How to Start a Consulting Business: Structure, Licenses and Looking Credible

Of all the businesses you can start in the US, consulting is one of the lightest to set up. There's no inventory or premises to sort out, and often no license either. Your first client may already be a former colleague who asks for help with a project. The real effort goes into getting clients who've never heard of you to trust your advice enough to pay for it.

To start a consulting business in the US, you choose a legal structure and plan for your taxes. Then you make your experience easy for clients to check. These are the main decisions:

• what problem you solve and for whom
• a sole proprietorship or an LLC, plus an EIN in most cases
• any license your city, state or field requires
• self-employment tax and estimated payments
• a written contract, insurance and prices that cover your unbilled time
• an online presence a potential client can check before the first call

The legal part is usually quick, and we'll go through these decisions in the order they come up in your first year.

Starting a consulting business: deciding what you sell

Before any paperwork, you sit down and try to describe your offer in one sentence. It's harder than it sounds. A consultant sells expertise. That means solving a problem the client can't solve alone, or can't solve fast enough.

The Bureau of Labor Statistics (BLS) counts many business consultants as "management analysts". BLS reports these figures for that group:

1. a median annual wage of $101,860 in May 2025
2. employment projected to grow 10% from 2025 to 2035, which BLS calls much faster than average
3. about 94,100 openings a year
4. typically at least a bachelor's degree and several years of related experience

That experience part matters most for you. Clients hire consultants for experience they can see and check. So your company structure, your paperwork and your online presence all serve one purpose: making that experience visible and believable.

The first paid job: a legal structure for your consulting firm

Your former colleague says yes and wants to start next week. At that moment, a quiet legal question appears. If something goes wrong, who carries the risk? The structure you choose decides that.

If you start doing paid work without registering a company, you're automatically a sole proprietor. The SBA describes a sole proprietorship as a business that isn't separate from its owner. So you're personally liable for its debts, and a client who sues the business is suing you. The SBA says this structure can suit low-risk businesses. It can also suit owners who want to test an idea before committing to it.

An LLC (limited liability company) is a separate legal entity registered with the state. According to the SBA, an LLC protects your personal assets in most instances if the company is sued or goes bankrupt. That includes things like your car, your house and your savings.

The SBA considers an LLC a good fit for businesses with medium or higher risk. Your work is advice. A client who believes that advice cost them money may bring a claim, so liability protection is a real factor in this field.

In our work with clients from outside the US, most choose an LLC because it's simpler than a corporation. They move to a corporation as revenue grows.

By default, the IRS treats a single-member LLC as a "disregarded entity". Its profit goes on your personal return on Schedule C. You pay self-employment tax just like a sole proprietor.

So forming the LLC changes your liability from day one but leaves your taxes as they were. That holds unless you later elect a different tax treatment. LLC vs Sole Proprietorship compares the two structures in more detail.

The EIN: a number most consultants get anyway

Once the LLC exists, you'll come across the EIN (Employer Identification Number). It's a business's federal tax number, and the IRS issues it for free. The IRS says a single-member LLC with no employees and no excise tax liability doesn't need an EIN for federal tax. It can use the owner's taxpayer number instead.

But the SBA notes that you need an EIN to hire employees, open a business bank account and apply for many licenses. So most consultants get one.

The IRS online application needs a principal place of business in the US or its territories. It also needs a responsible party with an SSN or ITIN. If your principal place of business is outside the US, you apply by phone, fax or mail.

Before the contract: licenses a consulting business may need

With the company in place, you start to wonder whether you need a license to give advice. According to NEXT Insurance, there's no single official license for consultants. But several kinds of license may still apply. The SBA explains that a federal license is needed only for work a federal agency regulates, and that covers little consulting.

State and local licenses depend on what you do and where you do it. Their fees vary, and some expire and must be renewed. The SBA suggests checking your Secretary of State's website for state requirements.

Your field matters most. NEXT Insurance gives these examples of consulting niches that need professional credentials:

• Accounting consultants typically need to be CPAs in their state.
• Engineering consultants may need a Professional Engineer (PE) license where they practice.
• Private investigators and investigative consultants are often licensed by the state.

