How to Start a Prop Firm: A Complete Step-by-Step Guide

Starting a prop firm can be a smart way to build a profitable business—especially if you understand trading and want to scale it up. A prop firm (short for "proprietary trading firm") allows you to fund traders, share in their profits, and grow a real financial operation.

This guide will walk you through everything you need to know—from setting up the legal side, choosing your tech, recruiting traders, all the way to marketing your firm. Whether you're going solo or considering a white-label setup, you’re in the right place.

Step 1 – Legal Setup for Your Prop Firm

Before you can start hiring traders or building a platform, you need to make your business official. That means setting up the legal side first.

Registering Your Business

Most prop firm founders register as an LLC (Limited Liability Company) or a Corporation (like an S-Corp or C-Corp). LLCs are popular because they’re simple to manage and offer liability protection. But if you’re planning to raise money or grow fast, a corporation might give you more flexibility.

Make sure your business name is unique and available in your state or country. Check domain availability too—your brand starts here.

Choosing Where to Incorporate

Where you register matters. Some founders choose to incorporate in places like Delaware (USA) because of business-friendly laws. Others pick countries with simpler regulations or better tax advantages. Think about where your customers (traders) are, and where you’ll be operating from.

Tip: If you’re going global, look into payment processing and compliance laws in those countries too.

Do You Need a License?

Good news: most online prop firms don’t need a financial license if they’re not holding customer deposits. That’s because you’re giving traders access to your capital, not managing theirs.

But still—make sure to talk to a lawyer who understands trading businesses. Rules can change depending on your model and your region.

Basic Compliance You Should Know

Even without a license, you still need some basic compliance steps:

• Have clear terms and conditions for your traders.

• Make sure you’re following anti-money laundering (AML) basics.

• Keep records of trades and payouts.

• Be transparent about your funding rules and profit splits.

This keeps you protected and builds trust with your traders.

For a full list of what you need, check out this: Legal Checklist for Starting a Prop Firm

Step 2 – Choose Your Prop Firm Business Model

Now that the legal stuff is handled, it’s time to pick the kind of prop firm you want to run. There are two main paths: build everything yourself (in-house) or use a white label setup.

Build Your Own (In-House)

This is the full control option. You set up your trading platform, manage your tech, create your trader programs, and handle risk settings. You’ll have more flexibility—but also more responsibility.

Pros:

• Total control over how everything works

• Custom features and branded experience

• No revenue split with platform providers

Cons:

• Takes longer and costs more to set up

• You’ll need a tech team or at least trusted devs

• You're responsible for everything (bugs, updates, compliance, etc.)

This option is great if you want to create a long-term brand and can afford the upfront work.

Use a White Label Prop Firm

If you want to launch fast without building everything from scratch, this is your shortcut. A white label provider gives you a ready-to-use platform. You just add your logo, set your trader rules, and start selling evaluations.

Pros:

• Launch quickly

• No need to worry about platform bugs or updates

• Tech and support handled for you

Cons:

• Monthly fees or revenue sharing

• Limited control over certain features

• Less unique (you’ll be using a shared platform)

If you’re just testing the waters or want to focus more on marketing than tech, white label is a solid choice.

Not sure which path is right for you? Start with white label, then switch to in-house later when you're ready to scale.

Want to dive deeper into this model? Check out: White Label Prop Firms: What They Are & How to Launch One

Step 3 – Build Your Technology Stack

Whether you're going white label or in-house, your tech stack is the engine of your prop firm. It's what powers your trader experience, handles risk, and keeps everything running smoothly.

Here’s what you need to think about:

Trading Platform

This is the core of your operation. Most firms go with trusted platforms like:

• MetaTrader 4/5 (MT4/MT5) – Popular, reliable, widely used by forex traders.

• cTrader – Great for UI and analytics.

• DXtrade – More flexibility and used often by white label firms.

Choose a platform that fits your trader niche and budget. If you're using white label, this may already be included.

Risk Management Tools

You need software that tracks trader performance in real time. This includes:

• Daily drawdown limits

• Maximum loss tracking

• Trade monitoring & auto-liquidation if needed

Some firms build their own, while others use third-party tools like Finotive Risk, PayoutHub, or RiskDesk.

Payment Processors

You’ll need to accept payments for trader evaluations or challenge fees. Popular options:

• Stripe

• PayPal

• Crypto gateways (like Coinbase Commerce or NowPayments)

Make sure your provider allows prop firm models (some don’t—read the fine print).

CRM (Customer Relationship Management)

A CRM helps you keep track of customers, send emails, manage support tickets, and upsell. Tools like HubSpot, Zoho, or Freshdesk are good starting points.

Analytics & Trader Dashboard

Give your traders a clean dashboard to view stats, rules, payouts, and progress. This improves transparency and builds trust.

