Every business I’ve ever worked with started the same way. It started with an idea and grew into something. In some cases it happened quickly and sometimes it was a massive grind. Regardless of the journey, it never started with a perfectly named Business Name. It didn’t have a fully functioning operating agreement or a snazzy logo.
It was the idea that made everything exciting at first. You might think to yourself when you see a great product… why didn’t I think of that? How did someone create this?
Sometimes it’s a problem you’re tired of seeing. Other times it’s a skill people keep asking you to help with. Occasionally, it’s just that quiet thought you can’t shake — the one that keeps showing up while you’re driving, working out, or lying awake at night thinking, “There has to be a better way.”
That moment matters more than most people realize.
In 2026, starting a company is easier than ever. Filing forms takes minutes. Setting up a bank account can happen online. Social media makes it feel like everyone and their cousin has a business.
And that’s exactly why so many people rush.
They jump straight to formation without understanding what they’re building, what they’re protecting, or how the decisions they make in the first thirty days can quietly cost them tens of thousands of dollars later.
I’ve spent my career helping business owners clean up those early decisions. Some fixes are simple. Others are painful. A few are impossible.
This is how I would approach starting a company in 2026 if I were doing it all over again — with clarity, protection, and strategy from day one.
The Moment an Idea Becomes More Than a Thought
Ideas are cheap. Execution is not.
That doesn’t mean your idea isn’t valuable. It means its value depends entirely on what you do next.
Before you file anything, before you talk to a CPA, before you worry about entity structures, I always ask one question.
Is this idea meant to stay a side project, or do you want it to grow up?
There’s nothing wrong with a hobby. There’s nothing wrong with testing something small. The problem starts when people accidentally build real businesses on hobby foundations. The truth is… most companies start as a hobby anyways. Even a tech-giant like Apple started in the garage of Steve Jobs patient parents.
In 2026, the IRS still draws a hard line between activities meant to generate profit and activities done for personal enjoyment. That line matters for deductions, losses, audits, and credibility.
When I started my own firm, I didn’t have a five-year plan. I did know one thing — I wanted optionality. I wanted the ability to grow, pivot, and protect what I was building if it worked.
That mindset shapes every decision that follows.
Protecting the Idea Before You Build the Business
Most people think protection starts with forming an entity… based on my tenure and experience — it doesn’t.
Protection starts with ownership and control. Answering questions like: Who owns the idea? Did someone else already come up with this? Who benefits if it works? How do we split profits and who is responsible for debts? Is there an exposure to other assets or my own future if it fails?
In the early stage, your biggest risks aren’t lawsuits or audits. They’re partnerships gone wrong, handshake agreements that fall apart, and assumptions that never get documented.
I’ve seen siblings stop speaking. Friends end up in court. Spouses discover they don’t agree on risk after the first tax bill hits. If you’re building alone, clarity is easier. If anyone else is involved (even casually) protection becomes non-negotiable.
That doesn’t always mean legal paperwork on day one. It does mean writing things down, defining roles, and understanding who controls decisions before money enters the picture.
Once revenue shows up, emotions change and disagreements start showing up like your annoying Uncle Pete on Thanksgiving. It’s inevitable… with success — expectations change faster. Your job early on is to protect future you from present optimism.
Is This Even a Business Yet?
Not every idea deserves an entity. That statement makes people uncomfortable, but it’s true.
Before I recommend any formal structure, I look for three signals.
First, does the activity aim to produce profit within a reasonable time frame? The IRS doesn’t expect instant success, but they do expect intent.
Second, does money actually change hands? Interest without transactions is just enthusiasm.
Third, does the activity require risk? Time, capital, or reputation all count.
If you’re experimenting, validating demand, or running a short-term test, forming an entity immediately can add cost and complexity without benefit.
On the other hand, if you’re signing contracts, collecting payments, or exposing yourself to liability, waiting too long becomes dangerous.
In 2026, speed is an advantage — but only when paired with judgment.
The Temptation to Incorporate Immediately
One of the most common mistakes I see is premature incorporation.
Someone hears that “LLCs protect you” or that “S-Corps save taxes,” and suddenly they’re filing paperwork without understanding what they just created.
Incorporation is a tool. Tools work best when used at the right time.
Forming an entity too early can lock you into compliance requirements, tax filings, and costs before the business earns enough to justify them. On the other hand, waiting too long can expose personal assets, limit deductions, and create audit risk.
The right answer depends on activity, income, and intent — not internet advice.
Sole Proprietorship — The Simplest Starting Point
Most businesses technically start as sole proprietorships, whether the owner realizes it or not.
