1. A federal tax ID number.  The IRS says you can use your Social Security Number as a federal tax ID number, but I wouldn’t if I were you.  You will have to give this number out to all of your clients, subcontractors and employees (if you have any), and frankly there aren’t a whole lot of people out there I would want to know my Social Security Number.  Go to the IRS website at www.irs.gov and fill out IRS Form SS-4.  Better yet, have your accountant do it for you so no mistakes are made.  Most accountants I know won’t charge for this service.

2. A state business license.  Next, it's time to register for a state tax identification number, sometimes called a "business license".  Some states require you to collect and pay sales tax when you provide consulting services - check with your accountant to learn your state's rules.  Even if they don't, you still have to register as a business with your state tax authority (and sometimes also your city or town tax authority).  To find your state tax registration form, go to http://www.taxsites.com/State-Links.html to find your state tax authority's website -- once there, click on the "forms and publications" link, then the "business registration" link.  Read the form thoroughly, and call your state tax authority (they usually don't bite) or a local accountant with any questions BEFORE you fill out the form online.     

3. A corporation or limited liability company (LLC).  A corporation or LLC can give you tax breaks, and will make you look like a "real" business.  Many corporate clients will want you to set up one of these anyway, so you might as well do it now.  A good lawyer or accountant can do the job for about $500.  Make sure to sign all documents as a representative of your company (for example, "John Doe, President of XYZ Corp."), not in your individual capacity ("John Doe").

4. A home office.  The home office deduction is one of the biggest tax benefits self-employed people have.  Set aside a spare bedroom in your home, put nothing but business equipment in that room, and make sure it's your only office.  Be careful about working too much at your clients' offices, as the IRS may deny your home office deduction if it's not the place where your principal consulting activities are conducted.

5. A good accountant and lawyer (okay, that's two things).  During your first few months in business you should spend 100% of your time generating business leads, selling your consulting services to prospective clients, and doing work for clients.  You do not have the time to become a legal and tax expert.  Hire a good accountant and a good business lawyer - you need both -- and let them "spoon feed" you information when you need it.  Your lawyer should review EVERY contract a client asks you to sign - you would be amazed at the crazy things some companies put in their consulting contracts.  Talk to your accountant at least monthly; don't wait for tax season, as he or she will be too busy to answer your Zen questions.

6. A supportive spouse or "significant other".  Up to now, your spouse or lover has seen you as a corporate executive or Wall Street professional.  Now they'll be seeing a person hanging around the house wearing pajamas and working on the computer all day.  Be honest and direct with them about the choice you have made, and make sure they're on board.  If they can't or won't follow you where you need to go, ask your business lawyer for a referral to a local divorce professional.  I'm serious.  Better to break up now than face years of misery and heartache from an unhappy or passive-aggressive partner who loved you more the "way you were" than the way you are now.