Step 4 – Compliance & Risk Management

Even if you don’t need a financial license, you still need to play it smart. Having the right rules in place protects both your business and your traders. Think of this as your “safety net” layer.

Set Clear Trading Rules

Every prop firm needs a rulebook. This is what sets the boundaries for your traders. Your rules should cover:

• Daily loss limits

• Overall max loss

• Max leverage allowed

• What instruments can be traded

• Trading hours (e.g., avoid high-risk news events)

These rules help manage risk—and also make it easier to spot high-quality traders.

Transparent Evaluation & Payout Terms

If you're charging for challenges or evaluations, make your terms super clear:

• What happens if someone passes or fails

• How payouts work (profit splits, timeframes)

• Whether there's a scaling plan or bonus structure

This builds trust and prevents complaints down the line.

Anti-Money Laundering (AML) Basics

Even if you're not a bank, it's smart to follow basic AML steps:

• Ask for ID verification (KYC) before withdrawals

• Use tools to spot suspicious behavior (like wash trading)

• Keep transaction records

Tools like Sumsub, Trulioo, or even Stripe Identity can help automate this.

Protect Your Business

A few more best practices:

• Add terms & conditions and a privacy policy to your site

• Consider getting business insurance

• Work with a lawyer who understands trading platforms

Need a complete legal prep guide? Check out: Legal Checklist for Starting a Prop Firm

Step 5 – Recruit Your First Traders

Once your firm is set up, it’s time to get people trading with you. Finding good traders is one of the most important parts of building a strong prop firm.

Here’s how to make sure you attract the right ones:

Build an Offer Traders Actually Want

The best traders are picky. They’ll compare your firm to others. So make your offer competitive:

• Fair evaluation rules (not impossible to pass)

• Attractive profit splits (like 70%–90% to the trader)

• Reasonable fees (don’t overcharge for challenges)

• Scaling plans (bigger accounts for consistent traders)

If your rules are too harsh or your payout is too low, good traders will go elsewhere.

Show Your Credibility

New traders won’t just trust you right away. You need to look and act legit:

• Publish clear funding rules and payout proof

• Post trader testimonials or reviews (even from early beta users)

• Get verified on social media if possible

• Build a professional-looking website (no sketchy templates)

First impressions matter—a lot.

Create a Trader Community

Starting a Discord server, Telegram group, or Slack channel can help build a real community around your firm. Let traders hang out, ask questions, and share results.

When traders feel like they’re part of something real, they stay longer—and bring friends.

Want to learn what you need in place before you start recruiting? Check out: What You Need to Build Before Attracting Traders to Your Prop Firm

Step 6 – Branding & Marketing Setup

You could have the best prop firm in the world, but if nobody knows about it... it won’t matter. This is where branding and marketing come in. You need to build a brand traders trust—and get the word out.

Build a Strong Brand Identity

Your brand is more than just a logo. It’s the feeling people get when they hear your firm’s name.

Start with:

• A simple, memorable brand name

• A clean logo (hire a designer if you can)

• Consistent colors, fonts, and tone of voice across your site, social media, and ads

You want traders to recognize you and feel like your firm is professional, trustworthy, and serious about success.

Launch Your Website

Your website is your home base. It should:

• Clearly explain how your funding programs work

• Highlight your rules, payouts, and trader benefits

• Show trust signals (reviews, payment proof, legal info)

• Make it easy to sign up or buy a challenge

Pro tip: Keep it clean. Avoid messy layouts and hard-to-read text. You want people to feel safe trusting you with their time and money.

Need help building your site? Check out: Website Development for Launching a New Prop Firm

Start Marketing (Even Before Launch)

Marketing isn't something you start after launching—it’s part of the launch.

Here’s a simple starting checklist:

• SEO: Start a blog targeting keywords like "best prop firms for beginners" or "how to pass prop firm challenges"

• Paid Ads: Try Facebook Ads, Instagram, or Google Ads targeting traders

• Social Media: Open accounts on Instagram, Twitter, LinkedIn, and TikTok (wherever your traders hang out)

• Email Marketing: Offer something free (like a trading checklist) to collect emails early

New to digital marketing? Get a full intro here: How to Start Digital Marketing

Need a full launch checklist? Use this: Checklist: 10 Essentials to Launch Your Prop Firm Smoothly

Final Thoughts: You’re Ready to Build Something Big

Starting a prop firm isn’t easy—but it’s 100% possible if you plan smart, stay compliant, and build trust with your traders.

If you ever feel stuck, just come back to this guide. And remember:

• Set up your legal foundation

• Choose your model wisely

• Build clean tech and risk systems

• Market your brand with confidence

Start strong—and grow your prop firm into a real powerhouse.