More people across the United States are choosing to start businesses. Changes in the economy, shifting views about work, and wider access to digital tools have made entrepreneurship a more realistic path for many. This rise in interest is part of a larger trend that has taken shape over the past several years. Understanding that broader picture helps explain why now is a significant moment for business creation.
Over the past several years, the United States has seen a steady rise in new business creation. According to the Bureau of Labor Statistics (BLS), as of 2019, businesses less than one year old accounted for 15 percent of gross job creation in the private sector. These young firms, though often vulnerable in their early years, have consistently contributed to new employment growth.
A turning point came with the COVID-19 pandemic. The economic disruption pushed many Americans to reconsider their career paths. In its January 2024 report, Harvard Business Review described how the pandemic reset the nation’s relationship with work. As job stability declined and remote work became common, more individuals sought autonomy and control through entrepreneurship. The article indicated that this was not a passing trend but a structural change in how Americans pursue opportunity.
Following this shift, startup activity began to accelerate. The Center for American Progress reported a 16 percent increase in the number of businesses under one year old between 2021 and 2023. This growth was observed across states, counties, and industries, suggesting a broad and inclusive wave of new business formation.
The Global Entrepreneurship Monitor (GEM) 2023 report reinforced this trend. Published by the GEM Consortium, it revealed that 62.5 percent of early-stage entrepreneurs were motivated by limited job options, a notable increase from previous years. This signaled that many individuals were turning to business creation out of necessity rather than ambition alone.
By 2025, entrepreneurship in the U.S. had reached a sustained high. Babson College’s GEM 2025 United States Report confirmed that the Total Entrepreneurial Activity (TEA) rate held firm at 19 percent, matching the record set in 2022. The report also highlighted expanding participation across demographic groups, including women, veterans, immigrants, and racial and ethnic minorities.
From 2019 through 2025, the U.S. entrepreneurial landscape has shown consistent growth. The increase reflects both economic adaptation and a deepening cultural shift toward self-employment. What remains to be seen is whether these businesses will transition from early-stage activity into long-term success.
This surge in entrepreneurial activity has created a strong foundation for new business owners. Across the country, people from all walks of life, such as veterans, teachers, recent graduates, and corporate professionals, are turning their skills into small businesses. For U.S. citizens who are ready to act, the conditions are favorable. Still, launching a business involves specific legal, financial, and administrative steps. The guide below outlines what those steps are and how to complete them.
How to Start a Business as a U.S. Citizen
1. Plan your business
Before taking legal steps, begin with a structured plan. A strong foundation improves decision-making and prepares you for conversations with lenders, partners, and service providers. According to the U.S. Small Business Administration (SBA), this stage should include market research, cost estimates, revenue projections, and a written business plan. Your plan should clearly describe your product or service, the problem it solves, your target audience, pricing strategy, and expected expenses.
Even small home-based businesses benefit from formal planning. It helps identify risks early and define what success will look like in the first year.
2. Choose a business location
Your location affects taxes, zoning rules, and customer access. For brick-and-mortar operations, research local zoning laws, commercial lease terms, and proximity to your market. For home-based or online businesses, location still matters. Some states have restrictions or registration requirements even for businesses operating out of a residence.
Tax rates and regulatory obligations may also vary by location, so check with your city or county office as well as your state’s business portal.
3. Select a legal structure
Your legal structure influences how your business is taxed, your liability exposure, and your long-term flexibility. Common options include:
- Sole proprietorship: Easy to start, but offers no legal separation between you and the business.
- Partnership: Shared ownership between two or more people, with liability and tax implications depending on the partnership type.
- Limited Liability Company (LLC): Offers liability protection while allowing profits to pass through to personal income.
- Corporation: A separate legal entity that provides strong liability protection but requires more formalities and tax reporting.
Selecting the right structure depends on your goals, your risk tolerance, and whether you plan to hire employees or seek outside funding.
4. Register your business name
Your business name must comply with state laws and be distinguishable from others already registered. If you plan to operate under a different name from your legal entity, you may also need to register a “Doing Business As” (DBA) name with your state or county. In some states, publishing the DBA in a local newspaper is also required.
It is also wise to search the U.S. Patent and Trademark Office database if you plan to protect your brand nationwide or build a recognizable name.
5. File business registration
LLCs, corporations, and most partnerships must register with their state government, typically through the Secretary of State’s office. This involves filing formation documents and paying a fee. Sole proprietorships may not need to register the business itself, but are often required to register a DBA or obtain local permits.
If you plan to operate in more than one state, you may need to register as a foreign entity in each additional state.
6. Apply for federal and state tax IDs
Most businesses need an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This number is used for tax reporting, opening a business bank account, and hiring employees. Applying is free and can be done online at irs.gov.
In addition to the EIN, many states require a separate state tax identification number. This is used for income tax, sales tax, or employment tax reporting, depending on your location and structure.
