Starting a business is an exciting journey. For many, it is a dream becoming a reality. Although you finally have your ducks in a row and are able to start the process, this is only the beginning. Owning and operating a business takes much work, and much of this work is required in the beginning stages. For starters, one must consider the business formation process and the steps required to even have the business exist.
The first question many aspiring business owners ask is where they should form their business. Business entities are formed at the state level, and the state has statutes that outline the business formation process and whether a business entity can be formed. For most entrepreneurs, the choice is obvious. Delaware is considered to be the best state to incorporate a business because there is no state income tax for corporations formed in the state that do not operate there.
Once an entity is created and filed, the next step is to develop the business entity. This means drafting corporate governance. For an LLC, this includes an operating agreement and, for corporations, this means drafting a shareholder agreement. No matter what type of business a person forms, it is important to have documents that govern operation, how ownership is treated, how relationships will be managed and how the company will be unwound.
The final step is to deliver the entity. Once all legal documents are completed and reviewed and approved by the business owner, the documents are executed. This means having all necessary parties sign these documents so the business is properly formed and the filing is completed.
Beginning a business can cause a person to have many questions, and for a good reason. It can be a major step in a person's life and often requires many details and steps. Thus, it is important to consider legal assistance when starting a business to avoid any legal issues down the road.
Source: Startupnation.com, "Learning the Ins and Outs of Business Entity Formation," Michael S. Melfi, Sep. 3, 2017