Every league has its own rules. Often, this year's rookies are drafted along with the rest of the players, but there's a separate draft for players who'll be starting the year in the minors. And just about every league includes adds and drops during the season.
There's no single right way to set up a league - pick a format that sounds fun, and take it from there. Your first decision will probably be whether to include player contracts or not - both work well, and both have (very adament) supporters.