Almost half of entrepreneurs say they’re burnt out because of too many responsibilities, and 62% are overwhelmed by the demands of their business. It’s not easy striking out on your own, especially at the very beginning.
You might be unfamiliar with paperwork, and you’re fretting about what’s coming up in your journey. But if you know what’s ahead of you, then you can relax and handle everything smoothly.
Do you want to tackle your upcoming challenges with ease? Then keep reading for a list of business formation documents you’ll need to get your company up and running.
Business Formation Documents – Sole Proprietorship
A sole proprietorship is when you are the only owner and the company is unincorporated. Legally speaking, there’s no distinction between you and the business, which means you operate under your own name (not always though).
This is one of the easiest business routes to take since you technically don’t need any formal formation documents. If you decide to have a sole proprietorship, this automatically happens when you start doing business.
Do note that you may have to get a business license or permit from your local government, depending on the nature of your business. Also, if you’re using a business name other than your legal name, you might have to file a “doing business as” (DBA) or fictitious name registration.
Partnership
A partnership is a step up from a sole proprietorship in that there are two or more owners of a business (they can be individuals or entities). Not only do they share ownership, but also profits, losses, and responsibilities.
Like with a sole proprietorship, you may need to file a DBA or fictitious name registration. Also, you’ll have to check if you need licenses and/or permits, based on your business activities.
Partnership Agreement
Not all jurisdictions require this document; if you’re located somewhere that doesn’t, we still recommend creating a partnership agreement.
This document outlines the rights, responsibilities, profit sharing, and other terms you and your partners have agreed to.
Business Formation Documents – Limited Liability Company (LLC)
An LLC is a happy medium between sole proprietorships/partnerships and corporations. All owners aren’t personally liable for the company’s debts or other liabilities, which is a huge advantage. This makes it very popular for small to medium-sized businesses since it’s a simple business structure, but still offers great protection for its members.
As you may have already guessed, you’ll have to check if you need business licenses and/or permits before starting everything up.
Articles of Organization
One of the LLC documents you’ll need is the articles of organization. It’s what you’ll file with the state (or equivalent jurisdiction) for the formation of a company. In it, you’ll include basic information, such as the LLC’s:
- Name
- Address
- Member names
- Registered agent name
Operating Agreement
Most states don’t require that you create an operating agreement to start an LLC, but again, it’s a document that we recommend you have. In it, you’ll outline the:
- Management structure
- Roles of members
- Operational procedures
Not only will the operating agreement give clear-cut instructions on how to run your LLC, but it’ll also be beneficial should legal cases arise. The judge will refer to this document to assist them in their ruling.
Initial Report or Statement of Information
In some jurisdictions, you’ll have to make an additional filing shortly after forming your LLC. The initial report or statement of information provides updated information about your company.
Business Formation Documents – Corporation
A corporation is a legal entity that’s separate from its owners, which means that the shareholders get limited liability protection. They aren’t personally responsible for the company’s debts or legal issues.
The difference between a corporation and an LLC is that it can raise capital by issuing stock and is subject to corporate taxation. These companies are also governed by a board of directors and must adhere to formalities such as regular meetings and reporting requirements. As you can see, there’s more work here than with an LLC, which is why most entrepreneurs opt for LLCs instead.
As always, check with your local government to see which business licenses or permits you’ll need.
Articles of Incorporation
One of the main entity documents for corporations is the articles of incorporation. It’s similar to the LLC’s articles of organization in that you have to file it with the state (or equivalent jurisdiction) to start up your company.
You’ll have to put down the following information in this document:
- Corporation’s name
- Corporation’s address
- Purpose of the business
- Details about the stock
Bylaws
Bylaws are the internal rules governing the corporation’s operations, which makes it akin to the LLC’s operating agreement. It’s also not always required by law in every state, but it’s good to have. Mainly, it states the roles of directors, officers, and shareholders.
While bylaws aren’t filed with the state, you should adopt them at your corporation’s first organizational meeting.
Initial Report or Statement of Information
Another parallel that corporations have with LLCs is the filing of initial reports or statements of information. Some jurisdictions may require that you file these shortly after forming your corporation.
Shareholder Agreements
This is an optional paper, but it’s recommended that you create one. It outlines the rights and responsibilities of shareholders; for example, it’ll tell you how shares can be bought, sold, or transferred. This can make future transitions go more smoothly.
Business Formation Documents – Nonprofit Corporation
A nonprofit corporation is a type of corporation formed to serve a public or charitable purpose. Regular corporations are formed to generate profits instead.
It’s unique because it operates under a special tax status, often exempting it from federal and state taxes. Plus, surplus funds can be reinvested into the organization’s mission rather than distributed as dividends.
Nonprofit corporations are governed by a board of directors. In addition, they must adhere to specific regulations to keep their tax-exempt status.
Business licenses or permits may be required based on your activities.
Articles of Incorporation
Like with regular corporations, nonprofits must file the articles of incorporation. However, there’s additional language to meet IRS requirements making the corporation tax-exempt.
Bylaws
This is also a document that applies to both regular and nonprofit corporations. Between then, there’s no difference in what text would appear here.
IRS Form 1023 (or Form 1023-EZ)
Depending on the size of your nonprofit, you’ll file either IRS Form 1023 or Form 1023-EZ (smaller corps). This is the application for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code.
State Tax-Exempt Applications
Not only can you be tax-exempt in the country, but also in individual states. Check if yours indeed has its own tax-exempt status and file for that as well if applicable.
Business Formation Documents – Limited Partnership (LP) or Limited Liability Partnership (LLP)
An LP is a business structure where at least one partner has unlimited liability and is considered the general partner. They manage the business while the other partners have limited liability and don’t participate in day-to-day operations. On the other hand, LLPs provide all partners with limited liability protection while allowing them to participate in management.
In both business structures, there’s flexibility in how partners share profits and responsibilities.
Certificate of Limited Partnership or Certificate of Limited Liability Partnership
Both of these are considered the certificate of business formation for the respective type of partnership. You’d file it with the state to create the business.
Partnership Agreement
This document outlines the rights and responsibilities of the partners. This includes:
- Profit sharing
- Decision making
- Management duties
Other Considerations
Are you planning on applying for a business bank account? And are you planning on hiring employees?
Then you’ll have to apply for an employer identification number (EIN). This is like a Social Security Number, but for businesses. You’ll use it for tax purposes.
Many jurisdictions also require that you designate a person or entity as your registered agent, which allows them to receive legal documents on behalf of your company. We offer competitively priced registered agent services, so you can count on us for this.
Lastly, a few states may have additional requirements, such as publishing a notice of your business formation in a local newspaper.
If you find all these documents overwhelming, then use our business registration service. We can take care of setting up your business in all 50 states for free!
Have Your Business Formation Documents Ready
Becoming a small business owner can be simultaneously exciting and daunting, especially when you factor in all the paperwork that’s involved. But now that you know which business formation documents you need to get started, hopefully, that’s helped you clear a huge hurdle.
Just make sure that you check with your local or state government, and consult with a legal professional if possible. That way, you’ll ensure you have all the necessary documents for your specific situation.
Sign up with Business Anywhere if you’d like professional assistance with creating your business. It can be done in a matter of a few working days!
