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Business Formation QuickStart

by StartupWise

Business formation is a pivotal step for entrepreneurs. It marks the transition from a concept to a legally recognized entity. This process involves several critical decisions and actions. You have to select an appropriate business structure. Then, you must register the business with the state, depending on the type of business structure you choose. You have to get any necessary licenses and permits and set up financial systems.

Business Structures

Each business structure has unique implications for liability, taxation, and operational flexibility. Understanding these aspects is essential for compliance with legal requirements. It also helps lay a stronger foundation for future success.

The main business legal structures are:

Choosing a Business Structure

Selecting the right business structure is a pivotal decision for entrepreneurs. This choice significantly impacts your company’s liability protection. It also affects your tax obligations and operational flexibility. Factors such as the type of business, the potential need to hire employees, and plans for business development play crucial roles. All these factors should be considered when choosing a business structure.

First, explore the different types of business entities in more depth with these articles:

  • Types of Business Structures — Learn about all the different types of business structures in one place

  • What Is a Business Entity? — Discover what a business entity is using this overview article

  • Sole Proprietorships — Learn the key facts about sole proprietorships, the simplest business structure

  • Partnerships — Learn important information about partnerships, a type of business structure

  • Corporations — Learn how to set up a corporation and key tax information, and read an FAQ about corporations

  • Limited Liability Companies (LLCs) — Learn the key facts about LLCs

  • Nonprofit and Tax-Exempt Organizations — Learn the pros and cons of running a nonprofit

Use these articles to compare and contrast the different business structures:

  • Choosing a Legal Structure — Overview of resources about choosing the right business structure for you

  • Benefits and Drawbacks of Different Types of Business Entities — Compare business entities

  • Business Form and Management of the Business: Pros and Cons — Learn how different business structures are managed

  • Business Form and Taxation: Pros and Cons — Compare taxation methods and implications of each legal entity

  • Business Structures: Which One Is Best for Your Business — Learn about which factors to consider

  • Do’s and Don’ts: Choosing a Business Form — Learn what to do and what not to do when choosing a business entity form

  • Picking a Business Form: X Things to Consider — Discover X essential factors you should consider

  • Investor Issues to Consider When Choosing a Business Structure — Different factors for investors to consider

Registering Your Business

Registering your business with the state is a fundamental step in legitimizing your enterprise. It involves filing necessary documents with the state’s office, typically the Secretary of State. This process formalizes your business entity. It also includes obtaining a tax ID number, which allows you to open a bank account for your business. This number is called an employer identification number (EIN). It is essential for tax purposes with the Internal Revenue Service (IRS).

  • Employer Identification Number (EIN) FAQ — Learn key details about EINs from the IRS

  • How To Get an EIN — Discover how to get an EIN

  • Business Accounting — Learn best practices for business accounting

  • The Basics of Business Accounting for Small Businesses — Uncover the basics of accounting

You might also need to register your “doing business as’ (DBA) name and appoint a registered agent for legal correspondence. You’ll need to get the necessary business licenses and permits.

Finally, you will need to create a robust business plan.

  • Choosing Your Business Name — Learn about naming your business

  • X Steps for Choosing Your Business Name — A X-step process for choosing a name for your business

  • Choosing a Business Name FAQ — Uncover answers to our frequently asked questions about choosing a name for your business

  • Registering the Name of Your Business — Learn how to register the name of your business with the appropriate state agency

  • What Is a DBA? — Learn about “doing business as” (DBA) names

  • DBA Registration — Uncover essential details about registering your DBA name

  • Business Licenses and Permits — Learn about the needed mandatory licenses and permits

  • Licenses and Permits Overview — Discover key facts about essential licenses and permits

  • Creating a Business Plan — Learn about creating a robust business plan for your business

  • Business Plan Overview — Uncover essential details about building a business plan

Starting a Partnership

Starting a partnership involves teaming up with one or more individuals to manage and operate a business. You share profits, losses, and decision-making responsibilities. This business structure is ideal for collaboration and pooling resources. It requires understanding aspects like liability protection, partnership agreements, and tax implications.

Here are key articles about partnerships provided by StartupWise:

  • Partnerships — Read articles, checklists, and various resources pertaining to business partnerships

  • Types of Partnerships — Discover the different types of partnerships

  • The Small Business Partnership: General and Limited Partnerships — Learn about limited and general partnerships

  • LLCs vs. LLPs — Learn the difference between LLCs and limited liability partnerships (LLPs)

  • Checklist: Starting a Partnership — Read a step-by-step list to help you form a partnership

  • Creating a Partnership Agreement — Read an overview of a partnership agreement

  • Partnership Taxes — Learn how partnerships handle taxes amongst their members

Incorporating a Small Business

Incorporating a small business transforms it into a legal entity. This means it’s separate from its owners, offering liability protection for personal assets. It also establishes a formal structure with a board of directors. This process involves drafting the articles of incorporation. You must also register with the secretary of state. You must also understand the implications of corporate taxes and potential double taxation.

