Starting your own business means there will be a lot of paperwork. Without business formation documents, such as operating agreements, companies can’t legally operate. That’s why it’s crucial to define your business structure and know the exact steps that are needed to both protect your company’s interests and comply with legal requirements. The main challenge is that getting business formation documents can feel overwhelming. You need to define leadership roles, secure the right permits and licenses, and file everything with the appropriate government authority. But that’s just the beginning.
The documents you need depend on your business structure and the state where you’re operating. Different entities, such as sole proprietorships, might require less documentation, depending on the business structure. Additionally, most companies will ask for business formation documents as proof to check if another company is legitimate. This is also part of the Know Your Business (KYB) compliance process, which helps organizations ensure the business isn’t involved in financial crime and is a trustworthy partner when working with vendors, suppliers, etc.
Tag along and learn the exact document types needed for concrete business structures, and how to access and get the right business formation documents for compliance and secure B2B relationships.
What are Business Formation Documents?
Business formation documents are mandatory paperwork that an entity must file with a government agency before it can legally start its operations as a new business. This process requires several steps, such as choosing the type of business entity you’re forming, selecting a name for your business, and submitting the required documents to the state’s Secretary of State office.
Business formation documents are important because they:
- Help define the groundwork for the business
- Lay out the ownership structure and management responsibilities
- Provide liability protection for the company’s owners
- Detail the entity’s purpose and other details about the business
These documents are also required for tax reporting purposes and in other cases, for example, when the business needs to open a business bank account. Common examples of business formation documents include Articles of Incorporation or an LLC operating agreement. Keep in mind that specific files depend on the type of business and its operating state.
What are the Key Business Structures?
The main types of business entities in the US include the following categories:
- Partnerships
- Sole proprietorships
- Limited liability companies (LLCs)
- Limited partnerships
- Limited liability limited partnerships (LLLPs)
- General partnerships (GPs)
- Nonprofit corporations
- Corporations (S Corp / C Corp)
- Benefit corporations (B Corp)
For example, corporations are required to file corporate bylaws, which define how the business is managed, including the responsibilities of shareholders and directors. In contrast, LLCs and partnerships use an operating agreement to outline ownership structure, management roles, profit distribution, and how disputes are handled. However, there are multiple documents that companies need to get before starting to operate legally. For instance, a shareholder agreement is a separate business formation document that defines shareholder rights and responsibilities that are not covered in the corporate bylaws.
Why Do You Need Business Formation Documents?
Business formation documents provide a detailed structure to the business owners showing how the entity must be managed and maintained for long-term success. This helps operate transparent business processes that are well-organized and, naturally, compliant with local and global regulations.
Ultimately, entities require business formation documents for:
- Showing commitment among investors and potential partners
- Setting high standards for credibility and legal compliance
- Building a positive brand image as a company that’s a legitimate business
- Selling products or services with a foundation of a legally established company
- Proving your company’s good standing during background checks like KYB verification
That’s why it’s essential for businesses to obtain the necessary formation documents and register with the state to establish a legal entity. For example, forming an LLC creates a clear separation between the business and its owner, which limits personal liability and helps protect the owner’s assets. By collecting and filling business formation documents, along with other documents, such as various licenses or permits, companies can ensure that they run smoothly from the start.
Types of Business Formation Documents
Here are the types of business formation documents that are out there:
Business Name Registration Form
This form is required to have a distinct brand name and confirm that the company is officially registered. For some small businesses, business name registration is simple, as it involves submitting the business name to state and local authorities. This helps prevent confusion with similarly named entities. Sole proprietors, or those that operate under their own legal name, sometimes don’t need official registration.
However, skipping this step isn’t a sustainable approach. Certain business structures provide several advantages, such as tax benefits, liability protection, and, most importantly, legal recognition. These factors are essential for future verification, especially during KYB verification and other business background checks. Additionally, if you want to trademark your business and product name, you’ll need to register with the Trademark Office and United States Patent after officially forming your business.
Crucial to: Partnerships, LLCs, Sole proprietors & corporations
Employer Identification Number (EIN)
An Employer Identification Number, or EIN, is required for all US businesses for legal compliance and tax reporting purposes, and other financial operations, such as insurance. Companies need to obtain an EIN through the Internal Revenue Service (IRS) to operate legally. Self-employed individuals, such as independent contractors and freelancers, do not need an EIN.
