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Business Formation QuickStart

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.

Each choice 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:

  • Sole Proprietorship
  • Partnership
  • Limited Liability Company (LLC)
  • Corporation
  • Nonprofit

The following resources will help you get started with the process of creating a legal structure for your new business.

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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:

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

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).

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.

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 FindLaw:

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.

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

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.

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.

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.

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.

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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