  • Corporations — Various articles and FAQ about corporations

  • Professional Corporations — Learn about these specific types of corporations

  • How To Start a Corporation — List of crucial steps for starting a corporation

  • How To Incorporate a Business — In-depth information about the process of incorporation

  • Pros and Cons: Why Form a Corporation? — Consider the pros and cons of forming a corporate business structure

  • C Corps and S Corps: Key Tax Differences — Compare C corporations and S corporations

  • Small Business Corporation FAQ — Learn our answers to FAQ about small business corporations

  • The Basics of Small Business Incorporation — Learn about incorporating your business

  • Writing and Filing the Articles of Incorporation — Learn about this important document

  • Incorporating in Delaware: Is It Worth It for My Small Business? — Consider whether incorporating in this business-friendly state is the right choice for you

  • Choosing a State To Incorporate Your Business In — Learn what to consider when choosing where to incorporate your business

After incorporating your business, you might consider the following articles as next steps:

  • Shareholders, Dividends, and Taxes — Learn about these key components of corporations

  • What Are the Ongoing Legal Obligations of a Corporation? — Discover the standards corporations must uphold to remain compliant with state laws and federal laws

  • Writing Corporate Bylaws — Learn about this key document and how to draft them

  • Corporate Structure: From Directors to Shareholders — Familiarize yourself with the corporate structure

Starting an LLC

Starting a limited liability company (LLC) offers entrepreneurs a flexible business structure. This structure combines the liability protection of a corporation with the tax efficiencies and operational flexibility of a partnership. This process involves filing articles of organization with the state’s office. You also need to create an LLC operating agreement. You must also understand the implications for personal assets and tax returns. Finally, understand the potential self-employment tax considerations.

  • Limited Liability Companies (LLCs) — Articles, checklists, and other resources about LLCs

  • Checklist: Starting an LLC — Step-by-step primer to help you start an LLC

  • How To Form an LLC — Detailed overview of how to form an LLC

  • What Are Articles of Organization? — Learn about the articles of organization

  • How To Write and File the Articles of Organization for Your LLC — Discover how to write and file this essential document with the state

  • Making LLC Operating Agreements — Learn about the LLC operating agreement

  • Sample LLC Operating Agreement — Access a sample LLC operating agreement

  • Self-Employment Tax — Learn about self-employment tax for Social Security and Medicare

Forming a Nonprofit Organization

Forming a nonprofit organization involves establishing a legal entity. This entity is dedicated to a mission that benefits the public or a specific community rather than pursuing profit. This process includes choosing an appropriate name and filing articles of incorporation with the state’s office. You will also need to apply for tax-exempt status, typically as a 501(c)(3) organization, through the IRS.

  • What Is a Nonprofit? — Learn the basics about nonprofit organizations

  • Checklist: Starting a Nonprofit Corporation — Important steps to follow when starting a nonprofit

  • How To Form a Nonprofit — In-depth information about forming a nonprofit

  • Writing and Filing the Articles of Incorporation — Learn how to write and file with the state

  • Nonprofit and Tax-Exempt Organizations — Government resources, guides, and articles related to nonprofit organizations

  • Becoming a Tax-Exempt Organization — Discover how to apply for tax-exempt status

  • Keeping Your Nonprofit Tax-Exempt Status — Learn how to maintain your tax-exempt status

State Resources

State resources play a crucial role in guiding entrepreneurs. They offer essential information, tools, and support services. The secretary of state’s office or local business development agencies often provide these resources. They help with choosing the right business structure. They can also help with filing necessary documents. Finally, they can help you understand specific state-level regulations and requirements.

  • State Guide: Corporations Offices — Links to corporate offices in all 50 states plus Washington, D.C.

  • State Guide: Forms and Filing Fees for Business Formation — Links to state-specific information

  • State Guide: Tax Agencies — Links to the tax agencies of all 50 states plus Washington, D.C.

Tax Information From the IRS

The IRS provides comprehensive tax information critical for businesses. This guides them on various aspects of federal tax obligations, filings, and compliance. This includes detailed guidelines on tax requirements for different business structures.

  • Tax Forms: Sole Proprietorships — Filing requirements of sole proprietorships, with applicable tax forms

  • Tax Information for Partnerships — FAQ, updates, tutorials, and related tax information for partnerships

  • Tax Forms: Partnerships — Filing requirements of partnerships with applicable tax forms

  • Tax Information for Corporations — Collection of FAQ and tax information for corporations

  • Tax Forms: S Corporations — Filing requirements of S corporations, with applicable tax forms

  • Tax Information for LLCs — Overview of tax requirements for LLCs

  • Tax Information for Nonprofits — Various updates and guides about the filing requirements

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Choosing a Legal Structure for Your Small Business? We Can Help

There are many processes that entrepreneurs can do on their own, including some tasks related to business formation. But many prospective business owners find it beneficial to go through an easy-to-use, reputable online service to form their business.

If you have specific questions about forming your business, you may benefit from the help of a trained lawyer. You can get started today by finding an experienced business organization attorney near you.

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