Business formation is the planning, preparation and registration process for starting up a business. This includes everything from the choice of name and business structure to its state of registration and location of the actual business premises. Depending on these basic choices, other issues have to be looked into, including permits and licenses, financing and insurance.
See the business formation checklist below to make sure you do not miss anything as a new startup:
The first order of business is to decide on the type of business structure. It is a complex issue, and there are pros and cons to every structure from sole proprietorship to partnerships, limited liability companies and corporations. This has to be decided based on the size and type of the business and forecasts for future growth or direction.
But the basic factors that impact this decision are liability, regulatory compliance requirements, control of the business and taxes. For example, partners have the advantage of pass-through taxation, but they are all liable for all of the business debt and decisions or actions taken by any partner on behalf of the business. Similarly, incorporation in states like Delaware has considerable tax advantages, even if your business premises and activities are actually somewhere else.
Would you like to know more about the laws surrounding business formation? Our business lawyers can help. Contact a business law attorney near you today for more information.
Did you know?
Most businesses will need to apply for an Employer Identification Number (EIN).
A federal EIN application has to be made with the IRS. It is a free service and can be applied for online or by telephone, fax or mail.