Forming a Legal Entity
This playbook outlines the sequential steps for choosing the appropriate business structure, such as an LLC, corporation, or sole proprietorship, and describes the legal requirements involved in forming a business entity.
Step 1: Research
Investigate different business structures (LLC, corporation, sole proprietorship, partnership). Consider factors such as liability, taxes, fundraising, and record-keeping.
Step 2: Decision
Decide on the most suitable business structure based on your research, weighing the pros and cons for your specific business needs.
Step 3: Name Selection
Choose a unique name for your business entity that complies with state guidelines and verify its availability, often through an online state database.
Step 4: Legal Documentation
Prepare and file the necessary legal documentation with the state. For LLCs, this is usually the Articles of Organization, for corporations, the Articles of Incorporation.
Step 5: Compliance
Understand and comply with additional requirements such as obtaining an Employer Identification Number (EIN), business licenses, bylaws or operating agreements, and initial reports.
Step 6: State Regulations
Check state-specific requirements which may include appointing a registered agent, publication requirements, or additional state-level tax forms.
Step 7: Maintenance
Maintain compliance with ongoing legal obligations like annual reports, franchise taxes, and renewing business licenses or permits.
General Notes
Seek Advice
Consult with legal and tax professionals to ensure your choices align with your business goals and legal responsibilities.
Understand Costs
Be aware of initial and ongoing costs associated with forming and maintaining your legal entity, as these will vary by state and entity type.