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How To Start A Small Business: A Step-by-step Guide Starting a small business can be as simple as selling a product or service to a customer. Businesses are considered sole proprietorships by default, which means the company operates under your name. If you want to form a separate business entity for legal or tax purposes, follow these steps to form your small business. How to start a small business 1. Decide the type of business entity you want Business entities come in several varieties. The type of business you choose influences your legal liabilities, taxes and requirements to maintain the business. Common business structures for small businesses include limited liability, corporation and S corp structures. Limited liability company (LLC) An LLC structure separates your personal assets from your business assets, allowing you to protect your personal assets if the business is ever sued or files for bankruptcy. While you must pay self-employment taxes to Social Security and Medicare ...