How to start a government contracting business from scratch
The steps before your first bid: a legal structure, an EIN and bank account, SAM.gov registration and NAICS codes, insurance and bonding, working capital, and free help.
Choose a legal structure and name
Decide on the structure before registering anything, because your tax records, SAM.gov registration and contracts all follow it. A sole proprietorship is simplest but leaves your personal assets exposed to business debts; an LLC or corporation separates them, with more filings and upkeep. Your state sets the rules for forming either; an accountant or attorney can help you choose.
The legal name must match across your IRS records and SAM.gov. A DBA (doing business as) name is a separate filing and doesn't replace the legal name in federal systems.
Get an EIN, a bank account and a physical address
Get an Employer Identification Number (EIN) from the IRS: SAM.gov registration needs your taxpayer ID, and an EIN keeps your Social Security number off business records. Open a bank account in the business's legal name; federal payments go electronically to the account in your SAM registration.
SAM.gov needs a physical address for the business, not a P.O. box; a home address works if the business operates there, and a separate mailing address can be listed. Check SAM.gov's current instructions before using a virtual office.
Register in SAM.gov and pick your codes
You must be registered in SAM.gov when you submit an offer or quote (FAR 4.1102), with a few narrow exceptions. Registration is free and gives you a Unique Entity ID; a UEI alone isn't enough to bid, so complete the full registration with representations and certifications. It can take several weeks, and must be renewed every year.
List the NAICS codes for the work you can actually do. Each solicitation has one NAICS code, and your size is measured against that code's SBA size standard, which decides whether you can compete for its small-business set-asides. The 8(a), HUBZone, women-owned and service-disabled veteran-owned programs each have their own eligibility rules and applications.
Insurance, bonding and working capital
- Insurance: each solicitation sets its own requirements; general liability and workers' compensation are common, and your state may require workers' compensation once you hire. Ask a broker what contracts in your field require.
- Bonds: federal construction contracts above the Miller Act threshold (FAR part 28) need payment and performance bonds, and bid bonds are often required too. Sureties look at your credit, finances and track record, so a new company may be limited in bond size.
- Working capital: the government pays after the work is accepted and invoiced, usually 30 days later. You need enough cash for payroll, materials and insurance in between; write a budget for your first contract before you bid.
Get free help
APEX Accelerators (formerly Procurement Technical Assistance Centers), funded by the Department of Defense, give free one-on-one help with registration, certifications and finding bids. Small Business Development Centers help with the business plan and financing.
On SpendQuery
Official sources
Questions people ask
Can I use my home address as my business address?
Usually, if the business actually operates there; SAM.gov needs a physical address (no P.O. boxes) and lets you list a separate mailing address. Check SAM.gov's instructions before using a virtual office.
Do I need insurance before I can bid?
Not always to bid, but many solicitations require specific coverage by award. Read each solicitation's insurance requirements, and note your state may require workers' compensation once you have employees.
How much money do I need to start?
Registering in SAM.gov is free. The real need is working capital: enough to pay staff, materials and insurance until the government pays, usually 30 days after a proper invoice and acceptance. Budget your first contract before you bid.
Should I form an LLC or stay a sole proprietor?
It depends on your liability, taxes and state rules. An LLC separates business debts from personal assets but needs filings and upkeep; ask an accountant or attorney.
Is there free help for new government contractors?
Yes: APEX Accelerators (formerly PTACs) give free counseling on registration, certifications and bidding, and Small Business Development Centers help with the business side.
More guides
- How to find government contracts
- What is a small business set-aside?
- How to read a SAM.gov contract notice
- How to register in SAM.gov
- NAICS codes and small-business size standards
- Federal contract types, explained
- How to market your business to government buyers
- Sole-source contracts for small businesses
- Joint ventures and the SBA Mentor-Protégé Program
- Size protests and certificates of competency
- How to decide whether to bid on a government contract
- How to find federal grants
- The federal fiscal year-end spending rush
- What are the easiest government contracts to get?
- FY2026 federal contract spending: which agencies grew and shrank
- Government contract lists: open bids, awards and small business
- Who buys janitorial services from the federal government
- How government contractors get paid: timing, invoices and factoring
- How to respond to RFIs and sources-sought notices
- Subcontracting on federal contracts: finding and vetting subs
- Who won federal IT support contracts in your state
- A free tool to ask government spending questions in plain English
- How to find federal bids your small business qualifies for
- How to find which federal agencies buy your product or service
- Free tools to search state and local government contracts
- How to understand the FAR without reading all of it
Updated 2026-10-20. General information, not legal advice; the solicitation and the FAR govern each purchase.