BUSINESS FORMATION & CHECKLIST
This comprehensive business formation guide is designed to help new business owners start confidently and avoid common pitfalls. It provides practical resources, expert tips, and actionable steps to simplify the process of launching a business, from legal setup to operational planning. Whether you’re just brainstorming ideas or ready to register your company, this guide helps you build a strong foundation, stay organized, and make informed decisions. Perfect for entrepreneurs looking to save time, reduce stress, and set their business up for long-term success.
01
FOUNDATION BASICS
Name Search
Before forming your business, confirm the name is available everywhere you plan to use it. Check your state’s business registry, look for open domain names, and search for existing trademarks to avoid conflicts. Then review social media handle availability so your branding stays consistent.
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Entity Type
Choosing the right business formation matters because it impacts taxes, liability, and long-term flexibility. Consider how much personal protection you need, whether you’ll have partners or investors, and how you want profits taxed. Think about your growth plans and how formal or simple you want the structure to be.
1 / Proprietorship
​The simplest business to start, with minimal setup.
The owner and business are legally the same, so income passes through to the owner and they’re personally liable for all debts.
2 / Partnership
​Forms when two or more people run a business together. Profits pass through to partners’ taxes, and liability depends on whether it’s a general, limited, or LLP structure.
3 / Limited Liability Company (LLC)
​An LLC provides liability protection similar to a corporation while maintaining the simplicity and tax flexibility of a sole proprietorship or partnership. Owners (called members) are shielded from personal liability, and the business can choose pass-through or corporate-style taxation.
4/ Corporation
Corporation is a separate legal entity that provides strong liability protection and a formal structure with shareholders, directors, and officers. Corporations can issue stock, attract investors, and exist independently of their owners, making them ideal for businesses planning to grow or raise capital.
C-corps can have unlimited shareholders and multiple stock classes but face double taxation (corporate tax + dividends).
S-corps avoid double taxation by passing profits to owners’ personal returns but are limited to 100 U.S. individual shareholders and one stock class.
Both structures require more paperwork, annual filings, and governance than an LLC or partnership.
02
FOUNDATION STRUCTURE
03
FOUNDATION SETUP
Formation
File your formation documents with your state’s Secretary of State and appoint a registered agent. This person or service receives official mail, legal notices, and compliance documents, ensuring your business never misses anything important.
Employer Identification Number
Once your formation documents are approved, you can obtain an EIN (Employer Identification Number). Apply for free on IRS.gov. You’ll need it for taxes, opening a business bank account, running payroll, and setting up vendor or payment accounts.
Permits
File any required local business licenses or permits to operate legally. Depending on your industry and location, you may need a general business license, a home-based business permit, or specific health, safety, or other approvals before opening your doors
04
GOVERNING DOCUMENTS
Internal governance documents define how your business operates, how decisions are made, and how ownership responsibilities are handled.
Clear, well-maintained documents prevent disputes, ensure legal compliance, and establish a professional foundation as your business grows.
Important documents include an operating agreement or bylaws outlining roles, responsibilities, voting rights, and decision-making processes. Shareholder or member agreements cover profit distribution, buyouts, and dispute resolution.
Additionally, meeting minutes and formal resolutions document decisions, approvals, and policies to maintain accountability.
Review and update documents regularly, especially as ownership or operations change. Store them securely in both digital and physical formats, and consult a lawyer to ensure compliance.
Apply policies consistently, document all agreements, and use templates as a starting point, customizing them to fit your business needs and values.
Review and update documents regularly, especially as ownership or operations change. Store them securely in both digital and physical formats, and consult a lawyer to ensure compliance.
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Apply policies consistently, document all agreements, and use templates as a starting point, customizing them to fit your business needs and values.
05
FINANCE SYSTEMS
Checking
Open a dedicated business bank account to keep your finances separate from personal accounts.
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This protects liability, simplifies bookkeeping, and makes tax filing easier. Choose a bank with low fees, online access, and tools for business payments and transfers.
Startup
Track all startup costs carefully—licenses, equipment, software, and office supplies. Proper tracking ensures you capture every potential tax deduction.
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Keep receipts and log costs digitally, categorize expenses correctly, and use bookkeeping software to simplify tax filings.
Savings
Establish a separate business savings account to cover taxes, emergency funds, or future investments.
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Regularly set aside a percentage of revenue to avoid cash flow surprises and ensure your business can handle unexpected expenses or growth opportunities.
Plan
Select bookkeeping software that meets your needs.
Platforms like QuickBooks Online, Xero, or Wave automate recordkeeping, reconcile accounts, generate reports, and help you manage income, expenses, and cash flow efficiently, saving time and reducing errors.
Credit
Consider a business credit card to manage expenses, build business credit, and earn rewards.
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Keep personal and business spending separate, pay balances in full if possible to avoid interest, & track transactions carefully for bookkeeping & tax purposes.
06
FINANCIAL CONTROLS
TRACKING
Keep detailed records of all business expenses, reimbursements, and owner contributions or withdrawals. Regular tracking helps with budgeting, tax deductions, and cash flow management. Consider monthly reconciliations to catch errors early and maintain clean, audit-ready records.
ACCOUNTING
METHOD
Decide whether to use cash or accrual accounting. Cash is simpler and tracks money when it moves; accrual gives a more accurate view of income and expenses.Tip: consult a bookkeeper if unsure which fits your business plan, and review your method annually as your business grows.
CHART OF
ACCOUNTS
Set up your chart of accounts to organize income, expenses, assets, and liabilities. ​A clear chart helps you categorize transactions consistently and simplifies bookkeeping and tax prep.
