Starting a business, whether it is to purchase and acquire an ongoing business or to start building a business from ground up, is a critical step. After all, this is when everything starts for your business entity. Generally, every business has to consider the following steps to start a company. Because every business has its own unique considerations and challenges, you should always consult with a lawyer before making and acting on a decision, which would have legal consequences.
A company will have a specific legal form. It can be a sole proprietorship, a general partnership, or one of the entities that are created under the state law, such as limited partnership, limited liability company, commonly referred by its acronym, LLC, or corporation (C corporation, S corporation, non-profit, and now, the benefit corporation distinction where applicable), to name some of the most common entity types.
For most businesses, the first thing to consider is whether to take advantage of one of the entities created under the state law. The decision to create a new entity depends on your specific situations. The common choices for most businesses are a corporation and LLC. These formats, while not the only choices, are popular because they can offer the owners of the company certain limited liability from the debts of the company itself.
Some of the common considerations in picking whether to be a corporation or LLC might range from who and what the owners will be, how the owners desire the governing structures of the company to be, how the owners wish to share the profits and losses of the company, how the owners and the business wish to be taxed, how the owners plan on compensating the employees, how comfortable the owners already are with the chosen entity, how the business will subsequently be funded, what the industry’s common practices are, what types of assets the business is planning to acquire, and all the way to how the owners envision the eventual exit strategy.
To create a legal entity, you will also need to have a registered agent who has an office within the forum state, and wherever else you might operate. Then, once an entity is created, your business, in many jurisdictions, must make an annual report to the state each year. State law may require the company to follow a set of specific protocols, such as having an annual shareholders meeting, and keep records. Your business is responsible for updating whatever information the state requires that you disclose initially.
The local government where the business is physically located, for example, Boston or Philadelphia, may also require the business to register with the local government.
If your company is also regulated by other government authorities, you will have to continue to comply with the additional requirements imposed.