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In this video tutorial, viewers learn how to properly set up business letters in Microsoft Word. The first step is changing the top margin from 1 inch to 2 inches. This is done by navigating to Page Layout, selecting Margins, and then choosing Custom Margins to set the top margin to 2 inches. After confirming the adjustment, the cursor will reposition accordingly. The next part of the tutorial involves adjusting the font style, size, and spacing options before proceeding with the letter composition. The tutorial emphasizes making these formatting changes to enhance the overall presentation of the business letter.