To make your business legit, work through eight steps in order: (1) pick and register a legal entity (LLC, S-corp, or corporation) with your state, (2) get a free EIN from the IRS, (3) open a dedicated business bank account, (4) secure the licenses and permits your industry and locality require, (5) register for state and local taxes and sales tax if you sell taxable goods, (6) put contracts, insurance, and basic bookkeeping in place, (7) build a business credit profile separate from your personal credit, and (8) keep clean, consistent records so you can prove revenue on demand.
That last point is where "legit" and "fundable" become the same thing. As underwriters, the single strongest signal we see is a real entity depositing real revenue into a real business bank account — because that is the paper trail a lender can verify in minutes. Below is the full checklist, in the order that saves you the most rework, plus how each step later affects your ability to get approved for capital.
Key takeaways
- An EIN is free directly from IRS.gov — you never have to pay a third party for one, and it takes only minutes online.
- Underwriters weigh your business bank deposits and revenue trend far more heavily than your credit score; commingling personal and business money is one of the most common approval killers.
- Most revenue-based / MCA marketplaces approve on cash flow with a FICO of roughly 500+, funding amounts starting around $10,000, often in 24-48 hours — never 'guaranteed.'
- There is no single federal 'business license'; requirements stack by industry, state, county, and city, so check all four levels.
- Registering an entity (LLC or corporation) creates the liability shield that separates your personal assets from business debts — a sole proprietorship does not.
- Business credit files (Dun & Bradstreet, Experian Business, Equifax Business) are separate from your personal credit and are built through trade lines and on-time vendor payments.
- Lenders typically want to see at least three consecutive months of business bank statements, so opening the account early starts the clock that later unlocks funding.
Step 1: Choose and register your legal entity
Your entity is the legal foundation everything else attaches to. The three most common choices for small businesses are the LLC, the S-corporation, and the C-corporation. A sole proprietorship requires no filing, but it offers no liability protection and makes you look informal to both lenders and larger customers.
- LLC — the default for most main-street businesses. It gives you a liability shield, flexible taxation, and light paperwork. Filed with your Secretary of State.
- S-corp — often an LLC or corporation that elects S-corp tax treatment to reduce self-employment tax once profits are meaningful. Talk to a CPA about the payroll requirements it triggers.
- C-corp — usually for businesses raising outside investment or planning to scale with shareholders.
Register with your state, appoint a registered agent, and file your articles of organization or incorporation. Keep the stamped, state-returned formation document — lenders and banks will ask for it.
Step 2: Get your EIN and separate your money
An Employer Identification Number (EIN) is your business's tax ID. Apply directly at IRS.gov — it is free and issued immediately online. Ignore any service charging a fee for it.
With your EIN and formation documents in hand, open a dedicated business bank account. This is not optional housekeeping; it is the step that later determines whether you can get funded. Every dollar of revenue should flow through this account, and personal expenses should never touch it. Commingling funds pierces your liability protection and muddies the exact record an underwriter uses to verify you.
Open the account as early as possible. Most revenue-based lenders review three or more months of business bank statements, so the day you open the account is the day your fundability clock starts.
Step 3: Licenses, permits, and tax registration
There is no universal 'business license.' Requirements stack across four levels, and you need to clear each one that applies to you:
- Federal — only for regulated activities (alcohol, firearms, transportation, agriculture, broadcasting, and similar).
- State — professional and occupational licenses (contractors, cosmetology, health care, food service) plus your state tax registration.
- County — local operating permits and, in some places, a general business tax receipt.
- City — zoning approval, signage, health department, and fire permits.
If you sell taxable goods or services, register for a sales tax permit and set up a schedule to remit what you collect. Missing tax registrations is one of the fastest ways to turn a legit business into a delinquent one, and unpaid tax liens show up on the same records lenders review.
Step 4: Contracts, insurance, and bookkeeping
Now you operationalize legitimacy. Three systems matter:
- Contracts — written client agreements, terms of service, and vendor contracts. Even a simple template protects you and signals professionalism.
- Insurance — general liability at minimum, plus workers' compensation if you have employees and any industry-specific coverage. Many commercial customers will not sign until you produce a certificate of insurance.
- Bookkeeping — accounting software or a bookkeeper from day one. Categorize every transaction, reconcile monthly, and keep receipts. Clean books mean you can produce a profit-and-loss statement on demand, which speeds up funding, tax filing, and any future sale of the business.
Bookkeeping is where most owners cut corners and pay for it later. When you apply for capital, a lender reading organized statements moves fast; a lender squinting at commingled, unexplained transactions asks for more documents or declines.
Step 5: Build business credit separate from personal
Business credit is a distinct file from your personal FICO. Start it deliberately:
- Get a D-U-N-S number from Dun & Bradstreet (free).
- Open net-30 vendor accounts with suppliers that report payments to the business bureaus.
- Consider a business credit card in the company's name, paid in full each month.
