Starting an online business comes down to five things: choosing what you’ll sell, setting up the legal foundation, building your storefront, connecting a way to get paid, and getting your first customers. The barrier to entry is lower than ever, with platforms that handle hosting and security for as little as $29 a month, but the legal and financial steps still matter. Here’s how to work through each stage.
Decide What You’re Selling and to Whom
Every online business falls into one of a few models: selling physical products (your own or sourced from suppliers), selling digital products (courses, templates, ebooks, software), offering services (consulting, design, writing, coaching), or earning through content and affiliate revenue. Your model determines almost everything downstream, from which platform you need to how you handle taxes.
Before you invest in tools or registration, validate your idea. Search for competitors and study what they charge, how they position themselves, and what their customers complain about in reviews. Look at search volume for terms related to your product or service using free tools like Google Trends or Ubersuggest. Talk to potential customers directly if you can. The goal is to confirm that real demand exists before you spend money on infrastructure.
Choose a Business Structure
You can legally sell online as a sole proprietor with no formal registration, but most business owners benefit from forming an LLC. An LLC (limited liability company) separates your personal assets from your business debts, so if something goes wrong, your personal savings and home aren’t on the line.
Registering a business typically costs less than $300 in total, depending on your state and structure. You’ll need to provide your business name, location, ownership structure, and a registered agent, which is a person or service in your state authorized to receive legal documents on your behalf. If you plan to do business in multiple states (common for online sellers shipping nationwide), you may eventually need to file a Certificate of Authority in those additional states.
Once your business is registered, get a federal Employer Identification Number (EIN) from the IRS. It’s free and takes minutes online. You’ll need it to open a business bank account, file taxes, and hire employees or contractors later. Open a dedicated business checking account right away and run all business income and expenses through it. Mixing personal and business funds undermines the liability protection your LLC provides.
Register for Taxes
Online businesses owe sales tax in states where they have “nexus,” which basically means a meaningful connection to that state. For online sellers, nexus is usually triggered when your sales volume or number of transactions in a state crosses a certain threshold. Each state sets its own rules, so most ecommerce platforms now handle sales tax calculation and collection automatically, which saves you from tracking dozens of different rate schedules.
You’ll also need to understand your federal income tax obligations. Sole proprietors and single-member LLCs report business income on their personal tax return. If you expect to owe more than $1,000 in federal taxes for the year, the IRS expects you to make quarterly estimated payments rather than waiting until April.
Pick Your Ecommerce Platform
Your platform is the engine that powers your online store: product listings, shopping cart, checkout, and order management. The right choice depends on your technical comfort level and budget.
- Shopify is the most popular all-in-one option, starting at $29 per month. Hosting, security, and PCI compliance (the data security standard required for handling credit cards) are all included. It supports selling in over 150 countries from a single store and has more than 8,000 apps for adding features like email marketing, reviews, or subscription billing. It’s the easiest path for someone who wants to launch quickly without touching code.
- BigCommerce starts at $39 per month and includes strong built-in support for B2B selling, 140+ currencies, and no transaction fees on top of your payment processor’s rates. It’s a solid choice if you plan to sell wholesale or internationally from day one.
- WooCommerce is a free plugin for WordPress, but you’ll need to pay separately for web hosting (roughly $250 per year and up), an SSL certificate for security, and various paid extensions to match the features that come standard on Shopify or BigCommerce. This route gives you more control over customization but requires more technical knowledge to set up and maintain.
If you’re selling services or digital products rather than physical goods, you may not need a full ecommerce platform at all. A simple website built on WordPress, Squarespace, or Carrd paired with a payment link from Stripe or PayPal can be enough to start collecting revenue.
Set Up Payment Processing
Your payment processor is how you actually collect money from customers. Most charge a percentage of each transaction plus a small flat fee.
Stripe charges 2.9% plus $0.30 per online transaction with no monthly fee, no long-term contract, and no termination fee. It’s the default processor built into many platforms and offers clean developer tools if you want to customize your checkout later. Square also has no monthly fee and includes a free online store with a built-in payment gateway, making it a good option if you might also sell in person at events or pop-ups.
For higher-volume sellers, Helcim uses an interchange-plus pricing model, meaning you pay the actual card network cost plus a small markup of 0.5% plus $0.25 for online transactions. This structure tends to save money once you’re processing more than a few thousand dollars per month.
Whichever processor you choose, make sure your checkout accepts major credit cards, debit cards, and digital wallets like Apple Pay and Google Pay. Friction at checkout is one of the biggest reasons online shoppers abandon their carts.
Build Your Website for Trust
A first-time visitor decides whether to trust your site within seconds. A few elements matter more than design polish: a clear description of what you sell, real contact information, professional product photos or service descriptions, and visible policies for shipping, returns, and refunds.
You also need a privacy policy. Multiple states now have consumer data privacy laws that require businesses to disclose what personal information they collect, how they use it, and how customers can opt out of data sales or targeted advertising. Some of these laws apply to businesses processing data on as few as 35,000 state residents. Even if your business is small, a clear privacy policy builds customer confidence and keeps you on the right side of expanding regulations. Free privacy policy generators can create a basic version, but make sure it accurately reflects your actual data practices.
Secure your site with an SSL certificate (most platforms include one) so your URL shows “https” and browsers don’t warn visitors that your site is unsafe. This also helps your search engine rankings.
Get Your First Customers
Having a live store means nothing without traffic. In the early days, focus on one or two channels rather than trying to be everywhere at once.
Search engine optimization (SEO) is the highest-return long-term strategy. Write product descriptions and blog content around the specific phrases your potential customers are searching for. This takes months to gain traction, but the traffic is free and compounds over time.
Paid advertising on Google or social media platforms can drive traffic immediately, but it costs money and requires testing to find profitable ads. Start with a small daily budget ($10 to $20) and test different ad creatives and audiences before scaling up. Track your cost per acquisition closely: if you’re spending more to get a customer than you earn from their purchase, the math doesn’t work yet.
Social media works best when you pick the platform where your target customers already spend time. Short-form video on TikTok and Instagram Reels tends to generate the most organic reach for new accounts right now. Email marketing remains the most reliable channel for repeat sales. Offer something valuable, like a discount or a free resource, in exchange for an email address, then send genuinely useful content alongside your promotions.
What It Costs to Launch
A bare-bones online business can launch for under $500. Here’s a realistic breakdown for a simple ecommerce store:
- Business registration and EIN: $0 to $300, depending on your state and structure
- Domain name: $10 to $20 per year
- Ecommerce platform: $29 to $39 per month
- Payment processing: no upfront cost, just per-transaction fees
- Initial inventory or product creation: varies widely
Service-based businesses can start for even less since you don’t need inventory or a full ecommerce platform. A domain, a simple website, and a Stripe payment link can have you operational for under $100.
The biggest ongoing costs for most online businesses aren’t the tools. They’re advertising, inventory (if applicable), and your own time. Plan to reinvest early revenue into the channels that are working rather than spreading your budget thin across every possible marketing tactic.