Legalities.
Make it legitimate. This lesson is intentionally light because requirements vary by location. We cover what you need to know and point you to the right resources for your specific situation.
This is not legal advice.
What follows is the standard playbook for solo founders launching a small service business in the US. Your state, country, and industry will have specific requirements. When in doubt, ask a CPA or business attorney — one consultation is cheap insurance.
Pick a business structure.
Three common starting points. For most people launching a service business: form an LLC. It is the best balance of liability protection and simplicity.
Sole Proprietorship
Simplest — no formal filing in most places. You and the business are legally the same. Personal assets exposed to liability. Fine for testing an idea, not for the long term.
LLC
Separates personal assets from business liabilities. Simple to set up and maintain. Pass-through taxation. This is where most small businesses should start.
S-Corp
Tax optimization for higher earners. More compliance overhead. Usually makes sense once consistently earning $50K+ in profit. Often done as an LLC electing S-Corp tax treatment.
File the paperwork.
Search "How to form an LLC in [your state]" or "[your state] Secretary of State business filing." You can file yourself for $50-500 depending on state, or use a service like LegalZoom, ZenBusiness, or Northwest Registered Agent.
- ›Get an EIN (Employer Identification Number) — free at IRS.gov.
- ›Open a business bank account. Keep finances separate from day one.
- ›Set up bookkeeping — QuickBooks, Wave (free), or even a spreadsheet to start.
Decide on insurance.
Not every business needs coverage on day one — but you should know what applies and have it in place before you actually need it. CoverWallet, Next Insurance, and Hiscox all offer instant quotes for small businesses.
General Liability
Covers basic business risks. Most service businesses should have this. Cheap relative to the protection it provides.
Professional Liability
Errors and omissions coverage. Required if you provide advice, consulting, or any professional services where bad work could cause loss.
Cyber Liability
Covers breach response and client data exposure. Get it if you handle any sensitive client information, payment data, or PII.
Build a service agreement.
You need one before taking on clients. PandaDoc, HelloSign, or Bonsai have templates. Have a lawyer review your first version — $200-500 once, and you reuse it for every client after.
- ›Scope of work — exactly what you are delivering.
- ›Payment terms — when and how they pay.
- ›Revision policy — how many rounds, if applicable.
- ›Termination clause — how either party can end the agreement.
- ›Liability limitations.
Check the local rules.
Some locations require business licenses or permits, sales tax registration, home occupation permits, or industry-specific licenses. Search "business license requirements [your city/county]" to find out what applies.
Before moving to Lesson 5.
- □Business structure decided (LLC for most).
- □Entity formed or filing date scheduled.
- □EIN obtained from the IRS.
- □Business bank account opened.
- □Insurance needs assessed.
- □Service agreement template ready (lawyer-reviewed or via contract tool).
You're a real business. Now catch the leads.
Lesson 5 is the CRM and follow-up automations — built before you start marketing, so no lead falls through the cracks.