How to Start a Web Development Company

Web development companies differ significantly from web design businesses, in that a web design company creates layouts and visuals for a website owner. The web designer is more concerned with user interface and design, while a web developer creates software and applications that power the website using basic and advanced coding.

However, some developers offer both design and development services. Web developers usually start as freelancers and enlist the help of other developers. Other developers can be contractors or in-house employees, depending on the size of your business.

You may also be interested in additional online business ideas.

Learn how to start your own Web Development Company and whether it is the right fit for you.

Ready to form your LLC? Check out the Top LLC Formation Services.

Start a web development company by following these 10 steps:

  1. Plan your Web Development Company
  2. Form your Web Development Company into a Legal Entity
  3. Register your Web Development Company for Taxes
  4. Open a Business Bank Account & Credit Card
  5. Set up Accounting for your Web Development Company
  6. Get the Necessary Permits & Licenses for your Web Development Company
  7. Get Web Development Company Insurance
  8. Define your Web Development Company Brand
  9. Create your Web Development Company Website
  10. Set up your Business Phone System

We have put together this simple guide to starting your web development company. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Web Development Company Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

  • Your state's business records
  • Federal and state trademark records
  • Social media platforms
  • Web domain availability.

It's very important to secure your domain name before someone else does.

Want some help naming your web development company?

Business Name Generator

What are the costs involved in opening a web development company?

Basic costs for starting a web development company are minimal. All that’s needed is a computer and some office space. Total costs should not exceed $5,000. Most of the cost will be wrapped up into a good quality laptop or desktop, ample screen space (using multiple screens for design work), a business phone, a pro-grade text editor, and design reference books.

Marketing costs may run you between $2,000 and $5,000 in the first year. This is especially true if you plan on doing any type of direct mail.

What are the ongoing expenses for a web development company?

Ongoing expenses are minimal. Web development companies with offices pay utilities and rent like every other business, which makes up the majority of the ongoing costs. Other costs, like office supplies, tend to be minimal. Costs like cloud storage, time tracking software, and project management software, vary based on the needs of the developer.

Some developers find it helpful to include project management and “whiteboard” apps like Basecamp. These project management applications also make collaboration with clients easier and more streamlined. They work well when you primarily work with clients over the Internet.

Who is the target market?

Ideal clients are corporate clients that have a need for extensive coding and application deployment. Most web design companies try to avoid small projects or projects which have a high overhead and low profit margin.

How does a web development company make money?

Web development companies make money by charging clients an hourly or flat fee for coding websites.

How much can you charge customers?

Entry-level pricing for web developers is between $25 and $100 per hour for small projects. Average pricing is $100 – $200 per hour. Project costs are often calculated or estimated in advance. Any work that goes over this amount is then cleared with the client before more work is performed. This helps set budgets and expectations for the client.

Some web developers charge flat fees for projects. Usually, the flat-fee arrangement is appropriate when a project is similar to other past projects the developer has done and there is a template or guide the developer will use for the current project.

How much profit can a web development company make?

Profit potential is high for this type of business since costs are relatively low. A one-person web development company can clear $65,000 per year. If you have a team of developers, profit potential is much higher. For example, a 5 person company could clear $400,000 to over $1 million in revenue, depending on average project size and hourly rate.

How can you make your business more profitable?

To make your web development business more profitable, consider adding additional services like web hosting and storage. An integrated CMS platform will also help increase revenue. All these revenue sources are scalable so even if you cannot provide development services to clients, you can sell them hosting, storage, and content management platform services.

Some development companies also offer design services or partner with web designers and collect a “finder’s fee.”

Want a more guided approach? Access TRUiC's free Small Business Startup Guide - a step-by-step course for turning your business idea into reality. Get started today!

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your web development company is sued.

Form Your LLC

Read our Guide to Form Your Own LLC

Have a Professional Service Form your LLC for You

Two such reliable services:

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

You can acquire your EIN through the IRS website. If you would like to learn more about EINs, read our article, What is an EIN?

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

  • Separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • Makes accounting and tax filing easier.

Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.

Get a business credit card

Getting a business credit card helps you:

  • Separate personal and business expenses by putting your business' expenses all in one place.
  • Build your company's credit history, which can be useful to raise money later on.

Recommended: Apply for an easy approval business credit card from BILL and build your business credit quickly.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a web development business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.