A practical test is to ask whether the work you advise on would need a license if an employee did it. If it would, assume the same goes for you, and check with your state and city before the first contract. How to Get a Business License explains how licensing works at each level.

The name on your invoices raises its own questions. If you trade under a name that differs from your legal name, most states require you to register it as a DBA ("doing business as"). The SBA notes that a DBA gives no legal protection by itself. A trademark protects a name nationally, so check your name against the USPTO trademark database before you commit. Your domain name doesn't have to match your legal company name exactly.

Signing the first consulting agreement

Consulting is advice, and advice can be disputed. So before the work starts, you put the job in a written agreement that both sides sign. At a minimum it should cover:

• the scope of the work and the deliverables
• fees and payment terms
• who owns the reports, code or other materials once the project ends
• a limit on your liability

A clear scope also gives you a basis for pricing extra work the client asks for later.

The contract has a partner: insurance. The SBA describes two types that matter for a consulting business. Professional liability insurance is also called errors and omissions (E&O). For most consultants it's the main policy. It's meant for service businesses and covers claims of errors, negligence or malpractice.

General liability insurance covers a different set of risks:

• bodily injury
• property damage
• libel and slander claims
• the cost of defending a lawsuit

For a rough budget, Wix estimates insurance at $500 to $2,000 a year. Most of that is for professional liability. It puts business registration and licensing at $50 to $500, and legal and accounting help at $300 to $1,000 or more. Actual quotes depend on your field and your clients.

Setting your price: the hours nobody pays for

Now you have to name a number. Consultants commonly use one of four pricing models:

1. An hourly rate suits small or loosely defined tasks, but it limits your income to the hours you can bill.
2. A fixed project fee sets a price for a defined result, so the client knows the cost in advance.
3. A retainer is a monthly fee for ongoing access to your advice.
4. Value-based pricing ties the price to what the result is worth to the client.

Hourly pricing has a practical limit, because you can't bill every working hour. Part of the week goes to sales, admin and keeping your skills current, and nobody pays for that directly.

We worked out an example ourselves. Say you want to earn $100,000 a year and can bill 20 hours a week for 46 weeks. That's 920 billable hours. You'd need about $109 an hour to hit the target. And that's before taxes, insurance and software.

The first payments arrive, and nobody withholds tax

The first client pays in full, and the whole amount lands in your account. At your old job, the employer withheld tax from every paycheck. It also paid half of your Social Security and Medicare tax. Now you handle both.

The tax is charged on 92.35% of your net earnings. You can deduct half of it when you figure your adjusted gross income.

We worked out an example ourselves from these rates. Say your consulting business makes $60,000 of net profit. After the 92.35% step that's $55,410. Self-employment tax at 15.3% comes to about $8,478. About $4,239 of it (half) is deductible for income tax, and regular income tax comes on top.

The Social Security cap changes every year. The Social Security Administration lists $176,100 for 2025 and $184,500 for 2026. For 2027 it's $192,300. Some IRS pages still show an older figure of $168,600, so use the SSA number. Self-Employment Tax: How It Works and How to Calculate It goes through the full calculation.

April 15: the first estimated payment

The IRS also expects to be paid during the year. If you expect to owe $1,000 or more when you file, you generally must pay estimated tax with Form 1040-ES. Nonresident aliens use Form 1040-ES(NR). If you don't pay, an underpayment penalty (worked out on Form 2210) can apply even if you end up due a refund.

The payments are due on the 15th day of the 4th, 6th and 9th months of the tax year. The last one is due on the 15th day of the first month after the year ends. For calendar year 2026 that gives these dates.

Many consultants move a fixed share of each client payment into a separate tax account. Then the money is there when each payment falls due.

January: the forms your clients send, or don't

Early on, a client will usually ask you for Form W-9. That's how you give them your correct taxpayer number, so they can report what they paid you. Form 1099-NEC is the form the client files to report your pay once it reaches the threshold. It's due January 31.

As your income grows, one more tax rule comes into view. The qualified business income (QBI) deduction is a tax break many small business owners can use. The IRS lists consulting as a "specified service trade or business". Special limits apply to these businesses once taxable income goes above a threshold, so raise it with an accountant as you grow.

