One of the first things an individual or group of individuals should do when they start a business is decide what form of entity they should be. An individual can simply be a sole practitioner. A group of individuals can be a partnership or some derivative thereof. An individual or group of individuals can also form a corporation, limited liability company, joint venture or some derivative of these entities. As time goes on, it may be desirable to change the form of business entity. This is usually possible and requires extensive coordination with your certified public accountant.

To reach an informed decision regarding the form of entity to use, you should, at the minimum, consult with your certified public accountant and corporate attorney. Do not assume that the CPA or attorney you presently use is completely versed in this area of decision making. If they are not, more than likely one of their partners is so versed. If that is not the case, then they will presumably refer you to another advisor for help in this particular area.

In many instances, forming a business entity requires filings with federal and state government agencies. In addition, you will or should develop agreements between the individuals involved and, where appropriate, have other initial formation documents, agreements and minutes prepared. A properly formed and documented business entity is the first step in a successful business.