Tip: start simple—you can expand categories as your business grows.
BUDGET
Create your first budget and cash flow forecast to understand your revenue, expenses, and financial runway.
Tip: start with realistic assumptions, update monthly, and adjust as actuals come in. A simple spreadsheet works fine for new businesses.
MANAGE
Decide whether to handle bookkeeping yourself or outsource. DIY is cost-effective for simple operations, while a professional ensures accuracy and saves time as you grow.
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Tip: even if outsourcing, track receipts and organize transactions consistently.
07
RISK MANAGEMENT
General liability insurance protects you from risks like injuries, property damage, or lawsuits. It covers legal fees, settlements, & medical costs.
Compare quotes, review your policy annually, and maintain claim records.
Tip: check contracts and leases for coverage requirements, keep digital certificates handy, and notify insurers of major changes.
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Consider additional policies such as professional liability, property, or cyber insurance.
These protect against specialized risks—mistakes, data breaches, or damage to your workspace—and help your business meet client or contractual requirements.
Review client agreements, vendor contracts, and lease documents to identify required insurance types or coverage limits. Note deadlines for proof of insurance and ensure policies meet or exceed requirements.
Tip: keep digital copies, update coverage as your business grows, and communicate proactively with clients or landlords if changes occur.
01
Business Address
Use a dedicated business address or virtual mailbox to keep personal and business correspondence separate.
This protects privacy, adds professionalism, and ensures you receive official documents and legal notices reliably.
Use it consistently for all registrations, marketing materials, and client communications to maintain a professional image.
03
Templates
Prepare contracts, service agreements, and reusable templates early.
This saves time, ensures consistent terms, and protects your business legally. Include payment terms, deliverables, cancellation policies, and consider consulting a lawyer for industry-specific clauses.
Keep templates easy to customize for different clients while maintaining consistency.
05
Tech Stack
Select essential tools to manage communication, collaboration, and operations efficiently.
Google Workspace, Slack, project management apps, and bookkeeping software streamline workflow and keep information organized.
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Test tools early, integrate them wherever possible, and train your team to ensure consistent use and maximum efficiency.
02
Business Contact
Create a business email and phone number to maintain professional communication.
Use consistent branding (name@business.com) and consider a VoIP or separate business line to keep work calls organized.
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This also helps when scaling your business or delegating communication tasks to team members or virtual assistants.
04
Finalize Pricing
Set clear pricing and payment policies upfront. Decide on hourly vs. flat rates, invoicing frequency, accepted payment methods, and late fees.
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Make terms easy to understand, communicate them clearly to clients, and consider using automated invoicing tools.
Review pricing regularly to ensure it covers costs, reflects value, and supports growth.
08
OPERATIONS PREP
09
ONLINE PRESENCE
DOMAIN & HOSTING
Secure your domain early to protect your brand. Use Google Domains, Namecheap, or GoDaddy to find a simple, clear URL.
Prioritize .com or choose a relevant alternative. For hosting, use trusted options like SiteGround, Bluehost, or Squarespace.
Tip: enable auto-renew and keep the domain linked to your business email to avoid ownership issues.
ALIGN VISUALS
Create a consistent look across all materials—colors, fonts, imagery, and tone. Pick a simple palette, 1–2 fonts, and a personality-aligned voice. Use tools like Canva or Adobe Express to build templates for posts and marketing assets.
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Tip: Save a mini brand guide so every new piece stays consistent.
GOOGLE PROFILE
Claim your Google Business Profile to show up in local search and Maps. Add your business info, verify your location, upload photos, and include hours, services, and a short description.
Tip: Enable messaging and consistently request reviews—fresh, frequent reviews boost rankings and trust.
SOCIAL MEDIA
Set up social media accounts that match your audience—Instagram, Facebook, LinkedIn, TikTok, Pinterest, or Twitter/X. Use consistent branding, clear logos, and descriptions. Post 1–2 times per week with tips, updates, or behind-the-scenes content, and schedule posts with tools like Buffer or Later for efficiency.
BUILD A WEBSITE
Start with a simple one-page site covering who you are, what you offer, pricing, and a clear call-to-action. Use platforms like Wix, Squarespace, Shopify, or Carrd, high-quality images, consistent branding, and concise copy.
Tip: Add a contact form and basic SEO so customers can find you.
4/ Professional Reviews
Schedule quarterly reviews with your accountant or financial advisor to analyze cash flow, profitability, and compliance. These sessions identify errors, uncover tax-saving opportunities, and ensure your financial strategy aligns with goals. Prepare KPI and expense summaries beforehand to make meetings efficient and actionable.
5/ Best Practices
Store digital and physical copies of all filings, permits, and reports for easy access. Automate reminders for renewals and bookkeeping tasks. Review compliance requirements annually.
Keep consistent documentation of all financial and operational decisions for transparency and audit-readiness.
10
COMPLIANCE
1 / Annual Filings
Filing your annual report on time is critical to keeping your business in good standing. Missing deadlines can lead to fines, dissolution, or trouble securing financing.
Track state requirements, mark due dates on a calendar, and set automated reminders to submit on time.
2 / Licenses & Permits
Renew all required city, state, and industry-specific licenses and permits. Requirements change annually, so review regularly. Proper licensing prevents penalties, legal issues, and operational interruptions. Keep a checklist or digital tracker for expiration dates.
3 / Financial Records
Clean, accurate monthly books are essential for taxes, audits, and decisions. Record all income, expenses, reimbursements, and owner draws promptly. Reconcile monthly to catch errors and maintain audit-ready records.
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Tip: use QuickBooks, Xero, or Wave to automate reports, categorize expenses, and simplify tax prep.