Business Formation

Service description

Business formation is the process of legally establishing a new business. This includes: (i) Selecting the appropriate business structure (like sole proprietorship, partnership, LLC, or corporation). (ii) Creating the necessary legal documents (like partnership agreements, operating agreements, articles of incorporation, bylaws, and shareholder agreements). (iii) Registering the business with relevant authorities (Secretary of State, State tax authority, IRS, and Corporate Transparency Act filing with FinCen). (iv) Ensuring compliance with all applicable laws and regulations. These components help entrepreneurs navigate the complexities of legal requirements, minimize potential risks, and build a solid foundation for their business.

Common industries

Any new business — professional services, retail, real estate, or a holding company for other ventures.

ROI

The right structure, set up correctly, saves on taxes and protects personal assets — and avoids costly restructuring later.

Benefit

Choose and form the right entity (LLC, S-corp, C-corp) for your goals, with proper formation documents, an operating agreement, and initial governance.

Why get it

Operating without a formal entity leaves the owners personally liable for the business's debts and lawsuits, and raises self-employment and other taxes that proper formation can reduce.

When you benefit

A one-time process at the outset, though a change in owners, states, or business activity can call for a follow-up filing.

What it costs

Usually a flat fee for standard formations, higher for multiple owners or a more complex structure.

When you pay

Typically paid up front, before the provider files with the state, since state filing fees are paid at submission. A follow-up fee may apply if the operating agreement or bylaws are drafted separately.

Other costs

State filing fees, a registered-agent fee if the provider doesn't include one, and any fee for a separate EIN or licensing application.

Risks to know

Forming in the wrong state, or picking an entity type that doesn't fit the owners' tax or liability goals, is expensive to unwind later. Skipping an operating agreement or bylaws leaves disputes among owners with no rulebook to fall back on.

When risks arise

Entity and state choice are locked in at formation, so mistakes here are cheapest to fix in the first few months, before contracts, leases, or a first tax return are filed in the entity's name.

The process

The provider confirms the chosen entity type and state, then prepares and files the formation documents — articles of incorporation or organization — with the Secretary of State. It drafts the operating agreement or bylaws and obtains an EIN. The business reviews and signs the governing documents before the entity is considered complete.

Your commitment

The business decides who the owners are and how they'll split ownership and control, and shares each owner's name, address, and ownership percentage. It should also say which state to form in, what the business will do, and whether it wants pass-through or corporate tax treatment, since that shapes the entity choice.

Documents to gather

• Names, addresses, and ownership percentages for every owner
• Proposed business name and backup names, in case of a conflict
• Description of what the business will do
• Registered agent information, if not using the provider's

Helpful reading

• Launch your business — choose a business structure — U.S. Small Business Administration
• The pros and cons of LLCs — Journal of Accountancy

Further research

• 26 U.S. Code § 7701 — Definitions (corporation, partnership, and related entity terms for federal tax purposes)
• 26 CFR § 301.7701-3 — Classification of certain business entities (the "check-the-box" election)
• 31 U.S. Code § 5336 — Beneficial ownership information reporting requirements (as of FinCEN's March 2025 interim final rule, all U.S.-formed companies are exempt; see FinCEN's current guidance below)
• FinCEN — Beneficial Ownership Information Reporting: current exemption for U.S.-formed companies