This guide sets forth the steps on how to start a business. Each business is unique, and may require additional steps, especially in the case where there will be more than one owner of the business, or where there will be outside investors. However, this guide sets forth the basic considerations.
Choose an entity
First, unless you want to operate as a sole proprietor, you'll want to select a corporate entity. Possible corporate entities include an LLC, corporation (S corp or C corp), partnership, limited liability partnership ("LLP") or limited partnership ("LP"). These days, LLCs are the most popular form of corporate entity, particularly for small businesses. Before selecting an entity, you'll want to discuss the options with your lawyer and accountant.
Second, you'll want to file incorporating papers. For LLCs, these papers are the "articles of organization," and for corporations the papers are the "articles of incorporation." (Some states use variations of these names; partnership often just file certificates with the state). These incorporating papers are filed with the secretary of state's office in the state in which you want to incorporate your business. If you are opening a small business, often the best state to incorporate in is the state where your business will be located. Many new business owners choose to incorporate in Delaware, but this is not a great idea unless your business is located in Delaware or you are seeking outside funding such as angel investors or venture capital.
By-laws / operating agreement
Third, you'll want to draft your governing document for the business. In the case of a corporation, this will be by-laws, and in the case of an LLC, this will be an operating agreement. Partnerships are less common, but typically are governed by some form a partnership agreement.
Minutes / Consents
Fourth, you'll want to hold your initial organizational meeting at which you will adopt the governing documents, appoint officers, convey property to the business, issue shares/interests, and take care of any other initial administrative tasks. In the case of a corporation, these actions will be memorialized in the form of minutes; and in the case of an LLC, these steps will be memorialized in the form of consents.
Fifth, unless you are a sole proprietor or will be operating a one person LLC and will choose to be taxed as a sole proprietor, you will want to obtain an employment identification number from the IRS ("EIN") and the equivalent tax identification number from the state in which your business will be located.
Sixth, follow up with your accountant and lawyer to ensure that all legal steps have been covered. Remember that each business is unique, and yours may require additional legal documentation, especially in the case where there are co-owners, outside investors or employees at the outset. In such cases, you may want to consider entering into a buy-sell agreement, drafting employment agreements and drafting various investor documents (such as promissory notes or stock purchase agreements).