Start and protect
Business formation
Should you register the business as its own entity, which structure fits, and who should do the filing?
Six short steps. No email or account.
- Who needs it
- Anyone trading under their own name who wants liability separation, and anyone who needs an EIN to open a business account or run payroll.
- When it matters
- Before the first customer payment if you can, and before hiring anyone. Retroactive formation does not protect past work.
- Compare first
- What is actually included
- Matters most when
- still planning, just started
Is this the right tool for you?
A business run under your own name mixes your personal assets, taxes and contracts with the company's. Choosing a structure affects liability, how the business is taxed, what paperwork you file each year and how easily you can bring in a partner or sell. The filing itself is simple; the choice behind it is the part worth getting right.
Signs you need it now
- You are signing contracts, leases or supplier accounts in your own name.
- A customer, general contractor or lender has asked for your business entity details.
- You are taking on a partner and have nothing in writing about who owns what.
- Your income from the business has grown to the point where your accountant has raised the question of structure.
- You work on property or with equipment where a claim against the business could reach your personal assets.
When another area fits better
- The business is already registered and you need to know what your trade requires you to hold to operate. Read the licences and permits guide
- Your main worry is a lawsuit or accident, which registration alone does not cover. Read the business insurance guide
Recognise two or more of these? Sort out business formation next.
Tell us how your business runs and get a plan that puts business formation in order with everything else: what to set up first, your must-haves and what to compare.
What matters at your size
Working alone
The question is whether separating from the business is worth the ongoing filings and fees in your state. Ask an accountant how each structure would change your taxes before choosing.
A small team
With partners or employees, the structure needs an operating or ownership agreement behind it: who owns what, who decides, and what happens if someone leaves.
Several teams or locations
Adding investors, multiple locations or operations in other states raises questions of registering elsewhere and changing structure. This is attorney and accountant territory.
How the way you work changes the choice
- Trades working in customers' homes
- General contractors, property managers and some licensing boards may expect a registered entity. Check what your state's licensing rules say about the name the license is held in.
- Professional firms: accounting, law, design, consulting
- Some licensed professions have their own entity types or restrictions in many states. Check with your licensing board before filing.
- Shops and counter businesses
- A lease, a sales tax registration and supplier credit usually all need the entity in place first, so form it before signing them.
- Working across state lines
- Doing business in another state can require registering there too. The rules differ by state, so ask before taking the work.
What to compare
What is actually included
Filing fees are usually separate from the service fee. Check which you are quoted.
Registered agent terms
Often free for year one, then renews annually. Know the renewal price before you commit.
Ongoing compliance
Annual reports and franchise tax differ by state. Some services track deadlines, some do not.
Exit cost
Moving registered agent later should be straightforward. Confirm it is.
Cost and setup effort
- Costs come in three parts: the state filing, any registered agent service, and recurring annual reports or fees. The recurring part varies widely by state, so check it before choosing where and how to form.
- Filing services and attorneys differ mainly in advice. A filing service submits what you tell it; an attorney helps decide what to tell it and drafts the agreements.
- After filing, plan for the follow-on tasks: a federal tax ID, a business bank account, and updating licenses, insurance and contracts to the new name.
Trade-offs to weigh
- Do it yourself or use a service
- Filing directly with the state is straightforward for a simple setup. A service adds reminders and a registered agent; an attorney adds judgment.
- Simple now or right for later
- The simplest structure is cheapest to run, but changing later can mean new filings, new accounts and new contracts. Ask a professional what your plans for the next few years imply.
- Liability protection in practice
- An entity's protection depends on treating it as separate: its own bank account, contracts in its name, no mixing of money. It does not replace insurance.
When to sort it out
Before the first customer payment if you can, and before hiring anyone. Retroactive formation does not protect past work.
Sole proprietor, LLC or corporation
If you simply start trading in your own name, you are a sole proprietor: there is nothing to file to exist, but you and the business are legally the same, so business debts and claims can reach your personal assets. An LLC is a separate legal entity that can limit that exposure when it is run properly as a separate business. A corporation does the same with more formality, and is usually chosen for outside investment or particular tax planning.
The tax side is a separate question from the legal form. An LLC can be taxed in more than one way, and the right choice depends on your income and circumstances, so it is worth an accountant's view before you file rather than after.
What forming actually involves
Forming an LLC means filing with your state, naming a registered agent to receive legal papers, and paying the state's fee. Most businesses then get an EIN from the IRS, which is free when applied for directly, open a business bank account, and set up any state tax registrations their work needs. An operating agreement, even for a one-person LLC, records how the business is run and helps show that it is genuinely separate from you.
Doing it yourself or using a service
You can file directly with your state. Formation services handle the paperwork, act as registered agent, and remind you of annual filings, which suits owners who would rather not track deadlines. Compare what is included, not just the headline price: registered agent service, the EIN, the operating agreement and annual reminders are often extras.
Staying in good standing
Most states require an annual or biennial report and a fee to keep an LLC active, and missing it can eventually lead to the company being dissolved. Put the date in your calendar or use a reminder service, keep business and personal money apart, and sign contracts in the company's name. Those habits are what make the separation real.
Your next step
Answer six short questions about how your business runs. You get an operating plan: where business formation fits among your priorities, the must-haves to hold every option to, and what to compare when you choose.
Where this comes first
Trades and businesses that usually sort this out early.
Often decided alongside
Other parts of start and protect.