How to start a small business

1. Select a Business Structure

Now that you've decided to start a small business, the first step is to select the appropriate legal business structure. Not sure which structure is right for you (Sole Proprietorship, General Partnership, Joint Venture, Limited Partnership - LP, Limited Liability Partnership - LLP, Limited Liability Company - LLC, S-Corporations, Non-Profit Corporations, Professional Corporations)? Before starting a small business, learn more about the most popular Business Forms and Structures utilized by most business owners in the United States today.

2. Choose a State of Formation

The next step is deciding where to create your small business start up. State laws governing corporations vary from state to state. However, if the small business start up will have significant business or shareholder contacts (a.k.a. "presence") within a state, there is usually not much reason to incorporate outside of that state. Under which state laws should starting a small business as a corporation be formed? Why do businesses incorporate in Delaware? Learn more about where to start your own business that will be beneficial.

3. Name Your Corporation

When you start your own business and choose a business name for your corporation you will need to take into consideration state specific "required corporate indicators" and "prohibited words and phrases". This state information table will provide links to state-specific information about corporations, state corporation filing fees, and contact information for each of the 50 Offices of the Secretary of State, Corporations Division.

4. Determine the Composition of Your Stock

Many different options are available in regards to the structure and composition of a corporation's stock. Where the corporation has a fewer than 35 shareholders, a simple, inexpensive model for the structure of corporate stock may be most appropriate. A savvy business owner will recognize that authorizing a number of shares that will qualify for the minimum annual state filing fee is often a wise, money-saving choice. Check our Corporations FAQ for answers to questions such as "Does the corporation have to issue stock?" and "What is Par Value?". After the corporation begins to thrive and is then considering issuing shares to the public, modifying the stock structure can be accomplished by filing an amendment to your articles of incorporation with the state at any time.

5. Designate Corporate Directors

The Board of Directors is essentially the management body for the corporation. Responsibilities of the Board of Directors include establishing all business policies and approving major contracts and undertakings. In addition, the Board may also elect the President. Ordinary business practices, however, are carried out by the Officers and employees of the corporation under the directives and supervision of these Directors. Learn more about Corporate Officers, Corporate Directors, and Corporate Shareholders.

6. Designate a Registered Agent

Almost ALL jurisdictions require that the corporation designate a registered agent for service of process. However, in most cases, anyone who has a street address (No P.O. Boxes) within the state of incorporation may act as a registered agent for the corporation. The main purpose of the registered agent requirement is to provide potential claimants against your corporation with a live person, whose whereabouts are available in public records, who may accept service of process on behalf of the corporation. Mycorporation.com can select registered agent services for you if you are in need of such services. Learn more about Registered Agent Services.

7. File Articles of Incorporation

A Corporation's "Articles of Incorporation" is the main filing document which begins the corporation's existence under state law. Once filed, the corporation comes into existence. Generally, most jurisdictions require Articles of Incorporation to contain, at a minimum, information about the Corporate Name, the Registered Agent, and the Corporation's business address. Requirements vary by state. File your Articles of Incorporation now.

8. Hold the First Board of Directors Meeting

During this meeting, the Board of Directors will resolve the following matters: Adopt Bylaws, Issue Stock, Adopt a Corporate Seal, and Designate a Banking institution to serve the corporation's banking needs. Note, in many states, this "Board" may be comprised of one person.

9. Operate Your Corporation

Proper observance of corporate formalities and record-keeping requirements is critical to the continued Good Standing of your corporation. Once your corporation is formed, the obvious priority is to ensure that your business thrives from your efforts and maintains stability through your management expertise. Certain Corporate Formalities must be observed in order to maintain this Good Standing.

Books about starting a business