Undergoing a Business Formation Process: Ultimate Guide to Preparation, Execution and Expectations


New businesses are springing up everywhere. In the US, monthly business formation rates rose sharply towards the end of 2020 and have remained high up since then.

You are trying to pursue an exciting new phase of your life as a business owner. A phase that will require effective leadership and management to achieve the best results. It is a phase that demands excellence in every area of your business, right from the formation process.

Although platforms like ZenBusiness help startups to speed up the business setup and formation process, there are still many tasks to be done, documents to be prepared, and financial preparations needed throughout the beginning of your business's life.

Under three major subheadings, this guide gives you the best insights into preparing for business formation, managing your expectations, and executing the process efficiently.

Choose a Business Structure

Different business structures offer you different incentives; they also each come with their disadvantages. You should be careful about picking a structure that matches your company model, expectations, and plans. Some of the most common business structures are highlighted below:

  • Sole proprietorship: This is the most basic type of business, owned by one person. Unless you register your business in a different structure, doing business in any way automatically makes you a sole proprietor. As a sole proprietor, you only pay personal taxes; your business and personal assets and liabilities anyway. So, a major con is that you may be held personally responsible for your business’s liabilities and debts.
  • Partnerships: Partnerships are structured like sole proprietorships, except that the former is owned by two or more people (partners). General partners may also be held personally responsible for their business’s liabilities and debts. Unless in the case of an LLP, every partnership must have at least one general partner; other partners may have limited liability, but also limited control over the business.
  • Corporation: This is a business that is legally distinct from its owners (shareholders); thus, the shareholders are not personally responsible for the company’s liabilities and debts. Corporations have a more complex structure than other companies and unlike the others, must pay an income tax on their profits. In the case of C-Corps, this leads to paying double taxes since shareholders must file personal tax returns on dividends. However, there is a different type of corporation (S-Corp) without this challenge by excluding the company from corporate tax rates.
  • Limited Liability Company (LLC): An LLC is a hybrid of a corporation and a partnership. On one hand, it offers you limited personal liability; on the other hand, an LLC never pays corporate taxes, it also never sells shares. Owners (members) of an LLC must still pay self-employment tax, though.

Hire a Registered Agent

A registered agent is a person who interfaces between your business and the state government, sending and receiving correspondence on behalf of your business.

You don’t need a registered agent if your business is a sole proprietorship (it doesn’t even have to be registered anyway). But you do need a registered agent for other business structures.

Registered agents handle all the state paperwork for your business, especially relating to taxes and general legal compliance. They also accept any legal notices on your behalf.

Besides being a legal requirement, having a registered agent makes sense because it frees you the business owner from extensive (and often unnecessary) paperwork so that you can focus on actual business operations.

While you can be your own registered agent, you must know that since the contact details of a registered agent are publicly available, you’d have to sort through a lot of mail, including spam mail.

Therefore, hiring a registered agent is also a beneficial decision from the aspect of privacy. If you plan to do business in multiple states, hire an agent service that has a presence and can act as your registered agent in all those states.

Register Your Business

Unless you are running a sole proprietorship, no state law recognises your business until it is formally registered.

This begins by registering your business name, serving as your unique business identity. Register your business as an entity name (state level), trademark (federal level), and domain name (website) to protect your identity.

Following that, you must formally register your business as required by law. Beyond getting a federal tax ID and registering your trademark, most businesses don’t have much to do with the federal government.

However, if your business operations fall within certain activities that are regulated by the federal government, you must apply for the required licences and permits.

The state registration is the most important and requirements vary by state. Of course, you must have gotten all the necessary documents ready before beginning the application process.


At this point, your business is officially formed and what remains is that you ensure the stability of the business as well as continued compliance with local, state, and federal regulations.

The details of forming a new business, including how taxes will be managed and benefits provided are varied and complex. It is vital that you are well informed regarding these issues and ready to take on whatever challenges may arise.