Startup Tools: Business Legal Structure Selector

What you get with this starter tool:

With this Starter Tool, you'll make three choices: (a) the state in which you'll form your company, (b) the type of entity to form, and (c) the legal name suffix to use (e.g., "Inc." or "LLC").

At Startomatic, we like things simple, so we offer formation for the two most common forms of legal entity: the corporation and the limited liability company ("LLC").

If you have questions about these decisions, don't worry - there's lots of practical advice in the FAQ tab of this tool.

Who needs this starter tool:

The Legal Entity Selector is for starters who are ready to form a legal entity for their new business.

We recommend you use this tool as a part of the comprehensive Legally Form Your Company Starter Guide (link below), which contains a complete set of instructions and tools for forming a new LLC or corporation.

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Details about this starter tool:

Frequently Asked Questions (9)

What type of business structure should I choose?: For most new companies, either a limited liability company (“LLC”) or a corporation is the right choice. Both protect your personal assets from the business’s debts and liabilities, which is the most important role of a legal entity. LLC’s tend to be simpler and more flexible to manage, with fewer administrative requirements, while corporations have more well defined management and ownership structures.
Generally speaking, if you don't plan to raise money from outside investors and don't plan to do much (or any) transferring of the ownership (“equity”) of the company after you form it, the LLC is the better choice. If on the other hand you plan on selling equity to investors in the future, or creating a stock option plan to incentivize employees or contractors, then a corporation is probably your best bet.

No idea which way to go? An LLC is usually a good choice for a new small business - and you can always convert it to a corporation in the future if necessary.

Still have questions? Take a look at our comprehensive Starter Post on this topic.
What state should I form in?: For the vast majority of small businesses, the best state to form in is the state where you'll be primarily located and where you do the most business. Looking for more detail about this? Check out our Starter Post on this exact topic.
What about forming in Delaware or Nevada?: Both Delaware and Nevada have made a push to encourage companies to incorporate there. However, for the vast majority of businesses, there is no benefit to forming in either Delaware or Nevada. In fact, there is often extra cost to incorporating in a state other than the one where you are located. This is because you are generally required to 'qualify to do business' in each state in which you operate, and that means paying filing fees and franchise taxes in more than one state.
The main exception to this is companies that intend to take outside investment from professional investors (think venture capital funds or professional angel investors). These types of investors will often prefer to invest in Delaware entities.
What about a sole proprietorship, nonprofit, or other entity type?: Startomatic offers basic support for sole proprietorships and nonprofits. This means we don't yet provide automated document creation or creation filings for these types of companies. We are working to add sole proprietorships and nonprofit corporations to our list of fully supported entities, so check back with us frequently if you need to form one of these entities!

At the moment, we do not plan to offer formation or support for most of the more 'exotic' entity types, like professional corporations, general partnerships, or limited liability limited partnerships. If you believe need one of these types of entities, we recommend you engage an experienced business attorney to assist you.
Can I change to a different form of entity in the future?: Almost always. In most states, you can convert your company to a different type of legal entity either by filing articles of conversion with the state, or by merging your existing entity into a new entity of the type you want to be. Both of these processes involve some paperwork, some tax implications, and some filing fees, so if you later decide you want to change your legal entity type, we recommend you speak with an experienced business lawyer.
What if I'm starting a law firm, medical practice, or other regulated professional business?: For these types of regulated businesses, there are regulatory bodies such as state bar associations and state medical licensing boards, that place specific requirements and additional steps on professional businesses. At the moment Startomatic doesn’t support formation of the entity types (typically professional corporations and professional limited liability companies) or the regulatory paperwork that is often required; however, we’re always working to add new functionality so check back with us often! In the meantime, we suggest you contact an experienced business lawyer for advice.
What about 'C-corps' and 'S-corps' - don't I need to pick one of those?: You may need (or want) to make one of these tax-related elections. You can make that decision when you use our S-Election Filing Starter Tool, which you can use directly or as a part of the comprehensive Legally Form Your Company Starter Guide.
Why do I have to use 'LLC', 'Inc.', etc. in my company's legal name?: This is a state requirement to identify your company as a corporation or an LLC.
Can I use a legal suffix like "Company", "Corporation", or "Ltd." in my company's legal name?: You've probably noticed that we believe in keeping things simple at Startomatic. If you're forming a corporation, this Starter Tool will allow you to choose either "Inc." or "Incorporated", and if you'll be forming a limited liability company, your options will be "LLC" or "Limited Liability Company".

While most states allow a variety of other legal suffixes, there are some complexities in which are allowed for which entity types, and different states have different rules. We limit this choice to avoid costly mistakes and headaches.

Legal Entity Selector

Choose the best legal structure and state of formation for your new company

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Frequently Asked Questions (9)

Cost:

Department:

Company Stage:

Frequently Asked Questions (9)

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