Step 1: Get an Employer Identification Number (EIN)

An EIN is a federal tax identification number for your business. Even if you have no employees, an EIN is useful — and in some cases required — for opening a business bank account, filing certain tax forms, and establishing your business as a separate entity.

You can apply for an EIN online through the IRS website at no cost. The process takes a few minutes and the EIN is issued immediately. There is no reason to use a paid service for this.

Step 2: Open a dedicated business bank account

Keeping business and personal finances separate is one of the most important things a new business owner can do. A dedicated business checking account makes it possible to track income and expenses accurately, simplifies bookkeeping, and supports the liability protection that an LLC structure provides.

All business income should go into the business account. All business expenses should be paid from it. Owner draws or distributions should be explicit transfers — not casual commingling.

Step 3: Set up bookkeeping from day one

The most common bookkeeping mistake new business owners make is not starting until they feel like they have "enough" transactions to justify it. By then, months of records need to be reconstructed.

Accounting software like QuickBooks or Xero can be connected to your business bank account and credit card to import transactions automatically. Setting this up in the first month of business — even if the volume is low — means you will have clean, organized records from the start.

At a minimum, you need to track: all income received, all business expenses paid, and the dates and descriptions of each transaction.

Step 4: Understand your estimated tax obligations

As a self-employed business owner, you are generally required to make quarterly estimated tax payments to the IRS and to New York State if you expect to owe more than a certain threshold. These payments cover income tax and self-employment tax on your business income.

The quarterly deadlines are generally in April, June, September, and January. Missing them — or underpaying — can result in a penalty even if you pay the full amount when you file. In your first year of business, it is worth getting a projection of your expected liability so you know what to set aside and when to pay it.

Step 5: Understand New York-specific obligations

LLC filing fee

If you operate as an LLC in New York, you are subject to an annual LLC filing fee based on New York source gross income. This fee is separate from income tax and is due with the LLC's annual filing. It ranges from $25 to $4,500 depending on income level.

Sales tax registration

If your business sells taxable goods or certain services in New York, you are required to register for sales tax with the New York State Department of Taxation and Finance and collect and remit sales tax on applicable transactions. Not all services are taxable in New York, but some are. If you are unsure whether your business activities are subject to sales tax, this is worth clarifying early.

New York City considerations

If you operate in New York City, the Unincorporated Business Tax may apply to your business income. City residents also pay a city income tax on top of state income tax. These obligations are separate from federal and state requirements.

Step 6: Keep records of startup costs

Costs incurred before your business officially opens — legal fees, equipment, website development, professional services — may be deductible as startup costs. The IRS allows a deduction of up to $5,000 in startup costs in the first year, with the remainder amortized over 180 months. Keeping records of these costs from the beginning ensures you can claim the deduction.

Step 7: Consider working with a CPA from the start

Many business owners wait until their first tax filing to engage a CPA. By then, the first year's decisions — entity structure, bookkeeping setup, estimated payments, retirement account options — have already been made, often without professional input.

A brief conversation with a CPA in the first few months of a new business can prevent the most common first-year mistakes and establish a foundation that makes every subsequent year easier.