Setting up a Company

SPEAK MODalities company photo.

There are several legally recognized business structures in the United States including sole proprietorships, general partnerships, C corporations (C corp), S corporations (S corp) and Limited Liability Companies (LLCs). The process of establishing a company’s existence is called “incorporation” and involves filing papers (“Articles of Incorporation” for C and S corporations and “Articles of Organization” for Limited Liability Companies) to set up a new legal entity. There are many decisions to be made at this point, and a company’s characteristics will depend on the choices made by the founders. Professionals working in the Purdue Foundry can advise and assist entrepreneurs in these early stages.

While one person can form a company, it is typical for multiple entities or individuals to gain an ownership interest in the company, through a stock purchase for example. Many third-party service providers can assist with this process, including providing online services. 

Articles of Incorporation or Organization are filed at the Secretary of State’s office for the state in which a person has chosen to set up a company, and therefore differ slightly in form and content. Check the appropriate state websites for further information.

Decisions to Make at the Start:

At the outset of a new business venture, there are a number of key decisions that must be made, including, but not limited to:

Company Name: This should be unique, memorable and clear of other existing businesses in similar market spaces; online search tools exist to find available names.

State of Incorporation: A business can incorporate in any state, but often it incorporates in the headquarters state.

Corporate Structure: Many new startups often begin as LLCs, but most growth companies choose a C corp.

List of Founders/Members

Mailing Address: Company headquarters can start in a residence, but soon moves to a separate space when operations begin. Post office boxes are generally not sufficient.

Website: This is a modern necessity – secure a domain name via one of the established hosting services, and expand the website to be your marketing nexus.

Accounting/Finance System: It is important to comply with relevant federal, local and state tax requirements. Keep tax records for a minimum of three years.

Employer Identification Number (EIN): An EIN (also known as a Federal Tax Identification number) is obtained from the IRS and is required for opening bank accounts or processing payroll.

Dun & Bradstreet D-U-N-S® Number: This free unique identifier for each business location is necessary to receive government grants or contracts such as Small Business Innovative Research grants (SBIRs).

Sales Tax Permit: From the state of company headquarters.

Business License: From city/county; grants the right to conduct business in that jurisdiction.

Business Insurance: To protect the business. Licenses from OTC require proof of insurance.

Federal Drug Manufacture Permit: If applicable, from the Food and Drug Administration (FDA).

Company Logo/Branding Materials: These can be developed after the company is established, but should be in place prior to web or product launch. This includes trademarks on the company name and logo.

Other Documents:

Operating/Partnership Agreements (LLCs): These agreements, while technically optional in many states including Indiana (but mandatory in several like New York and Missouri) are important, as they protect the company from certain state laws that apply by default to LLCs without such agreements, and help avoid or resolve conflicts between members by memorializing in writing the company’s daily operations and member roles.

Corporate Bylaws (C or S Corps): Typical bylaws include the company’s Name, Object, Members, Officers, Meetings, Executive board, Committees, Parliamentary authority and Amendment process (NOMOMECPA).

Employment Agreements: Often overlooked at the start, these are helpful when dealing with disagreements or conflicts between founders and early employees. These agreements should discuss roles and responsibilities, titles, compensation, any equity and vesting terms, duration of employment, grounds for termination, any applicable non-compete clauses, confidentiality of company information, work product ownership and dispute resolution. 

Non-Disclosure Agreements: Most licenses require Purdue or PRF confidential information (such as patent applications) to be protected if shared with investors or potential new management team members. 

Finally, it is important to select service providers in the early days to assist with legal representation and the accounting and human resources functions. 

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