Company formation is a process that involves the legal creation of a company. It is the process of registering a business with a federal or state government, typically the Secretary of State.
We offer a comprehensive, streamlined solution for setting up and maintaining your local legal entity. With an increase of 24.7% from 2019, it was also the fastest growth in the preceding ten years.
Trust our local team of legal experts to help you understand the types of legal entities and guide you through the complete company formation and corporate bank account opening process.
This guide explains the legal requirements and essential steps you need to take, including choosing a company name, adopting articles of association, appointing directors, issuing shares, and successfully completing the application process.
There were 2.50 million new business applications. In 2020, ten years after the current year, this number rose by 75% to 4.38 million.
Our 5-Steps Company Formation Process
1. Choose a business name: The first step in forming a company is to choose and register a business name. This name will be used when filing documents with the government and for all official correspondence.
2. Choose a business structure: The next step is to decide on the legal structure of the company. Each structure has different advantages and disadvantages depending on the business’s purpose and objectives.
3. Register with the state: Depending on the chosen business structure, the company must be registered with the state in which it will be doing business. This involves filing documents with the state and paying any applicable state fees.
4. Obtain necessary permits and licenses: Depending on the type of business, certain permits and licenses may be required. These permits and licenses are obtained from the local government and may include a business license, sales tax permit, and/or zoning permit.
5. Set up a business bank account: The final step is to open a business bank account. This will allow the company to accept payments from customers and pay bills. It is also important to properly manage the business’s finances.
5 Types of Company Formation
- Single Proprietorship: A sole proprietorship is a company that is run and owned by just one person. It is the most basic and typical kind of business structure.
- Partnership: A partnership is a business owned and operated by two or more individuals. Partnerships allow the owners to share profits, losses, and liabilities.
- Limited Liability Company (LLC): An LLC is a business entity that combines the features of a corporation and a partnership. It offers the benefits of limited liability protection, flexibility in management and taxation, and the ability to raise capital.
- Corporation: A corporation is a business entity that is owned by shareholders and managed by a board of directors. It offers the benefits of limited liability protection, access to capital, and the potential for greater profits.
- Non-Profit Organization: A non-profit organization is a business entity formed for charitable or educational purposes. Nonprofits are exempt from paying federal taxes and can receive tax-deductible donations from individuals and corporations.
The Costing Structure of Company Formation
The cost of forming a company can vary significantly depending on the type of company, the complexity of the business, and the services required. In general, the expenses fall into the following groups:
- Legal Fees: Most companies will require the services of a lawyer or other legal professional to help with the formation and filing of the necessary paperwork.
- Accounting Fees: The cost of setting up and managing the company’s finances will be another expense. This includes filing taxes, setting up payroll, and other related services.
- Licensing and Registration Fees: Depending on the type of company, certain fees may be required to register the company with the appropriate authorities.
- Advertising and Marketing Costs: Companies may need to invest in advertising and marketing to promote their products and services.
- Equipment and Supplies: Depending on the type of business, equipment and supplies may need to be purchased.
Our Streamline Benefits of Company Formation
- Limited Liability: One of the biggest benefits of forming a company is limited liability. This means that if the company fails, shareholders and directors are not held personally liable for its debts.
- Credibility: Forming a company creates a certain level of credibility that you may not have as an individual. Potential customers and partners are more likely to trust a business entity than an individual.
- Separate Entity: A company is considered a separate legal entity from its owners. This means that the company can enter into contracts, purchase assets, and incur liabilities in its own name.
- Tax Benefits: Forming a company can have tax advantages. Companies may be able to take advantage of certain deductions and exemptions, as well as pay lower tax rates than individuals.
- Raising Capital: Companies are often able to raise capital more easily than individuals. This allows them to expand their operations, invest in growth, and pursue larger opportunities.
Tips For Company Formation Services
- Choose the right type of business entity: The form of business entity you choose will have legal and tax implications. Consider the type of business you’re starting and the level of liability protection you need.
- Research the state requirements: Every state has its own requirements for forming a business. Research the requirements specific to your state to ensure you meet all the necessary criteria.
- Choose a business name: The name of your business should reflect your values and mission. Choose a name that is unique and memorable.
- Obtain an EIN: An Employer Identification Number (EIN) is a unique nine-digit number used to identify your business for tax purposes. Obtain an EIN from the IRS before you open your business.
- Draft the necessary documents: Depending on the type of business you’re forming, you may need to draft documents such as articles of incorporation, partnership agreements, or LLC operating agreements.
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Conclusion
The formation of a company requires careful consideration of various factors, such as legal requirements, business objectives, and financial considerations.
It is important to research and choose the most appropriate type of company structure that aligns with your business goals and meets legal and tax obligations.
Seeking the assistance of professionals, such as lawyers and accountants, can be helpful in ensuring compliance and maximizing the benefits of company formation.
Once established, ongoing management and compliance efforts will be necessary to maintain the company’s status and achieve long-term success.
FAQs
1. What is the process for forming a company?
The process for forming a company typically involves choosing a business name, selecting a legal structure, registering with the appropriate government agencies, obtaining any necessary licenses and permits, and fulfilling tax obligations.
2. What are the different types of company structures?
The most common types of company structures include sole proprietorship, partnership, limited liability company (LLC), and corporation. Each structure has its own advantages and disadvantages, and the best choice will depend on factors such as business goals, ownership structure, and tax considerations.
3. What are the legal and tax requirements for company formation?
Legal requirements for company formation vary depending on the jurisdiction, but typically include registering with the government, obtaining necessary permits and licenses, and adhering to labor laws. Tax requirements may include obtaining an employer identification number (EIN), filing annual tax returns, and paying business taxes.
4. What are the benefits of forming a company?
Forming a company can offer many benefits, including limiting personal liability, accessing tax advantages, and creating a professional image. Additionally, a company structure can help attract investors and enable easier transfer of ownership.
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