If you earn money under your own name and don’t form an entity, the IRS treats you as a sole proprietor by default. That simplicity is both its strength and its weakness.
From a tax perspective, sole proprietorships are straightforward. Income flows directly to your personal return. Deductions are generally available. Startup costs can often be written off. From a protection standpoint, there is none.
Your business and personal life become one in the same. If something goes wrong, everything you own sits on the table.
There’s also a tax issue most people miss. Self-employment tax applies to every dollar of net profit. In 2026, that still means Social Security and Medicare stack up quickly once income grows.
For testing an idea, a sole proprietorship can make sense. For scaling one, it rarely does.
The Psychological Cost of Staying Small Too Long
Here’s something people don’t talk about enough. Your structure affects how you think.
I’ve watched business owners delay growth because their setup made everything feel risky. They avoided hiring. They avoided marketing. They avoided opportunity — not because they lacked ambition, but because their foundation felt shaky.
Structure creates confidence. Confidence creates action. Action creates momentum.
This is where entity choice stops being a tax conversation and starts becoming a business one.
When an LLC Starts Making Sense
Limited liability companies exist for a reason. They separate you from the business, at least legally. They create a boundary between personal and professional risk when maintained correctly.
In 2026, LLCs remain flexible, relatively simple, and widely understood by banks, vendors, and clients.
For many businesses, an LLC becomes the natural next step once revenue is real and risk exists.
That said, an LLC is not a magic shield. Courts care about behavior more than paperwork. Commingling funds, skipping documentation, and ignoring formalities can pierce protection quickly.
From a tax standpoint, single-member LLCs are often taxed like sole proprietorships by default. The structure helps legally, but tax treatment stays the same unless you elect otherwise.
This is where strategy begins to matter.
Why Everyone Talks About S-Corps — And Why Timing Matters
At some point, income grows enough that self-employment tax becomes painful.
That’s when the S-Corp conversation shows up. S-Corps don’t eliminate taxes. They shift how income is treated. Salary gets taxed like wages. Distributions do not trigger self-employment tax.
When done correctly, this can save thousands per year. When done incorrectly, it invites audits, penalties, and stress.
In 2026, reasonable compensation rules still apply. Payroll still matters. Documentation still matters.
The biggest mistake I see is people electing S-Corp status too early or too late. Too early, and payroll costs outweigh benefits. Too late, and unnecessary taxes pile up. The right time sits in a narrow window — one that requires actual math, not guesses.
Building with Flexibility Instead of Perfection
Here’s the truth most advisors won’t say. Your first structure doesn’t need to be perfect. It needs to be adaptable.
I’ve changed structures for clients as businesses evolved. I’ve helped people undo decisions made years earlier. The goal isn’t to get everything right forever. The goal is to avoid decisions that trap you.
In 2026, laws change faster than ever. Tax incentives shift. Opportunities appear unexpectedly. The smartest founders don’t chase loopholes. They build frameworks that allow strategy to evolve.
The Hidden Cost of DIY Advice
Online advice isn’t wrong — it’s incomplete.
What works for a software founder in California may fail miserably for a contractor in Florida. Income type, state law, growth plans, and risk tolerance all matter.
I don’t believe in cookie-cutter setups because businesses aren’t cookies. Every year, I meet people who formed the “right” entity for the wrong reason. Fixing those mistakes costs more than getting guidance early.
Starting Smart Means Thinking Beyond This Year
Taxes don’t exist in isolation.
Entity choice affects retirement options, exit strategies, audits, lending, and valuation. When I help someone start a company, I don’t ask where they’ll be in twelve months. I ask where they want to be when this works. Because if it does, today’s small decision becomes tomorrow’s expensive one.
Bringing It All Together
Starting a company in 2026 isn’t about speed. It’s about alignment.
Alignment between idea and intent, protection and growth, and finally taxes and reality.
The paperwork is easy. The thinking is where value lives.
If you take nothing else from this, remember this — structure should serve the business, not the other way around. And when you’re ready to move beyond guessing, that’s where real strategy begins.
Welcome to the New Age of Accounting. Let’s begin.
P.S. If you found this article helpful, you’ll love my new book S-Corp Mastery: How Smart Business Owners Maximize Tax Savings & Build a Lasting Legacy. It’s now live and available in a sleek, easy-to-read PDF version. Grab your copy here
Chris is the Managing Partner at Weston Tax Associates, a best-selling author, and a renowned tax strategist. With over 20 years of expertise in tax and corporate finance, he simplifies complex tax concepts into actionable strategies that drive business growth. Originally from Sweden, he now lives in Florida with his wife and two sons.