Services Contract

Web development businesses should require clients to sign a services agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership (who will ultimately own the site’s design). Here is an example of one such services agreement.

Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your web development business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

FInd out what types of insurance your Web Development Company needs and how much it will cost you by reading our guide Business Insurance for Web Development Company.

STEP 8: Define your brand

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.

Recommended: Get a logo using Truic's free logo Generator no email or sign up required, or use a Premium Logo Maker.

If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.

How to promote & market a web development company

Promoting your business is going to take work. Find a mailing list of business owners who have purchased design services in the last year and mail them your offer. These leads are most likely to want to buy design services from you. Alternatively, send out flyers to local businesses.

How to keep customers coming back

Differentiate yourself by specializing in certain industries. For example, if you become known as a web designer for restaurants, it will be easier for you to dominate that market. If you specialize in designing websites for consultants or doctors or financial planners, you it will decrease your competition. Clients want to work with specialists, not generalists.

STEP 9: Create your business website

After defining your brand and creating your logo the next step is to create a website for your business.

While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldn’t delay building your website:

  • All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
  • Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
  • Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.

Recommended: Get started today using our recommended website builder or check out our review of the Best Website Builders.

Other popular website builders are: WordPress, WIX, Weebly, Squarespace, and Shopify.

STEP 10: Set up your business phone system

Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.

There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.

Recommended Business Phone Service: is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.

Is this Business Right For You?

This business is ideal for people who love problem-solving. Because the work entails a fair amount of computer screen time, business owners need to be comfortable with using computers, typing, and manipulating computer code.

While the business might require long hours, it’s not absolutely required that owners work weekends and holidays.

Attention to detail is very important in this line of work, as is the ability to meet deadlines.

Want to know if you are cut out to be an entrepreneur?

Take our Entrepreneurship Quiz to find out!

Entrepreneurship Quiz

What happens during a typical day at a web development company?

Day-to-day activities include coding and invoicing clients. Most web development companies also spend considerable time training coders and freelancers for on-spec work. A lot of time is spent reading and replying to emails, analyzing reports, attending meetings, and doing phone conferences with clients. You may also spend significant time face-to-face with clients.

Some clients and projects require you to be on-site to complete the work. This includes planning the backend design of the site, or how the content, words, pictures, animations, and videos are structured. It may also include coding of applications into the site to allow for flash presentations, custom apps like calculators or slideshows, and tracking software.

Sites need to be tested extensively for bugs. This is especially important on larger commercial sites that receive a lot of traffic. The site needs to be secure as possible. Revisions may need to be made, checked and rechecked.

What are some skills and experiences that will help you build a successful web development company?

The necessary skills for web development can be acquired through college courses, or online courses. Either way, it is essential to be well-versed in web development in order to meet clients’ needs. Developers should be well-versed in fundamentals of design imaging, basic web design, principles of animation, multimedia design, content management, editing for video and audio, and multimedia programming and technology.

A variety of certifications can also be obtained. However, no specific certification is required to begin a web development company. It may help to work for an established web developer prior to starting your own business to get a handle on the trends in the industry.

What is the growth potential for a web development company?

Growth potential for a web development company is unlimited. They can be operated as a one-person business or bloom into a large company with thousands of employees. Small companies tend to work with small business owners. Larger companies can handle corporate accounts and the unique needs of those types of companies.

Not sure if a web development company is right for you? Try our free Business Idea Generator and find your perfect idea.

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Take the Next Step

Find a business mentor

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

Learn from other business owners

Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.

Resources to Help Women in Business

There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:

  • Funding
  • Events
  • Guides
  • Support

If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.

What are some insider tips for jump starting a web development company?

Getting up and running in this business is simple, but controlling costs is essential. Do not skimp on the computer, but feel free to buy everything else used. Aim for professional or business clients that can afford ongoing work so you can establish a base level of revenue and income.

How and when to build a team

Building a team is optional. If you decide to build a team, do it only when you have enough revenue to justify another developer. Most development companies start out by hiring independent contractors. This keeps your costs low while also allowing you to earn revenue needed to expand and grow. The problem with this approach is that your contractors won’t be as loyal as employees.

At some point, consider hiring people on full-time. Full time employees come with the additional labor costs of insurance and benefits but may be more loyal than independent contractors.

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