Foundations · Lesson 6 of 9
Business formation basics
Entity type, state of formation, and what each one means for the licenses you'll later go after.
About 2 minutes to read
Builds on
What you'll learn
- How entity choice ripples into licensing
- Why state of formation matters when you expand
- The paperwork that follows formation
Entity type ripples into everything else
Most regulated industries accept the common entity types , LLC, corporation, partnership , but the supporting documents differ. A corporation will need bylaws, an officer list, and a stock structure. An LLC will need an operating agreement and a member list. Either way the state regulator will look at the Control personAn owner, officer, or director with enough authority over a regulated entity that regulators want to vet them personally, often via background checks and disclosure forms. list and run background checks on the senior owners and officers.
State of formation versus state of operation
Where the entity is formed and where it does business are two separate questions. A Delaware LLC operating in Texas needs to register in Texas as a foreign entity, appoint a Texas Registered agentA person or company that accepts service of process and official mail on a business's behalf in each state where the business is registered., file a Texas , and then go after its Texas license. The Delaware formation by itself does not let it operate in Texas.
What follows formation
Almost every newly-formed regulated entity quickly picks up an EIN, an operating agreement or bylaws, a Doing business asA trade name a business uses other than its legal name. Often filed at the state or county level so the public knows who's behind the brand. filing if it uses a trade name, and a registered-agent appointment in every state where it plans to operate.
How we'd handle it
Forming the entity, drafting the operating documents, registering as a foreign entity where you'll do business, and getting the registered-agent piece in place is the kind of thing that's easy to skip a step on. Cornerstone Licensing handles formation end-to-end so the first license application has a clean entity behind it.