Going out on your own comes down to a short, cheap checklist you can knock out in a week: pick a simple structure, get your free federal tax ID, register with your state, open a separate business bank account, and sort your license and insurance. None of it is complicated, and most of it is nearly free. Two rules save you the most money and grief: your federal tax ID is free (anyone charging for it is a scam), and your business money must never mix with your personal money.
1. Pick a structure
For most tradespeople that is a single-member LLC: cheap to form, and it protects your house and savings if the business is ever sued. You can technically start as a plain sole proprietor with nothing to file, but you carry unlimited personal liability doing that. See Sole prop, LLC, or S-corp for the full call. Decide this first, because it shapes the steps below.
2. Get your EIN, for free
An EIN (Employer Identification Number) is a federal tax ID for your business, like a Social Security number for the company. You need it to open a business bank account, hire, and get licensed in many states.
Get it straight from irs.gov, using their online EIN tool. It takes about 10 minutes, it is instant, and you download a confirmation letter (the CP 575) to keep. Do it in one sitting, because the session times out.
The scam to dodge: dozens of websites rank above the IRS in search results and charge up to $300 to "file" your EIN, a task that is free and takes ten minutes yourself. The FTC warned these operators in 2025. The rule is simple: the IRS issues EINs for free. If a site charges anything, you are on the wrong site. If you already got charged, dispute it with your bank and report it at ReportFraud.ftc.gov.
3. Register with your state
If you formed an LLC, you register it by filing Articles of Organization with your Secretary of State. Check your business name is available on their site first, and be ready with your address, a registered agent, and the owners' details. Formation fees are set by each state and vary widely, so get your state's exact fee from Working in Your State before you file.
Two things here: a plain sole proprietor using their own legal name usually does not register with the state (though you may still need a local business license), but a trade name or DBA does. And when you search for your state's filing portal, make sure the address ends in .gov, because the same paid formation services that oversell EINs advertise right alongside the official site.
4. Open a business bank account
This is the boring step that saves you at tax time and in an audit. Keep every dollar of business money in a dedicated business account and card, and never run it through your personal account. Mixing the two (commingling) is one of the fastest ways to weaken your LLC's protection and turn a simple tax return into a mess. You will need your EIN and formation documents to open it.
5. License and insurance
Sort your contractor license or registration for your state and trade (rules vary a lot, so see Licensing and credentials and Working in Your State), and get insured: general liability at a minimum, plus workers' comp once you hire anyone.
Common questions
Do I need an LLC to start, or can I just start working?
You can legally start as a sole proprietor with no formation paperwork at all, but most tradespeople should form a single-member LLC because it draws a legal line between the business and your house, car, and savings if you ever get sued. A sole proprietor and the business are the same legal person, so a business debt or lawsuit can reach your personal assets. An LLC is cheap to set up and separates the two. Which one fits you is covered in full in Sole prop, LLC, or S-corp. Formation rules and fees vary by state, so check yours in Working in Your State.
How much does it cost to go out on your own?
Less than most people think for the paperwork, and more than most people think to survive the first few months. Your federal EIN is free, always. State formation and any license or permit fees vary by state and trade, so get your real numbers from Working in Your State. The bigger cost is not the filing, it is tools, a work vehicle, insurance, and enough cash in the bank to cover your bills while you wait to get paid. What it really takes to start out breaks the money down as categories.
Can I use my Social Security number instead of an EIN?
A sole proprietor with no employees can technically use their SSN, but you should still get an EIN because it is free, takes about ten minutes, and keeps your Social Security number off invoices, W-9s, and bank paperwork. You will also need an EIN to open a business bank account and to hire anyone. Get it straight from irs.gov, and never pay a third-party site for it, because the IRS issues EINs for free.
How long does it take to set everything up?
The paperwork side is roughly a week: the EIN is instant, state registration runs from same-day to a couple of weeks depending on the state, and a business bank account can be opened as soon as you have your EIN and formation documents. Licensing and insurance can take longer depending on your trade and state, so start those early. The setup is fast. Having work lined up and cash in the bank is the part that takes real planning.
Is a business license the same as a contractor's license?
No. A general business license is a basic permit from your city or county to operate at all, while a contractor's license is a trade-specific credential that lets you legally bid and perform construction work. Many tradespeople need both, and the rules vary widely by state, trade, and even city. Do I need a contractor's license and Working in Your State cover which ones apply to you.
The honest bit
- Formation fees, registration rules, and licensing requirements all vary by state. Get yours from Working in Your State before you file.
- Figures and processes here are current for 2026. Confirm at irs.gov and your Secretary of State.
- This is general guidance, not legal or tax advice.
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Templates you might need
Need help pricing your work? Read Section 14: Pricing Your Work - day rates, job prices and how to stop underselling yourself.
Finished your apprenticeship? Read our guide: After Your Apprenticeship - the stuff nobody teaches you in college.
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