A Step-by-Step Guide to Business Formation in the US

Congratulations! As you have decided to start your business in the US, are you familiar with the legal and procedural aspects of business formation? Working with a reputable business formation service Company will bring extensive experience and reputable expertise to your side.

This blog clarifies the technical jargon surrounding the business formation process. It provides a concise and clear outline of the steps it takes to form a business in the US. Let's dive in.

The Most Significant Steps for Business Formation in the US

Starting a business in the US can be exciting. Although it may feel overwhelming, breaking down the formation process into planning, launching, and managing can help you realize that it is manageable.

Figuring out your business idea, target market, funding, and operations are all aspects that comprise the planning phase. Registering your business by choosing a unique name and marketing your brand are included in the launching stage. Lastly, ensuring compliance with business laws and tax related compliance are a part of the ongoing management stage.

Now, let's discuss with a step-by-step approach. With this guide, you can plan and carry out actionable steps in the execution of your company formation process:

1. Market Research

The first step is to understand the market and your target audience for the products and services you plan to offer. This crucial planning step helps you assess the practical market requirements and identify target areas where you can offer products or services to grow your brand.

2. Work Out Your Business Idea

Arrive at a clear conclusion regarding the business you wish to establish based on an extensive market research. Determining the nature, shape, and initial size of your business will help you execute the next steps in the business formation process effectively. 

3. Compose Your Business Plan

The next step is to document your business plan properly. You should be ready with a strategic roadmap outlining the nature of your business, your value proposition, how you plan to operate, manage finances, and follow realistic growth strategies.

4. Pick Your Business Name

Settle on a unique name that no other business has taken. The business name should include the appropriate entity designator (such as 'LLP'). The name will become the identity of your business, therefore choose wisely.

5. Choose an Appropriate Business Structure

Consider your liability protection, taxation, and capitalization requirements. These aspects help you determine the most suitable legal structure of your business. LLC is a good option as it offers pass-through taxation, while Corporations bring a great deal of ease in capital raising.

At Edom & Co. CPAs, we advise our clients to choose the ideal business structure tailored to their specific business goals and milestones they aim to achieve. Be sure to consult with us if you are at this stage of the business life cycle.  

6. Registration with a State

Consider the fees for company formation, business laws regarding privacy, and the overall ease of business formation when choosing an appropriate state to register your business. Notably, various states offer varied benefits. Therefore, research to determine which option is best suited to your business goals and preferences.

We advise and assist in the process of registering your business with the desired state. Our professionals are experienced in the required documentation and procedures to register your business properly.

7. Obtain Your Employer Identification Number

Apply for your EIN after you submit state specific documents (Articles of Organization for LLCs and Articles of Incorporation for Corporations). Stay legally compliant and safeguard your financial interest by understanding taxation requirements and related reporting procedures. 

Obtain your tax ID number (EIN), which serves as the social security number of your business. The Internal Revenue Service (IRS) is the essential US federal authority issuing an EIN to all businesses. You need an EIN for tax filing, hiring employees, and operating your business's bank account.

Our experts are familiar with the process of acquiring an EIN (whether for a single member or a multi member business entity). You can rely on Edom & Co. CPAs for assistance in the timely obtainment of an EIN.

8. Obtain Licenses and Permits

Research and learn about the necessary licenses and permits required by local, state, and federal authorities based on the nature of your business. Obtaining these documents promptly will guarantee smoother operations in the long run. Licenses and permits may vary depending on your sector. Since there isn't a ‘one-size-fits-all’ formula, researching and obtaining the proper licenses and permits becomes a critical step in the early stages of the business life cycle.

9. Open a Business Bank Account

You will need to open a bank account for any US based business, in order to help you keep your personal and business finances separate. Many banks offer business checking and credit account options. Some banks may require physical presence in the US, but there are a few fintech providers offering digital onboarding options. 

10. Maintain Compliance

Along with hiring suitable employees, managing financial operations, and marketing your brand, staying up-to-date with legal compliance is also very important. Prioritize business insurance, tax planning and filing, and timely license/permit renewals for seamless operations.

Why Work with Us

Edom & Co. CPAs has been a trusted name in Business Formation and Development Services for many years. With our team of experienced professionals across various geographies, we ensure the timely completion of your business formation process. We have the expertise to secure the necessary documentation and execute the required steps for your US business establishment, freeing you to focus on core growth and activities.

Key Takeaways

This blog outlines the key steps involved in forming a business in the US. We hope it helps you in executing the process and making informed decisions at the right time. Collaborate with Edom & Co. CPAs, your trusted partner for business formation services, to ensure the timely completion of the formation process while electing the most suitable business structure, according to your goals and aspirations.

Frequently Asked Questions (FAQs)

Q 1: How long does the business formation process take in the US?

It may take anywhere from a few days to a few weeks to form a business in the US. The duration largely depends on state specific rules and the volume of applications.

Q 2: Is a registered agent mandatory for business formation?

Yes. Every business in the US must have a registered agent with a physical address in the state of formation. Working with reputable business formation services is, therefore, paramount.

Q 3: Do I need to stay in the US to register my business there?

No. Nonresidents can form a business in the US and obtain an EIN.

Q 4: Which state in the US is best for registering a business?

Different US states offer different benefits. For the vast majority of small businesses, the simplest and often most cost effective solution is to register your business in your home state (the state where you shall physically operate or reside). For Start-Ups seeking venture capital, and large corporations, Delaware is preferable due to the key advantage of Delaware's highly developed and flexible corporate laws (especially for C-Corporations).

Contact us today for Business Advisory, Accounting, Tax and Payroll Management Services!