software: protect devices from malware and viruses
• Train your team: ensure everyone follows security best practices
• Back up regularly: keep copies of critical data in multiple locations

Cloud-based accounting software like Xero automatically backs up your financial data and uses bank-level encryption to keep it secure.

Build your online presence

Your online presence is how customers find and learn about your business on the internet. Most customers research businesses online before making a purchase, so your website and social media profiles are often their first impression.

Create your website

A business website tells customers who you are, what you offer, and how to contact you. Even simple websites help you appear more credible and show up in search results.

Essential website elements:

• Homepage: clearly explains what your business does and who it serves
• About page: shares your story and builds trust with visitors
• Products or services page: describes what you offer and the benefits
• Contact page: provides phone, email, address, and a contact form
• Mobile-friendly design: works well on phones and tablets

Website builders like Squarespace, WordPress, and Wix let you create a professional site without coding skills. Start simple and improve your site as your business grows.

Set up social media accounts

Business social media accounts help you connect with customers, share updates, and build brand awareness. Choose platforms where your target customers spend time.

Platform selection guide:

• Facebook: broad reach, good for local businesses and community building
• Instagram: visual content, strong for retail, food, and lifestyle businesses
• LinkedIn: professional networking, ideal for business-to-business (B2B) and service businesses
• TikTok: short video content, reaches younger audiences
• YouTube: longer video content, good for tutorials and demonstrations

Start with one or two platforms and post consistently. Quality content on fewer platforms works better than scattered efforts across many.

Plan your marketing strategy

A marketing strategy defines how you'll attract and retain customers. Planning your approach before launch helps you spend your marketing budget effectively and build momentum from day one.

Identify your target audience

Your target audience is the specific group of people most likely to buy from you. Understanding them helps you create messages that resonate and choose channels that reach them.

Define your target audience by:

• Demographics: age, location, income, occupation
• Needs: problems they're trying to solve
• Behaviours: where they shop, what media they consume
• Preferences: how they like to communicate and buy

Create a simple customer profile that describes your ideal buyer. Use this profile to guide all your marketing decisions.

Choose your marketing channels

Marketing channels are the methods you use to reach potential customers. Focus on channels where your target audience spends time.

Common marketing channels for small businesses:

• Word of mouth: encourage satisfied customers to refer friends and family
• Social media: share content and engage with followers on relevant platforms
• Email marketing: build a list and send regular updates and offers
• Local search engine optimisation (SEO): optimise your website and Google Business Profile for local searches
• Content marketing: create helpful blog posts, videos, or guides
• Paid advertising: run targeted ads on Google, Facebook, or other platforms
• Networking: attend events and build relationships in your community

Start with two or three channels and test what works before expanding.

Set your marketing budget

Your marketing budget determines how much you can spend on advertising, content creation, and promotional activities. New businesses typically spend 5% to 10% of projected revenue on marketing.

Budget allocation tips:

• Prioritise free channels first: word of mouth, social media, and local networking cost time but not money
• Test before committing: run small ad campaigns to see what works before increasing spend
• Track results: measure which channels bring customers so you can focus your budget
• Plan for consistency: steady marketing over time works better than occasional large campaigns

Set up operations and technology

Business operations include your physical or virtual workspace, equipment, and the tools you use daily. Setting up efficient operations from the start saves time and reduces friction as you grow.

Choose your business location

Your business location affects your costs, customer access, and licensing requirements. Consider whether you need a physical space or can operate remotely.

Location options:

• Home office: lowest cost, works for many service and online businesses
• Co-working space: flexible, professional environment with networking opportunities
• Retail or office space: necessary for customer-facing businesses, higher cost and commitment
• Virtual office: provides a business address and mail handling without physical space

Factors to consider:

• Zoning regulations: confirm your business type is allowed at your chosen location
• Lease terms: understand costs, length, and flexibility before signing
• Customer access: ensure customers can reach you easily if location matters
• Growth potential: choose a space that can accommodate expansion

Select business technology and equipment

Business technology includes the hardware and devices you need to operate. Buy quality equipment that will last, but avoid overspending on features you don't need yet.

