Congratulations! You have decided to start a business and embrace your entrepreneurial spirit. Forming a business entity does not have to be intimidating or complicated. We can help. We have broken down the formation process into eight simple steps and given you some food for thought.

Choose a Name and Check to see if it is available

Before registering your business, please check your name availability with the state in which you are registering. Each state has unique rules regarding naming and may or may not accept variations of business names.

Check the Domain Name

Your company’s domain name should be as close as possible to the company name filed at the state for brand identity.  Both names should be searched simultaneously to help find the perfect combination.   Common names are difficult to get, so we encourage you to go through these separate processes simultaneously.  Businesses are not recommended to use free, generic domains and email addresses due to a lack of security and an unpolished website appearance.

Choose the Entity Type

You should discuss choosing an entity type with your attorney and accountant to make sure you select the best option.  We have listed three of the most popular types of entities, but there are more, including partnerships, DBAs, and Sole Proprietorships.

• C corporations are those taxed by the Internal Revenue Service as regular corporations and pay income tax based on corporation tax rates. If a corporation does not qualify for “S” corporation status to be taxed as a small business, it must be treated as a “C” corporation. The decision to be a “C” corporation is one of default – a corporation is automatically a “C” corporation unless it obtains approval from the Internal Revenue Service to be taxed under a different provision.
• S Corporations may have tax advantages for U.S. taxpayers because the tax liability flows to the stockholders. Profits and losses are passed through to the individual stockholder’s tax returns and are taxed at the individual rate. To create an S Corporation, first form a regular or close corporation, then apply to the Internal Revenue Service for S Corporation status within 75 days of forming the entity. An S Corp cannot have more than 100 shareholders, meaning it can’t go public, limiting its ability to raise capital from new investors. S Corporations are as popular as Limited Liability Companies but enjoy different tax advantages.
• Limited Liability Companies have become a favored choice for operating a business and have gained popularity over the past twenty years as their unique advantages are widely known. An LLC is a hybrid – a combination of a corporation and a partnership. LLCs enjoy the limited liability of a corporation and the pass-thru tax treatment of a partnership, where the individual members (owners) take the tax liability to their personal tax returns. This can be especially advantageous as a substitute for an “S” corporation when the entity cannot meet the requirements of an “S” corporation but desires the advantages of the tax pass-through.

Form Your Entity

Necessary documents must be drafted and filed in the state or states where you are doing business. Each jurisdiction has specific laws and regulations depending on the type of entity you have chosen.

Designate a Registered Agent

A Registered Agent acts on the entity’s behalf in the state of formation with the primary duties of providing a registered office address, receiving service of legal papers, and being a local contact point for the Secretary of State or other government agencies. For example, if the corporation is sued, notice would be served upon the Registered Agent, who would then contact the corporation. The Registered Agent also receives any tax notices, such as franchise tax, and forwards them to the entity.

Get an Employer Identification Number (EIN)

An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is used to identify a business entity. Your business’ EIN is its Social Security Number, which is needed for bank accounts and business licenses. You can apply for an Employer Identification Number if you are a U.S. citizen with a Social Security Number or a foreign citizen with proper identification.

Apply for A Business License

Some states, counties, and cities require a business license.  Check with your local municipalities to see if this applies to you.

Open A Bank Account 

The bank will need your identification, a copy of the Articles of Incorporation or Organization, and your EIN letter to open the account. They may need additional documentation, such as certified copies of your formation documents or a Good Standing document. Check with your local branch office to see what documentation they require.

Forming business entities is what we do.

At Corp1, we love the rising entrepreneurs, small businesses, and the lawyers and accountants who support them.  We are here to assist you every step of the way.

We urge you to consider whether incorporation is suitable for operating your business. If you are uncertain, please consult your lawyer or accountant for advice. When you are ready, we are here. Please contact us to learn more about forming your entity and how Corp1 can streamline your process.

Resources: IRS.gov