When beginning a business, you must decide what form of business entity to establish. Your form of business determines the amount of regulatory paperwork you have to file, your personal liability regarding investments into your business, and the taxes you have to pay. The most common business structures include:
If you decided to create a corporation, a non-profit, a limited liability company or a partnership (limited, or limited liability), you will have to register your business and file certain documents with your state government. If your business is a sole proprietorship, you do not need to register your business with the state. However, many states require a sole proprietor to use their own name for the business name unless they formally file another name as a trade name, or a fictitious name.
Choose a state to find out about specific filing requirements in the state where your business will be formed.
Your initial choice of a business type is not permanent. You can start out as a sole proprietorship, and if your business grows and your risk of personal liability increases, you can convert your business to an LLC.
If you change your business structure, follow the Internal Revenue Service's instructions for Changes in Ownership or Organization.
You will also need to file new documents with your state government, and, depending on state and local laws, you may also need to obtain new business licenses.