Common technology needs:

• Computer: laptop or desktop for daily work
• Phone: dedicated business line or mobile phone
• Internet: reliable, fast connection for cloud software and communication
• Printer and scanner: for documents, contracts, and receipts
• Industry-specific equipment: tools, machinery, or devices for your trade

Choose business applications and tools

Business applications are the software tools that help you manage operations, communicate with customers, and track performance. Cloud-based tools let you work from anywhere and automatically save your data.

Essential business applications:

• Accounting software: Xero or similar for invoicing, expenses, and financial reports
• Email and calendar:Google Workspace or Microsoft 365 for communication and scheduling
• Document storage: Google Drive, Dropbox, or OneDrive for file sharing and backup
• Project management: Trello, Asana, or Monday for tracking tasks and deadlines
• Communication: Slack, Zoom, or Teams for team and customer communication
• Customer relationship management: HubSpot, Salesforce, or similar for tracking leads and customers

Choose tools that integrate with each other to reduce manual data entry and streamline your workflows.

Build your team

Building your team involves hiring the right people and setting up systems to pay and manage them. Not every business needs employees immediately, but planning for growth helps you scale when the time comes.

Hire your first employees

Hiring employees is a significant step that adds costs, responsibilities, and compliance requirements. Consider whether you need employees, contractors, or can manage alone initially.

When to consider hiring:

• You're turning down work: demand exceeds what you can handle alone
• You're spending time on tasks outside your expertise: someone else could do them better
• Growth requires it: expanding to new locations or services needs more people

Steps to hire your first employee:

1. Define the role clearly with specific responsibilities and requirements
2. Set a competitive salary based on market research
3. Post the job on relevant job boards and your network
4. Screen candidates through applications and interviews
5. Check references before making an offer
6. Complete required paperwork including tax forms and employment agreements

For more guidance, see the guide to hiring the right employees.

Set up payroll and benefits

Payroll is the system for paying employees and handling tax withholdings. You must set up payroll before your first employee starts work.

Payroll requirements:

• Register as an employer: obtain state and federal employer accounts
• Collect employee paperwork: tax withholding and work eligibility forms
• Choose a pay schedule: weekly, biweekly, or monthly
• Calculate and withhold taxes: federal income tax, state tax, Social Security, Medicare
• File payroll taxes: deposit withheld taxes and file quarterly reports
• Provide pay stubs: document wages and deductions for each pay period

Payroll software automates calculations, tax filings, and direct deposits. Xero integrates with payroll services to keep your employee costs and financial records in sync.

Launch your business with confidence

You've validated your idea, set up your legal structure, organised your finances, and prepared your operations. Now you're ready to launch.

Starting a business takes planning, persistence, and the right tools. This checklist covers the essential steps, but success ultimately depends on your decisions, your customers, and your ability to adapt as you learn.

Stay focused on:

• Serving your customers well: their satisfaction drives referrals and repeat business
• Monitoring your finances: track income, expenses, and cash flow closely
• Adjusting your approach: be willing to change what isn't working
• Continuing to learn: seek advice from mentors, peers, and industry resources

Xero makes managing your business finances simple from day one. Track expenses, send invoices, and see your cash flow in real time so you can focus on growing your business. Get one month free and start your business with the financial clarity you need.

FAQs on starting a business

Here are answers to common questions about starting a business.

How long does it take to start a business?

Most businesses can complete basic setup in two to four weeks, including registration, licensing, and opening a bank account. Building a customer base and reaching profitability typically takes six to 18 months depending on your industry.

How much does it cost to start a business?

Startup costs range from under $1,000 for simple service businesses to $50,000 or more for retail or manufacturing. Insurance is a significant cost, and the average cost of small business insurance can range from $40 to over $160 per month depending on the type of coverage, such as general liability or a business owner's policy.

Do I need a lawyer or accountant to start a business?

You can complete most setup steps yourself, but consulting professionals helps you avoid costly mistakes. An accountant can advise on business structure and tax planning, while a lawyer can review contracts and protect your intellectual property.

What's the difference between an LLC and a sole proprietorship?

A sole proprietorship is the simplest structure with no separation between you and your business, meaning you're personally liable for business debts. An LLC creates a separate legal entity that protects your personal assets from business liabilities while offering tax flexibility.

Can I start a business while working full time?

Yes, many successful businesses start as side projects. Check your employment contract for restrictions, manage your time carefully, and be prepared to transition to full time when your business generates enough income to support you.

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.