Steps to Forming a Business

Before starting a business, there are several necessary steps to take in order to make sure the business is legal and complies with local, state, and federal statutes, regulations, and taxes. The attorneys at The Carroll Law Firm PLC have put together the following checklist to assist clients in starting their business.


  • Create a Business Plan
    A business plan should include business goals, an executive summary, business description, projected costs, profits, and losses, business environment analysis, industry background, competitor analysis, market analysis, marketing plan, operations plan, management summary, and financial plan. Be realistic with your plan, most businesses don’t turn a profit until the end of the first year due to start-up costs and the fact that a clientele list takes a while to build.
  • Determine the best type of business entity
    There are many different options when it comes to forming a business entity, and it is important to consider a number of different factors when deciding which entity would be best for your needs. The major factors to consider are: size of the company, duration of existence, level of liability, operational procedures, start-up costs, type of management, taxation, interest transferability, and dissolution.


  • Choose a Name
    Choose a name that will appropriately describe your business. Generally, we recommend that you choose several variations of names that may work, in order to ensure availability.
  • Check Name Availability
    As a precursor to registering a business entity, you will want to search to make sure that the desired name is available. An attorney can assist you in this process.
  • Check Domain Name Availability Make sure that there is a domain name available that is either the same as or closely related to the name you choose for your new business. Having a web presence is essential for a business to thrive in today’s society.
  • Register New Business Entity Register the New Business Entity with the Arizona Corporations Commission as soon as possible. The sooner you register, the more likely you are to have the name of your choosing available to you. An attorney can complete this process for you in order to assure that the entity is properly filed, registered, and published to comply with statutory requirements.
  • Transfer business property into new entity To protect yourself and your family, in most cases you should transfer any business property into the business entity’s name. If a client brings a claim against your business entity, the use of the entity can protect you personally against claims by the client.


  • Determine Roles of Each Partner If you plan to enter into business with a partner or partners, make sure that everyone involved has a thorough understanding of what will be expected of him or her before starting the business.
  • Draft Partnership Agreement Drafting a partnership agreement in writing is essential! Many people feel that if you enter into a business with a friend, then there is no need to draft a written agreement. The presence of a written document is extremely important to protect against future disputes within the business. Attorneys at The Carroll Law Firm PLC generally discourage clients from entering into a business with anything less than an ownership percentage equal to 50% (when two people are involved).


  • Obtain All Necessary Permits Prior to Operation
    If a contractor is necessary, make sure to hire one who is licensed and bonded, and who is familiar with state and city permit regulations. Hiring someone with these qualifications will save you time and money in the long run.
  • Check with Local Regulations
    You should also do your own preliminary research into any licenses or permits that are necessary to conduct your business. Make sure your business complies with local rules and regulations, including those imposed by the community, in order to operate your business legally and efficiently.
  • Register for Taxes
    As a business owner, you will have to pay certain taxes, including state taxes, federal taxes, and unemployment taxes for those businesses with employees. You should apply for a Tax ID number with the IRS for this reason.
  • Purchase Business Insurance
    Purchase business insurance in order to protect your business assets against any claims, theft, fire, etc. If this business is a primary source of income, then you will certainly want to protect your interests from any possible harm.


  • Unemployment Insurance
    Employers have to pay unemployment insurance tax. Each employer’s unemployment insurance tax rate is different. The tax rate an employer pays is adjusted periodically based on the number of prior claims for unemployment benefits that have been filed against that employer.
  • Workers’ Compensation Insurance
    Most states) essentially require employers to purchase an insurance policy to handle their statutory obligations to workers who are injured or made ill due to a workplace exposure.
  • Payroll
    If you are going to have regularly paid employees, you should set up a payroll service. Generally these services will automatically calculate the amount of taxes and withholdings from each paycheck, and will provide you with an itemized accounting of each employee’s paycheck.


  • Trademarks
    Goodwill is associated with a company’s brand of product or service. Goodwill is built by advertising, networking, satisfying customers, referrals, news articles, sponsorships, and other public relations activities. The goodwill exists in the minds of the consumer as they consider purchasing products or services that are associated with a brand. Goodwill in a name or symbol can be protected with trademark rights. Many small businesses spend time and money on building goodwill in a brand name without first determining if their trademark rights conflict with existing brands. When a business builds goodwill in a brand and then discovers there is a conflict with an existing brand, they may lose millions of dollars in lost revenue from the cost of building goodwill in a new brand name.
  • Patents/Trade Secrets
  • An invention is a new and unique product, or a new and unique method of solving a problem. There are two ways to protect an invention. The technical knowledge can be protected with patent rights, or kept secret as a trade secret. Sometimes businesses are not aware of inventions within their own company. This results in loss of market share and lost revenue opportunities for licensing.
  • Copyrights
    Valuable content is found in books, songs, music, movies, pictures, sculptures, websites, articles, computer programs, and other writings or works of art. The value in the content is usually the ability of the content to inspire, inform, instruct, and entertain. Many businesses have employees that do not understand the value of content they are producing, and therefore do not protect this value with copyright rights. Often businesses or individuals obtain content without a proper license under copyright rights, which can cost millions of dollars in attorney fees and damages.

The attorneys at The Carroll Law Firm can assist you with any of the above steps in starting your own business. We also have an in-house patent attorney who is available to meet with you regarding any intellectual property questions.


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