Forming a company in the United States involves choosing a business structure, registering with your state, and obtaining a federal tax ID. The entire process can take as little as a few days if you file online, though planning your structure carefully before you file will save you time and money down the road. Here’s what the process looks like from start to finish.
Pick the Right Business Structure
Your business structure determines how you pay taxes, how much personal liability you carry, and how you can bring in investors or partners. The most common options are LLCs, C corporations, and S corporations, and each one works differently.
A limited liability company (LLC) is the most popular choice for small businesses. It shields your personal assets (your home, car, savings) from business debts and lawsuits. Profits and losses pass through to your personal tax return, so the business itself doesn’t pay income tax. The trade-off: LLC members are considered self-employed and owe self-employment taxes toward Medicare and Social Security on their earnings.
A C corporation offers the strongest personal liability protection and is the standard structure for companies that plan to raise venture capital or eventually go public. The downside is double taxation. The corporation pays income tax on its profits, and shareholders pay tax again when those profits are distributed as dividends. Despite that, C corps give you the most flexibility to issue different classes of stock and bring on outside investors.
An S corporation combines some benefits of both. Like an LLC, profits pass through to owners’ personal returns without corporate-level tax. Like a C corp, it offers liability protection. However, S corps are limited to 100 shareholders, all of whom must be U.S. citizens or residents, and you can only issue one class of stock. Many small businesses start as an LLC and elect S corp tax treatment later to reduce self-employment taxes once profits are high enough to justify the added paperwork.
Choose Where to Register
Most small businesses should register in the state where they physically operate. If your office, employees, and customers are all in one state, forming there keeps things simple and avoids extra fees.
That said, some states are known for business-friendly laws. Delaware has the most flexible corporate statutes in the country and a dedicated court system (the Court of Chancery) that handles business disputes. Investors, especially venture capital firms, often prefer Delaware corporations because the legal framework is well established and predictable. Delaware also allows a single person to serve as officer, director, and shareholder simultaneously.
Other states attract businesses with low tax burdens. Some have no state corporate income tax, no personal income tax, and no franchise tax, though they still collect annual fees or license charges. The key thing to understand: if you form your company in a different state from where you operate, you’ll likely need to register as a “foreign entity” in your home state too, which means paying filing fees in both places and maintaining compliance in both. For most founders, that only makes sense if you have a specific legal or fundraising reason to incorporate elsewhere.
Name Your Business and Check Availability
Before you file anything, search your state’s business name database (usually available on the secretary of state’s website) to make sure the name you want isn’t already taken. Every state requires your registered business name to be distinguishable from existing entities. Most states also require your name to include a designator that signals your structure, such as “LLC,” “Inc.,” or “Corp.”
If you plan to operate under a different name than your legal entity name, you’ll need to file a “doing business as” (DBA) registration, sometimes called a fictitious name or trade name filing. This is a separate step from forming your company and is typically filed at the county or state level.
File Your Formation Documents
The specific document you file depends on your structure. For an LLC, you submit articles of organization. For a corporation, you submit articles of incorporation (sometimes called a certificate of incorporation). Both go to your state’s secretary of state office, and most states let you file online.
Articles of organization for an LLC are straightforward. You’ll provide your company name, business address, the names of members or managers, and your registered agent’s name and address. A registered agent is a person or service that accepts legal documents on your company’s behalf. Every state requires one, and the agent must have a physical address in the state of formation.
Articles of incorporation for a corporation are more detailed. You’ll include your company name, business purpose, the number and value of shares you’re authorized to issue, and the names of your initial directors and officers.
State filing fees vary widely, ranging from about $35 to $500 depending on the state and entity type. Many states offer expedited processing for an additional fee if you need your documents approved faster. Standard processing times range from a few business days to several weeks.
Create Your Internal Governance Documents
Formation documents get filed with the state. Governance documents stay internal but are just as important.
For an LLC, this is your operating agreement. It spells out how profits and losses are divided, how major decisions get made, what happens if a member wants to leave, and each member’s duties and responsibilities. Even single-member LLCs benefit from an operating agreement because it reinforces the legal separation between you and your business.
For a corporation, these are your bylaws. Bylaws define how the board of directors operates, how meetings are conducted, how officers are appointed, and how shareholders vote. They’re the internal rulebook for running the company.
Neither document needs to be filed with the state, but banks, investors, and courts may ask to see them. Draft these early and keep them updated.
Get Your Federal Tax ID
Almost every business needs an Employer Identification Number (EIN) from the IRS. Think of it as a Social Security number for your company. You need it to open a business bank account, hire employees, and file taxes. The application is free, and if you apply online through the IRS website, you’ll receive your EIN immediately. There is no cost.
Open a Business Bank Account
Once you have your formation documents and EIN, open a dedicated business bank account. Keeping business and personal finances separate is essential for maintaining your liability protection. If you mix personal and business funds, a court could decide your LLC or corporation doesn’t truly function as a separate entity, which means your personal assets could be on the line in a lawsuit. This is called “piercing the corporate veil,” and it’s one of the easiest ways to lose the protection you formed a company to get.
Most banks will ask for your articles of organization or incorporation, your EIN confirmation letter, and a government-issued ID. Some also require your operating agreement or bylaws.
Handle Licenses, Permits, and Ongoing Compliance
Depending on your industry and location, you may need business licenses or permits at the federal, state, or local level. Common examples include general business licenses, sales tax permits, health department permits for food businesses, and professional licenses for regulated industries like real estate or accounting.
After formation, most states require some form of annual or biennial filing to keep your company in good standing. This might be called an annual report, a periodic report, or a statement of information. These filings typically confirm your company’s current address, registered agent, and key personnel. Missing the deadline can trigger late fees, and some states will administratively dissolve your company if you fall too far behind.
If you hire employees, you’ll also need to register for state payroll taxes, set up workers’ compensation insurance where required, and comply with federal employment reporting requirements.
What It Costs to Get Started
The baseline costs of forming a company are relatively low. State filing fees for articles of organization or incorporation typically fall between $35 and $500. If you use a commercial registered agent service instead of serving as your own agent, expect to pay between $50 and $300 per year depending on the provider and state. Your EIN is free. A business bank account may or may not have monthly fees depending on the bank.
Where costs climb is in optional but often worthwhile services: legal help drafting your operating agreement or bylaws, accounting setup, business insurance, and any industry-specific licenses. A bare-bones LLC filing can cost under $100 in some states, while a fully set-up corporation with legal and accounting support might run $1,000 to $2,000 or more. Many founders start lean and add professional support as revenue grows.