Stop paying to start: what a new business needs before its first sale
New owners get pushed to buy an LLC, an EIN service, a trademark, a patent search and ten apps before they have sold anything. What you can wait on, what you cannot skip, and the order that makes sense.
By Lance Culbreth, founder of Fraya · · 6 min read
Short answer
Most new businesses spend money they do not need to before the first sale. In the US you can usually start selling as a sole proprietor without an LLC, use your Social Security number instead of an EIN, and file a trademark or patent later, once the name or idea has proven worth protecting. What you should not skip is anything your state or city requires to sell, like a sales tax permit or a local license, and anything regulated, like food or cosmetics. Sell first. Add the rest as revenue and risk give you a reason to.
The pressure to pay before you sell
Search “how to start a business” and the first page is a checklist of things to buy. Form an LLC. Get an EIN. Register a trademark. Search for patents. Open a business bank account. Sign up for a website builder, an email tool, a booking app, invoicing software, a review app and a logo service. Much of that advice comes from companies that sell those exact things.
None of it is useless. The problem is the order. A business with no customers does not have much to protect, and every subscription you start before your first sale is a monthly bill against revenue that does not exist yet. The typical stack of ten tools alone runs about $253 a month.
What you can usually wait on
- An LLC. If you sell on your own without forming anything, you are a sole proprietor, and that is legal in every US state. An LLC can separate business debts from your personal assets, which starts to matter as orders, contracts and risk grow. Filing fees vary by state, and some states charge yearly; California’s minimum is $800 a year.
- An EIN. It is free from the IRS and takes minutes online, so never pay a service for one. A sole proprietor with no employees can generally use their Social Security number instead. You need an EIN once you hire, form certain entities, or a bank or partner asks for one.
- A federal trademark. In the US, using a name in commerce gives you some rights in the area where you use it. Federal registration adds nationwide protection and starts at $350 per class at the USPTO. It is worth it once the name is earning, not before you know customers like it.
- A patent. Most makers, shops and service businesses will never need one. If you have a genuinely new invention, talk to a patent attorney before you show it publicly, because public disclosure starts a clock on your rights.
- Ten separate apps. You need a place to sell and a way to get paid. Email, booking, invoicing, reviews and the rest can wait until there are customers to email, book and invoice. Fraya puts the site, store and checkout in one place, and the rest is there when you need it.
What you should not skip
- A sales tax permit, if you sell taxable goods. Most states want you registered before you collect sales tax. Marketplaces like Etsy collect it for you; on your own site, that is your job. Once you are registered, Stripe Tax can calculate it at checkout, and Fraya turns it on from your shop settings.
- Local licenses. Many cities and counties require a general business license, and some trades need their own, like hair, food service and childcare.
- Rules for regulated products. Food, cosmetics, supplements and anything for children come with specific rules. Many states have cottage food laws for small home kitchens; check yours before you sell.
- Records. Keep every sale and every expense from day one. Business income goes on your tax return whether or not you formed anything. Fraya keeps every order, expense and a tax view in one place, and exports it for your accountant.
This is general information, not legal or tax advice. Rules change by state, county and city. Your state’s business office, your city hall or an accountant can tell you exactly what applies to you.
The order that makes sense
- Sell. Put up a site with a real checkout and send the link to people who might buy.
- Separate the money. A separate bank account for the business makes taxes and records far easier, even as a sole proprietor.
- Get an EIN when something asks for one. It is free and takes minutes.
- Form an LLC when the risk or revenue justifies it, or when an accountant tells you it saves money.
- Register the trademark when the name is worth defending.
- Add tools one at a time, when a real task shows up that you are doing by hand every week.
Where Fraya fits
Fraya is built for the first step. Describe your business in one sentence and she builds the site, the store and checkout through your own Stripe. It is free to publish and sell, with 1% only when you sell, so nothing is charged before there is revenue.
As the business grows, the rest is there when you need it: standard legal pages from day one, then email campaigns, bookings, reviews and invoices in the same place, and the $29 plan when you want your week drafted. Fraya does not form LLCs or file trademarks; when it is time, that work belongs with your state, the USPTO, or a professional.
Straight answers.
Do I need an LLC to sell online?
No. In the US you can sell as a sole proprietor without forming anything. An LLC can protect personal assets from business debts, which matters more as sales, contracts and risk grow. Many owners form one after they have proven the business.
Do I need an EIN to start a business?
Not always. A sole proprietor with no employees can generally use their Social Security number. EINs are free from the IRS and take minutes online, so you never need to pay a service for one.
Should I trademark my business name before I launch?
Usually not before you know the name works. Search the USPTO database to make sure no one is already using it for similar products, then launch. Federal registration starts at $350 per class and can come once the name has value.
What do I actually need before my first sale?
Something to sell, a way to get paid, and whatever your state and city require: often a sales tax permit if you sell taxable goods, sometimes a local business license, and specific permits for regulated products like food. Check with your state and city before your first sale.
Can Fraya set up my LLC or trademark?
No. Fraya builds and runs the site, store and checkout. Business formation goes through your state, trademarks through the USPTO, and both can be done yourself or with a professional.
