Business entity formation refers to the series of steps that are required to set up a business. The bulk of business entity formation involves legal and tax issues, which is why having experienced lawyers from early on is a good idea. This makes the process smooth and reduces errors that could result in lawsuits, penalties and other legal complications in future. Every state has its own requirements for starting and operating a business, but there are a few core elements that are common in all states. After defining the type of business, you want to form and have all the paperwork such as a business plan in place, the next step would be to apply for an Employer Identification Number (EIN). This, of course, is not a prerequisite for all businesses. Business entity formation also requires that you select and adhere to a business structure. The business structure you choose will define many aspects of the day to day running of the business including which types of income tax you will be filing. Common types of business structures include sole proprietorships, corporations, partnerships and limited liability companies. All these require extra legal documentation with details such as the portions of the company that each member owns or how shares will be distributed. This is a very shallow guide as to how business entity formation is done; there is a lot more that has to be considered. The fact that this is affected by the type of business as well as your locality means that your best shot at getting it right would be to have a legal firm handle most of the work.