Determine what kind of label you are going to start. Thousands of record labels are out there, so you want to carve a niche. For example, while there may be tons of hip-hop labels, you might decide to start a political hip-hop label and sign bands with a political message in their lyrics. The beginning is also the time to decide the scope of your label---whether you want to do it just for fun or intend on making a profit. Remember, it's hard enough just getting a music label off the ground, let alone turning one into a money-making machine.
Name your label. Come up with an original name that doesn't sound too similar to another label. Check online databases and sites like the U.S. Copyright Office to see if another record label or music business already exists with your name.
Find funds. Running a successful music label requires capital. You need to pay for promotion, CDs, graphic design, a web site and many more obligations. If you know someone who might be interested in running the label with you and who has some money and expertise to offer, consider starting a business partnership.
Register as a business. Decide how you are going to structure your business, whether it is a sole proprietorship, a corporation or an LLC (limited liability company).
Scout bands. Search on sites like ReverbNation, MySpace and Purevolume. Go to shows, and watch new bands play. Take your friend's advice to check out certain bands. Negotiate contracts with these bands.
If the bands you sign have no current music to market, work on getting their music recorded. If you can, pay for all or part of the recording costs. If not, at least set up the bands with a cost-effective recording session that will yield something of releasable quality.
Release your artists' music. Press CDs by contacting manufacturing companies like Disc Makers or Oasis Disc Manufacturing. Set up a deal with a distribution company to distribute the music digitally and physically.
Promote your bands and their music. Contact terrestrial and Internet radio stations. Buy ads in trade magazines. Spread the word on social networking sites like MySpace and Facebook.