Small Business Formation:
Setup and Manage Your Business the Right Way
As an entrepreneur, your small business isn’t considered a business until it is formed and has a structure recognized by your state.
Business formation (also known as “forming in business”) is a crucial step when starting a business, to make the business officially registered and be identified as a legal entity in its state of operation. The most common forms of business are the sole proprietorship, partnership, corporation and Limited Liability Company (LLC).
“We’re here to help you navigate the increasingly complicated process of starting a business: from finding a profitable business idea and choosing a business structure to managing your small business using the right services, software tools, and guides to grow your business.”
Starting a Small Business?
How to Start a Small Business in 4 Easy Steps
To start a small business, follow these 4 simple steps.
- Find a small business idea and do market research.
Start by settling with a small business idea you can do. - Write a business plan.
Your business plan is a roadmap for how to structure, finance, manage and grow your new business. - Form an LLC.
Choose a business structure of your choice and use an online business formation service to quickly file all paperworks. - Open a business account.
Launching products is our passion. We’ll help you get your product live and help spread the word.
The Easiest Way to Form Your LLC or Corporation
The easiest way to form your business is to use an online business formation service or registered agent service. We test a range of trusted online business formation services with free and paid options that help you file all your Paperworks. Start your company today, form an LLC or incorporate easily.
How to Incorporate or Form an LLC Online
Follow these 4 simple steps to incorporate or form an LLC:
- Choose a business structure. Choose between LLC and other business structures that best fit your business.
- Choose a formation service or registered agent to file your paperwork.
A business or company formation service handles all required paperwork and filings to keep your business compliant. - Select your state and name your business.
Select your state of doing business to get specific state law, tax, and other requirements to properly register your business. - Answer a few questions about your business to begin your business fillings. Your business formation service completes and file your paperwork.
To start a small business that’s officially recognized, you’ll need to choose a business structure (also known as “business entity” or “business type”) to file certificates of formation and authorization of business entities in order to properly register your business with the state.
US Small Business Administration
Trusted Online Business Formation Services Near You
What does a business formation service do?
Business formation services are legal organizations used to file certificates of formation and authorization of business entities in their respective states. In simple terms, they help small business owners with all legal documents and filings needed in the formation of a new business to properly register their business with the state.
Zenbusiness
Great for small business formation.
ZenBusiness is a top-rated online small business formation service, dedicated to helping entrepreneurs launch their businesses from start to finish.
Incfile
Cheapest LLC filing services.
Incfile is a low cost, reputable and trusted business formation and incorporation service with a special focus on small business owners on a budget.
Rocket Lawyer
Good business advisors.
Rocket Lawyer offers a wide range of online legal services including business contracts, advisory and company formation services for small and medium scale businesses.
Choose a Business Structure
Your business structure influences all of your business operations such as how much you pay in taxes, your ability to raise money, the paperwork you need to file, and your personal liability (and how many personal assets you have at risk).
LLC
An LLC ensures that you or your business partners aren’t personally held for company debts and liabilities.
Corporation
A corporation, sometimes called a C corp, is a legal entity that’s separate from its owners.
Nonprofit
Nonprofit corporations are organized to do charity or render services that benefit the public and are given tax breaks.
DBA – Doing business as
A DBA lets you go by a different business name without creating a new company altogether.
Helping You at Every Stage of Your Business
Our small business checklists, in-depth guides and articles will help you quickly get started with everything from small business ideas to starting a business, creating a business structure, staying compliant, managing and growing your business.
The right way to navigate this page
Set up your business the right way.
Learn about business structures, LLCs and Corporation if you are a beginner, our step-by-step business formation guide will show you the right way to set up a business that is officially recognized in your state.
If you are ready to form, choose a trusted online business formation & LLC filing service (the easiest way) to file certificates of formation and authorization of business entities easily to properly register and keep your business compliant.
Jump to: Types of business formation | Top rated business formation services near you | Business entity comparison
What exactly is Business Formation?
When starting a business, entrepreneurs would have to go through various stages and complete certain tasks including the creation of legal structures to fully get the business ready for operation.
Business formation (formation process of a business) is a necessary early step when starting a business, whether you’re registering a simple DBA, forming an LLC, incorporating or forming a partnership. The way in which your business is formed will determine the personal liability of the founders, how taxes are paid, scope of business operations and other important details.
How it Works
- Choose a business structure.
- Name your business and select your state.
- Start filing or choose a formation service to complete and file your paperwork.
- Open shop and start your new company.
Types of Business Formation
The main types of business structures when forming a business are: Sole proprietorship, Partnership, Limited Liability Company (LLC), Corporation and Nonprofit.
Business Types at a Glance
Compare Business structures and their benefits to know which one is right for you
Compare business structures and their benefits to find and choose the right business structure for you and your business.
| How it protects you | LLC | Corporation | Nonprofit | Sole Prop. |
|---|---|---|---|---|
| Limited liability protection This ensures you or other partners aren’t personally on the hook for company debts and liabilities. | Yes | Yes | Yes | No |
| Taxation: How its taxed | LLC | Corporation | Nonprofit | Sole Prop. |
|---|---|---|---|---|
| Taxed LLCs and corporations have multiple tax options. | Yes | Yes | Federal and state tax exempt | Taxed |
| Tax exempt Nonprofits with 501(c)(3) status are exempt from federal income taxes. | No tax exempts | No | Yes. Only if registered with 501(c)(3) status | No |
| How it’s managed and maintained | LLC | Corporation | Nonprofit | Sole Prop. |
|---|---|---|---|---|
| Flexible management structure Corporations require a board of directors, annual meetings, record keeping, and more. LLCs and sole proprietorships have rules too—but they’re less strict. | Yes | No | No | Yes |
| State compliance requirements After you form, there are annual requirements to keep your business in good standing. | Yes | Yes | Yes | No |
| How it can grow | LLC | Corporation | Nonprofit | Sole Prop. |
|---|---|---|---|---|
| Flexibility to raise capital Get access to funds from banks, venture capital firms, and foundations. | Yes | Yes | Yes | No |
| Able to IPO Only corporations can sell shares on the stock market. | No | C corp only | No | No |
Differences
The major differences between each of these business structures are mainly taxes, ability to raise funds (IPO) and the personal liability of the business shareholders or partners.
Business Taxation
Regarding taxes, your business structure is a determinant factor on whether business profits go to you as a shareholders (i.e., you only pay your personal tax), or whether business profits will be taxed at the business level and again at the shareholder level, if profits are distributed to the shareholders.
Liability
As for the liability issue, your business structure will also dictate whether or not shareholders will be liable for company debts or whether the shareholders will only be risking the capital they paid to purchase equity in the business.