The next client is a stranger: finding work beyond your network

Your first clients usually come from people who already know your work, such as former employers, colleagues and partners. A small paid pilot project is a common start. It lowers the risk for the client and gives you a result to show the next one. How to Find Clients for a Service Business covers more ways to find work.

Then comes a client who has never met you. They're trusting a stranger's judgment with their money, so they look the firm up first. In our work with clients, we see partners checking young companies more and more through AI tools. They also look at the company's Google profile and at reviews on Google, Trustpilot and similar sites.

Whatever comes up when someone searches your firm's name or asks an AI tool about it forms their first impression. When very little comes up, the client has little to base trust on. A new consulting business usually needs to show these things:

• a website or landing page that says who you help, with what, who's behind the firm and how to reach you
• a business email address on your own domain
• evidence of results: short case studies, real numbers and testimonials from real clients
• professional profiles, LinkedIn in particular, that describe the same services as the website
• reviews on platforms your clients actually read

Many consultants expect to show up on Google Maps automatically. Google's guidelines allow a Business Profile in two cases. The business has a physical location customers can visit, or it travels to customers. A consultant who works only online, through video calls, may not qualify. Google can suspend profiles that break its guidelines.

The temptation of a few quick reviews

With no reviews yet, you may be tempted to add a few. In August 2024 the FTC announced a final rule, adopted by a 5-0 vote, that bans fake reviews and testimonials. That includes AI-generated ones. The rule also bans these practices:

• buying positive or negative reviews
• posting reviews by insiders without disclosure
• running "independent" review sites the company controls
• suppressing reviews
• buying fake followers or views

The FTC can seek civil penalties against people who knowingly break the rule. Real reviews take longer to collect, but they hold up when a careful client looks closely. How to Tell if a Business Is Legitimate, and How a New Business Looks Credible covers what clients look for.

Building your own website and profiles is realistic if you have time and a clearly defined offer. The hard parts are describing your own work clearly and keeping everything up to date. Outside help makes more sense if you live outside the US or many pieces need to be in place at once. It also helps if you'd rather spend those weeks working with clients. That is the kind of work we do for new companies. We build the landing page and social media pages, and set up a Google profile where the firm qualifies.

If you run the firm from outside the US

If you live outside the US, you can still run a US consulting company. But a few rules work differently for you. If your principal place of business is outside the US, the online EIN tool isn't open to you. You apply offline instead, by phone, fax or mail. Nonresident aliens who owe estimated tax use Form 1040-ES(NR).

Beneficial ownership (BOI) reporting changed too. FinCEN issued a final rule on August 11, 2026. It took effect on August 14, 2026. Under it, companies formed in the US no longer have to file.

Foreign companies registered to do business in a US state after March 26, 2025 still have 30 days to report. And US clients can't visit your office. So what they find about you online carries even more weight.

Where new consultants slip in the first year

Looking back, the common mistakes all tie back to the moments above:

1. Offering consulting on everything. A vague offer is hard to buy. "I help logistics companies reduce late deliveries" is easier to accept than "business consulting".
2. Working without a written contract. Then any scope dispute comes down to one person's word against another's.
3. Setting no money aside for taxes. Self-employment tax and income tax together make a big bill if you saved nothing during the year.
4. Assuming no 1099 means no tax. With the $2,000 threshold you'll get fewer forms, but the income is taxable in full.
5. Mixing personal and business money. It makes bookkeeping and tax filing harder.
6. Skipping the license check in a regulated field.
7. Using invented reviews or testimonials. That can turn a trust problem into a legal one.
8. Pricing like an employee, without covering the hours you can't bill.

What to do this month

Check the license rules for your city, state and field before you take paid work. Set money aside for tax from your first invoice, even if no 1099 arrives. Put every job in a written contract, however friendly the client.

Then search your firm's name the way a new client would and see what comes up. If you live outside the US or need many pieces in place at once, that's the point where outside help pays off. How to Find Clients for a Service Business covers where that first work can come from.