diff --git a/.gitignore b/.gitignore
index 1262b41..8b7c2d8 100644
--- a/.gitignore
+++ b/.gitignore
@@ -1,3 +1,5 @@
+# Ignore VS Code settings
+.vscode/
 # Logs
 logs
 *.log
@@ -35,4 +37,11 @@ venv/
 env/
 ENV/
 venv.bak/
-pycache/
\ No newline at end of file
+pycache/
+
+# Environment files
+.env
+backend/.env
+
+#next.js
+.next/
diff --git a/backend/README.md b/backend/README.md
new file mode 100644
index 0000000..666559c
--- /dev/null
+++ b/backend/README.md
@@ -0,0 +1,3 @@
+# Backend
+
+Project backend structure and setup instructions.
diff --git a/backend/app/__init__.py b/backend/app/__init__.py
new file mode 100644
index 0000000..2839885
--- /dev/null
+++ b/backend/app/__init__.py
@@ -0,0 +1 @@
+# app package init
diff --git a/backend/app/api/__init__.py b/backend/app/api/__init__.py
new file mode 100644
index 0000000..04823ca
--- /dev/null
+++ b/backend/app/api/__init__.py
@@ -0,0 +1 @@
+# api package init
diff --git a/backend/app/api/routes/__init__.py b/backend/app/api/routes/__init__.py
new file mode 100644
index 0000000..8ebd595
--- /dev/null
+++ b/backend/app/api/routes/__init__.py
@@ -0,0 +1 @@
+# routes package init
diff --git a/backend/app/core/__init__.py b/backend/app/core/__init__.py
new file mode 100644
index 0000000..eebe93b
--- /dev/null
+++ b/backend/app/core/__init__.py
@@ -0,0 +1 @@
+# core package init
diff --git a/backend/app/core/config.py b/backend/app/core/config.py
new file mode 100644
index 0000000..64ba7f2
--- /dev/null
+++ b/backend/app/core/config.py
@@ -0,0 +1,12 @@
+# Configuration settings for FastAPI app
+from pydantic_settings import BaseSettings
+
+class Settings(BaseSettings):
+    database_url: str
+    ai_api_key: str
+
+    model_config = {
+        "env_file": ".env"
+    }
+
+settings = Settings()
diff --git a/backend/app/db/__init__.py b/backend/app/db/__init__.py
new file mode 100644
index 0000000..691cef1
--- /dev/null
+++ b/backend/app/db/__init__.py
@@ -0,0 +1 @@
+# db package init
diff --git a/backend/app/db/database.py b/backend/app/db/database.py
new file mode 100644
index 0000000..f55fa7c
--- /dev/null
+++ b/backend/app/db/database.py
@@ -0,0 +1 @@
+# Database connection setup
diff --git a/backend/app/main.py b/backend/app/main.py
new file mode 100644
index 0000000..1b0dad4
--- /dev/null
+++ b/backend/app/main.py
@@ -0,0 +1,18 @@
+from fastapi import FastAPI
+from fastapi.middleware.cors import CORSMiddleware
+import os
+
+app = FastAPI(title="Inpact Backend", version="0.1.0")
+
+# --- CORS Setup (so frontend can talk to backend) ---
+app.add_middleware(
+    CORSMiddleware,
+    allow_origins=os.getenv("ALLOWED_ORIGINS", "http://localhost:3000").split(","),
+    allow_credentials=True,
+    allow_methods=["*"],
+    allow_headers=["*"],
+)
+
+@app.get("/")
+def root():
+    return {"message": "Welcome to Inpact Backend 🚀"}
diff --git a/backend/app/models/__init__.py b/backend/app/models/__init__.py
new file mode 100644
index 0000000..654e47b
--- /dev/null
+++ b/backend/app/models/__init__.py
@@ -0,0 +1 @@
+# models package init
diff --git a/backend/env_example b/backend/env_example
new file mode 100644
index 0000000..a56d896
--- /dev/null
+++ b/backend/env_example
@@ -0,0 +1,6 @@
+# Example environment file for backend
+
+DATABASE_URL=postgresql://user:password@localhost:5432/inpactdb
+AI_API_KEY=your-ai-api-key-here
+
+ALLOWED_ORIGINS=http://localhost:3000
diff --git a/backend/requirements.txt b/backend/requirements.txt
new file mode 100644
index 0000000..da081ce
--- /dev/null
+++ b/backend/requirements.txt
@@ -0,0 +1,23 @@
+annotated-doc==0.0.3
+annotated-types==0.7.0
+anyio==4.11.0
+black==25.9.0
+click==8.3.0
+fastapi==0.120.3
+h11==0.16.0
+idna==3.11
+mypy_extensions==1.1.0
+packaging==25.0
+pathspec==0.12.1
+platformdirs==4.5.0
+pydantic==2.12.3
+pydantic-settings>=2.0.3
+pydantic_core==2.41.4
+python-dotenv==1.2.1
+pytokens==0.2.0
+ruff==0.14.3
+sniffio==1.3.1
+starlette==0.49.1
+typing-inspection==0.4.2
+typing_extensions==4.15.0
+uvicorn==0.38.0