Companies need to file Form SS-4, which is available on the IRS website. It needs to include details about the entity type, the start or acquisition date, and the reason for applying, such as:
- Starting a new business
- Undergoing an organizational change
- Complying with IRS withholding requirements
It also requires information like the business’s industry and the name and Taxpayer Identification Number (TIN) of the company’s principal officer, general partner, grantor, owner, or trustor. Third-party solutions, such as iDenfy’s EIN verification tool, can automate the lookup process, confirming that the EIN is valid in seconds.
Crucial to: Partnerships, corporations, LLCs & sole proprietors
Articles of Incorporation
This business formation document is required to legally form a corporation. This is the first step in the incorporation process. It helps the company outline its key details, or, in other words, articles of the entity, such as the corporation’s:
- Name
- Purpose
- Addresses (of the initial board directors as well)
- Contact information
- Corporate structure
- Registered agent
- Authorized incorporator
- Duration of the corporation (if it has a limited lifespan)
A corporation can’t legally exist without filing the Articles of Incorporation with an appropriate government agency. Like with other business formation documents, looking up this document helps other businesses confirm that a certain entity is operating legitimately as a corporation.
Crucial to: Corporations
Articles of Organization
This document is required for LLCs and works in the same way as a corporation’s Articles of Incorporation. That means LLCs must file articles of organization with the appropriate government agency to be considered as a proper, legal entity in its state. To file for the Articles of Organization, companies must check filing instructions. Most filings can be done online by visiting the state’s Secretary of State website. Details like state-specific requirements and associated costs are listed there as well.
The document needs to include information like the business name, address, the names of managers or members, registered agent’s information. Depending on the state, the entity might be required to answer additional questions during the filing process, such as detailing the LLC’s purpose or providing extra information about the LLC’s ownership structure. To make this process easier, most entities prepare a draft before submitting the document.
Crucial to: LLCs
Operating Agreement
An operating agreement is a business formation document that defines how the entity is managed. It defines the entity’s structure, management, and other information linked to operations and the people who are responsible for them on a daily basis. While some states don’t legally require this document, many LLCs still create one, as it serves as a reliable reference in cases like future audits or disputes.
An operating agreement typically includes the following information:
- Duties and benefits of all members
- Ownership shares, including the exact share percentage
- Voting rights
- Distribution of profits and losses
- Tax considerations
- Procedures for holding board meetings
- Buyout and sellout processes
It also requires establishing procedures for adding or removing members, including processes linked to raising additional capital. Once an operating agreement is signed, all LLC members are legally required to follow its terms. In general, an operating agreement doesn’t need to outline every little detail step-by-step, but the more well-put it is, the easier it is to have a good formal structure that demonstrates compliance.
Crucial to: LLCs
Corporate Bylaws
This document is essential when forming a corporation, much like the Articles of Incorporation. That’s why corporations need to file corporate bylaws with the government for them to legally exist. Bylaws outline the rules of how the entity will operate, covering various aspects linked to daily operations, such as responsibilities, meeting frequency, record-keeping protocols, election procedures, etc.
When a corporation creates bylaws, it helps:
- Ensure transparency in the corporation’s daily operations
- Resolve disputes that happen both in the corporation and in external legal settings
- Guarantee that every member is aware of the corporation’s terms and operates under the same set of conditions
In general, the initial bylaws are discussed during the organizational meeting. This document is prepared after filing the Articles of Incorporation. Throughout its existence, a corporation has the right to amend its bylaws, either by the shareholders or the board of directors. Small businesses that have a simple corporate structure often change bylaws when the business grows. This helps stay compliant and increase transparency if the corporation plans to attract capital in the future.
Crucial to: Corporations
Shareholder Agreement
This legal document defines the responsibilities and rights of shareholders in the company. A shareholder agreement doesn’t have a strict structure, as it’s based on individual company bylaws. A typical shareholder agreement has a list of the number of shares issued, along with exact dates and ownership percentages or restrictions on transfers. The main purpose is to have a framework for the company’s management, and, at the same time, safeguard the interests of all shareholders
Having a shareholder agreement is important because it helps:
- Establish fair pricing of shares (if there are plans to sell them)
- Cover extra details about the ownership structure that might not be listed in the Articles of Incorporation or corporate bylaws
- Define rights to vote and have a say in which outside parties can become future shareholders
- Create procedures, for example, how to handle a shareholder’s stock if they leave the corporation
This document should also address shareholder rights that enable current shareholders to preserve their ownership stakes in the event of new share issuances. However, a shareholder agreement is mandatory only if the company plans to offer its shares for trade. Otherwise, different from bylaws and the Articles of Incorporation, shareholder agreements are optional.
