Business Startup Formation Checklist
When starting a business, here are 10 key items to consider to help prepare you for the process.
Choose the Type of Entity
There are a variety of entities to consider, including sole proprietorship, general partnership, limited partnership, C-Corporation, S-Corporation, limited liability company, and limited liability partnership. Each comes with its own pros and cons. It is important to evaluate each entity to determine which is best suited for your business, with relevant factors including tax consequences, governance and management considerations, and how the business will handle employees.
Choose the State of Formation
In determining the state of formation, you will need to consider the location of the principal place of business, the requirements to qualify to do business in other states, and the tax considerations of forming in certain states.
Choose a Name
The name of the entity must be distinguishable from other entities and include an identifier for the type of entity When selecting a name for your business, it is particularly important to consider current and future trademark concerns.
Prepare and File the Formation Documents
There are a number of documents that need to be filed with the applicable Secretary of State. It is important that you prepare and file the correct paperwork for the type of entity selected.
Prepare the Governance Documents
Each type of entity has organic, self-governing documents. For example, a corporation generally uses by-laws and a limited liability company generally uses an operating agreement. These documents are important to outline, among other things, how the business will operate and how ownership will be allocated or changed.
Undertake Initial Acts
Some actions should be taken in conjunction with the formation of the business, including opening bank accounts, adopting a fiscal year, and electing officers, if applicable.
Prepare the Minute Book
You will need to maintain copies of all formation documents, agreements, resolutions, and other important governance documents.
Register with Taxing Authorities
You will need to apply for a Federal Employer Identification Number and register for various state and county taxes. In Indiana, you should fill out an application using the Indiana Department of Revenue Form BT-1.
As your business moves forward you will want to continue to keep accurate recordkeeping including Indiana Business Entity Reports (if organized in Indiana), annual minutes, accounting records, and tax returns.
As you look to the future of your business, it is important to think about an exit plan for you, whether by succession to future generations, sale to another business or individual, change in entity, or otherwise.