- Pay every trade line early or on time — payment history is the core of your business score.
A strong business credit profile widens your future options and can lower your cost of capital. But be clear about the sequence: in the early years, most small businesses get funded on cash flow, not on a mature business credit file. Building business credit is a long game you start now and benefit from later.
Step 6: The funding readiness checklist
Once the legal and operational foundation is in place, 'legit' becomes 'fundable.' Here is the exact document set most revenue-based lenders and MCA marketplaces ask for. Have these ready before you apply and you compress a multi-day back-and-forth into a same-day decision.
| Document | Why underwriters want it | Have it ready? |
|---|---|---|
| Business bank statements (3+ months) | Proves real, consistent revenue and cash flow | Core requirement |
| EIN confirmation letter | Confirms the business is a registered tax entity | Core requirement |
| Formation documents | Verifies legal entity and ownership | Core requirement |
| Government-issued ID | Identity and ownership verification | Core requirement |
| Voided check / bank details | Confirms the funding-deposit account | Core requirement |
| Recent P&L or tax return | Adds context for larger requests | Sometimes requested |
See our complete guide to small business funding for how each product uses these documents.
Decision framework: which funding fits a newly-legit business
Being legit opens the door to capital, but not every product fits every stage. For a business that is registered, banking cleanly, and generating steady deposits — but is still young or has a thin or bruised personal credit file — a revenue-based / MCA marketplace is often the realistic first door. Approval leans on bank deposits and revenue rather than credit, typically FICO 500+, amounts starting around $10,000, with funding frequently in 24-48 hours. Nothing in funding is ever guaranteed, and you should always weigh cost against the cash flow the capital will generate.
Works best when:
- You have at least three months of consistent business bank deposits.
- Your credit is below bank thresholds but your revenue is solid.
- You need capital quickly for inventory, payroll, a time-sensitive opportunity, or a revenue-generating purchase.
- You want approval weighted on cash flow, not a long credit history.
Avoid or wait when:
- Your deposits are thin, seasonal to the point of unpredictability, or you have not yet opened a business account.
- You could qualify for a lower-cost SBA or bank term loan and can wait weeks for it.
- The capital would fund an expense that does not improve cash flow.
- You are still in setup and have no revenue to show — finish the legitimacy checklist first.
For most newly-legit owners, the honest answer is: complete steps 1-6, run the business through the bank account for a few months, then match the funding product to your actual cash flow rather than reaching for the fastest option by default. Our funding pillar breaks down each product side by side.
Frequently asked questions
How long does it take to make a business legit?
The core legal steps — forming an entity, getting an EIN, and opening a business bank account — can often be done in a few days to a couple of weeks, depending on your state's processing time. Licenses and permits vary widely. The part that takes real time is building a track record: most lenders want to see at least three months of business bank activity before they will fund you.
Do I need an LLC to be legit or to get funding?
You do not strictly need an LLC to operate, but a registered entity (LLC or corporation) gives you a liability shield, looks far more credible to lenders and customers, and separates your personal assets from business debts. Many revenue-based lenders will fund sole proprietors with strong deposits, but a formal entity broadens your options and is worth doing early.
How much does it cost to make my business legit?
State filing fees for an LLC typically range from roughly $50 to a few hundred dollars depending on your state. Your EIN is free from IRS.gov. Licenses, permits, insurance, and bookkeeping software add variable costs. Be wary of services charging a fee for an EIN — the IRS never charges for one.
Why does a business bank account matter so much for funding?
Because it is the record underwriters trust most. Revenue-based lenders approve on your deposit history and revenue trend, and a dedicated business account gives them a clean, verifiable picture. Commingling personal and business money makes your statements hard to read, weakens your liability protection, and is one of the most common reasons applications stall or get declined.
Can I get funding before I have business credit built?
Yes. Most young businesses get funded on cash flow, not on a mature business credit file. Revenue-based and MCA marketplace products weigh your bank deposits and revenue over credit history, typically accepting FICO around 500+ with funding amounts starting near $10,000. Building business credit is a longer-term project that improves your options over time.
What licenses do I actually need?
It depends on your industry and location. Requirements stack across federal (only for regulated activities), state (professional and occupational licenses plus tax registration), county, and city (zoning, health, fire, signage) levels. Check all four. A quick call to your state's business portal and your city or county clerk will surface most of what applies to you.
What paperwork should I have ready before applying for capital?
For a revenue-based lender, have three or more months of business bank statements, your EIN confirmation letter, formation documents, a government-issued ID, and voided-check bank details. Larger requests may also ask for a recent profit-and-loss statement or tax return. Having these organized in advance can turn a multi-day review into a same-day decision.
Is any funding approval guaranteed once my business is legit?
No. No legitimate lender guarantees approval. Being legit and showing consistent revenue improves your odds significantly, but every application is evaluated on its own cash flow, deposit patterns, and documentation. Treat any offer that promises 'guaranteed' funding as a warning sign.