Crucial to: Corporations
Partnership Agreement
A partnership agreement outlines the roles, guidelines, and overall structure of the business entity. Simply put, this legally binding document details how the partnership will operate, creating a clear structure and defining the business relationship between the partners. Partnerships with a complex ownership structure and multiple partners need to have a properly drafted partnership agreement; otherwise, they increase the risk of conflicts or disrupted operations.
There are different types of partnerships:
- Limited partnerships (which need a Certificate of Limited Partnership)
- Limited liability partnerships (which need a Statement of Qualification)
- General partnerships (which need a Statement of Partnership Authority)
A partnership agreement needs to list who the initial partners are, including their responsibilities, capital contribution, and details regarding the decision-making process. Other important details that need to be filed include how the partnership can be ended, how a partner can be removed (and added), and how will the partnership handle operations like tax reporting.
Crucial to: Partnerships
Which Other Licenses and Permits are Necessary?
There are state-specific requirements and documentation that are mandatory only in certain industries. For example:
Federal Permits
There are industries that additionally require specific permits. For example, companies that sell or import alcohol are required to get a permit from the Alcohol and Tobacco Tax and Trade Bureau (TTB). Other sectors also need these permits. Examples include selling firearms, manufacturing drugs, meat processing, and providing investment advising services.
If you’re unsure whether you meet all permitting requirements, it’s a good idea to contact your local authorities to avoid missing any documents or critical details that could result in non-compliance.
Industry-Specific Licenses
In certain cases, additional licenses, certifications, or registrations are required. Depending on the company’s business activities, they can be required to obtain such documents from their state agencies. For example, heavily regulated sectors like food are required to get extra industry-specific, state-level licenses to comply with state regulations and meet health standards.
How to Verify Business Formation Documents?
Since most US-based companies are registered at the state level, and not with federal or country governments, the most reliable source to find business formation documents is to screen and look up state records. Other alternative ways include accessing federal agencies (such as the IRS) or asking the business itself to provide needed documentation. This way, companies can assess potential partners and ensure they have the required business formation documents to operate legally.
Other steps you can make to verify business formation documents:
Search the SEC’s EDGAR System
The Electronic Data Gathering, Analysis and Retrieval system, or EDGAR, is a public filing database online, which is managed by the Securities and Exchange Commission (SEC). In the US, the Securities Act of 1933 requires that certain company information needs to be disclosed to the public. As a result, EDGAR’s search allows companies to access the full text of electronic filings dating back to 2001. Alongside accessing business formation data, it also enables companies to search records for insurance products, mutual funds, and other types of securities.
Look Up Secretary of State Offices
Secretary of State (SOS) offices are one of the main government bodies in the US. Since businesses must register with the Secretary of State’s office, many of their records are available online. Businesses can search for another entity and its business formation data by using a state’s entity search tool or by visiting the official state government website.
However, this method has its challenges, such as:
- There’s no centralized federal tool that lets you search all state databases at once.
- Each state site has its own interface, and some may require creating an account or paying fees to access records.
Since businesses aren’t always registered in the state where they primarily operate, companies sometimes need to manually look up multiple portals individually. This process takes time and resources, making it challenging to scale or handle multiple onboarding requests during business verification checks or standard background checks that are intended to check if a company is legit.
Use iDenfy’s Business Verification Solution
Integrating a fully automated third-party Business Verification solution helps assess businesses more efficiently, automatically detecting red flags and suspicious signals that need to be verified for compliance. This makes it easier to navigate KYB challenges faster, such as manually looking up business formation documents and typing in data into several different government databases.
Such RegTech tools, as well as iDenfy’s software, allow users to automatically collect and verify company information, including formation documents, business ownership data, bank statements for bank verification, and more, including:
- Verifying the company’s legal status
- Reviewing registration documents and licenses
- Analyzing financial statements and PDF reports
- Assessing the company’s financial stability
- Understanding the industry sector and associated risks
- Identifying and verifying Ultimate Beneficial Owners (UBOs)
What else you get with iDenfy: built-in KYC checks for all related individuals on the same KYB dashboard, automated risk-scoring, screening against adverse media, sanctions, watchlists, and PEP databases, as well as custom automation rules for conducting ongoing monitoring of all business relationships with corporate customers.
So, with our KYB service, you can download credit bureau reports, government registry reports and other business formation or industry-specific documents in one, multi-feature platform.
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