7. Obtain required licenses and permits
Licensing requirements vary by industry and location. Depending on your business activities, you may need permits at the federal, state, and local levels. Common examples include:
- Health department permits for food businesses
- State-issued licenses for professions such as contractors, accountants, or cosmetologists
- Sales tax permits for product-based businesses
- Home occupancy permits for home-based operations
Failing to obtain the correct licenses can result in fines or closure, so verify requirements through your city, county, and state government.
8. Open a business bank account
Separating your business and personal finances is essential. Most banks require your EIN, business registration documents, and possibly your operating agreement or corporate bylaws. A business account makes it easier to manage cash flow, accept payments, and prepare accurate records for tax filings.
Maintaining a dedicated account also helps preserve the liability protection offered by LLCs and corporations.
9. Set up bookkeeping and recordkeeping
Accurate financial records support informed decisions, simplify tax preparation, and demonstrate credibility. Choose accounting software or hire a professional to help manage:
- Income and expenses
- Payroll and contractor payments
- Receipts, invoices, and tax documents
The IRS recommends keeping most records for at least three years. Set up a system for secure storage and regular backups from the start.
10. Get business insurance
Business insurance protects your operation from financial loss. Most businesses start with general liability coverage, which protects against accidents or property damage. Depending on your field, you may also need:
- Professional liability insurance, which covers errors in services or advice
- Workers’ compensation insurance, required in most states if you have employees
- Commercial property insurance, for businesses with inventory or a physical location
Speak with a licensed insurance agent familiar with your industry to assess the appropriate level of coverage.
11. Know your ongoing responsibilities
Legal and tax compliance does not end at launch. Businesses must stay current with obligations such as:
- Filing annual or biennial reports with your state
- Renewing licenses and permits
- Paying estimated taxes quarterly if required
- Complying with labor laws if you hire workers
Missing a deadline can result in penalties or suspension, so set calendar reminders and keep up with government notices.
12. Establish a basic marketing presence
Once registered and legally operational, begin building your customer base. Most businesses should start with:
- A website that includes your contact information, services, and location
- A social media presence relevant to your audience
- Local outreach or community networking, particularly for service-based businesses
Even basic marketing helps establish credibility and reach your first customers.
Conclusion
Most businesses start with a personal decision. The steps matter, and the paperwork matters, but behind all of it is someone choosing to act. For some, it’s about independence. For others, it’s about solving a problem, building stability, or creating a new direction. Whatever the reason, getting the foundation right makes everything else more manageable. The resources are there. So is the opportunity.
Sources
- Bureau of Labor Statistics (BLS) – Entrepreneurship and the U.S. Economy
https://www.bls.gov/bdm/entrepreneurship/entrepreneurship.htm - Center for American Progress – Entrepreneurship, Startups, and Business Formation Are Booming Across the U.S.
https://www.americanprogress.org/article/entrepreneurship-startups-and-business-formation-are-booming-across-the-u-s - GEM Consortium – Record-Breaking Entrepreneurial Growth in U.S.
https://www.gemconsortium.org/news/record-breaking-entrepreneurial-growth-in-u.s.-according-to-latest-gem-national-report - Harvard Business Review – How the Pandemic Rebooted Entrepreneurship in the U.S.
https://hbr.org/2024/01/how-the-pandemic-rebooted-entrepreneurship-in-the-u-s - Babson College – GEM USA 2025 Report
https://entrepreneurship.babson.edu/gem-usa-2025 - U.S. Small Business Administration (SBA) – Write Your Business Plan
https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan - U.S. Small Business Administration (SBA) – Pick Your Business Location
https://www.sba.gov/business-guide/launch-your-business/pick-your-business-location - U.S. Small Business Administration (SBA) – Choose a Business Structure
https://www.sba.gov/business-guide/launch-your-business/choose-business-structure - U.S. Small Business Administration (SBA) – Register Your Business
https://www.sba.gov/business-guide/launch-your-business/register-your-business - U.S. Small Business Administration (SBA) – Get Federal and State Tax ID Numbers
https://www.sba.gov/business-guide/launch-your-business/get-federal-state-tax-id-numbers - Internal Revenue Service (IRS) – Apply for an EIN Online
https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online - U.S. Small Business Administration (SBA) – Apply for Licenses and Permits
https://www.sba.gov/business-guide/launch-your-business/apply-licenses-permits - Internal Revenue Service (IRS) – Recordkeeping
https://www.irs.gov/businesses/small-businesses-self-employed/recordkeeping - U.S. Small Business Administration (SBA) – Get Business Insurance
https://www.sba.gov/business-guide/launch-your-business/get-business-insurance - Internal Revenue Service (IRS) – Business Taxes
https://www.irs.gov/businesses/small-businesses-self-employed/business-taxes - Internal Revenue Service (IRS) – Estimated Taxes
https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes - U.S. Patent and Trademark Office (USPTO) – Trademark Search
https://www.uspto.gov/trademarks/search