FAQs about Formation
1. What does “forming a business” mean?
Forming a business refers to legally creating a distinct entity—like an LLC or corporation—to conduct operations, shield personal assets, and follow appropriate regulations.
2. When should I form my business entity?
You should consider forming your entity before launching your product or service, accepting payments, or signing significant contracts. Early formation can provide liability protection from the start.
3. What’s the difference between an LLC and a corporation?
An LLC (Limited Liability Company) is generally simpler to set up and run, with more flexible management and fewer formalities. A corporation may offer more structured governance and can issue stock, making it a common choice for companies seeking venture capital.
4. Which entity type is right for me?
It depends on your goals, your industry, and your plans for growth. LLCs are often chosen by small businesses seeking flexibility, while corporations sometimes appeal to startups expecting to raise equity from investors. Dappr’s guided setup can help point you in the right direction, but a legal or tax advisor can give more customized advice.
5. Can I form a business in a state other than my home state?
Yes. Many entrepreneurs form businesses in states like Delaware, Nevada, or Wyoming, due to favorable laws or tax considerations. However, if your primary operations are in another state, you may still need to register as a foreign entity there.
6. Do I need an EIN (Employer Identification Number)?
Most businesses need an EIN for tax and banking purposes, even if they don’t plan to hire employees right away. Dappr will obtain an EIN for you as part of the formation process.
7. How long does it take to form an LLC or corporation using Dappr?
Timelines vary by state. Some process formations in a few days, while others can take a couple of weeks. Dappr handles filings promptly and keeps you updated with the status through our platform.
For detailed state-by-state comparisons, click here.
8. What is a registered agent and why do I need one?
A registered agent is a person or company with a physical address in the state of formation who can receive official correspondence on your behalf. This is typically required by law for LLCs and corporations. Dappr can provide a registered agent service if you don’t have your own.
9. Do I need a separate business bank account?
Yes. Separating business and personal finances is critical to maintain your limited liability protection and keep your bookkeeping organized.
Your Dappr-account includes a Financial Account. Since Dappr is not a bank, we can't call it a bank account, but the account is protected in case of bank failures just as regular bank accounts. Learn more in the Dappr Financial Account Agreement.
10. What is an S corporation?
“S corp” is not a separate entity type—it’s a tax classification available to eligible LLCs or corporations. It can offer certain tax advantages, especially for small businesses with U.S. owners. You can elect S corporation status by filing specific forms with the IRS, and Dappr can assist!
11. How does Dappr handle state filing fees?
Dappr collects any required filing fees during the formation process. The exact amount depends on the state. We ensure your fees are submitted properly so your formation documents can be processed. Dappr does not get a cut of the state filing fees.
12. How do I convert my sole proprietorship into an LLC?
You’ll file LLC formation documents in the state where you do business, then transfer assets, accounts, and licenses into the new LLC’s name. Dappr’s takes care of this for you.
13. Will Dappr remind me about annual reports and fees?
Yes. Dappr offers compliance reminders for annual filings, fee deadlines, and other routine obligations. You’ll receive alerts so you can stay in good standing with your state’s requirements. With our Pro plan, or with the Automated Report Filing add-on, Dappr will even file the report for you without any action required on your part.
14. Do I need a lawyer or accountant to form a business through Dappr?
Certainly not! Dappr is here to assist throughout the formation process. You can even get a dedicated accountant through Dappr with a monthly or annual subscription. If you're starting a business within a highly regulated industry, it's always recommended to consult with an attorney with industry-specific knowledge and experience.
15. What’s the best state for forming an LLC or corporation?
There’s no universal “best” state. Delaware is a common choice for corporations, Wyoming is popular for LLCs, and many entrepreneurs choose their home state to keep it straightforward. Deciding factors include fees, laws, taxation, and your business’s nature.
16. What is a Corporate Veil?
The “corporate veil” refers to the legal separation between a company and its owners, shielding personal assets from business debts. Properly maintaining your business as a separate entity is crucial to upholding this protection, and Dappr will help you do just that.
17. Is there a minimum number of owners required for an LLC?
Unlike Corporations, LLCs must always start out with at least 1 member (also called single-member LLCs).
18. Does Dappr help with trademark registration?
While Dappr doesn’t currently provide direct trademark filing services, we do have resources and step-by-step guidance to help you navigate the trademark process, including referrals to legal services if needed.
19. How do I update my business name after formation?
If you’re simply adding a “doing business as” (DBA) name, you typically file a DBA/assumed name registration. If you want to change your official entity name, you’ll need to file an amendment with the state. Dappr can handle the paperwork in either case.
20. Can Dappr help me form a nonprofit?
No, Dappr does not currently offer nonprofit formations.
21. Do I have to pay annual fees even if my business is inactive?
Yes. Even if your business isn’t actively operating, you must keep up with your state’s required reports and fees to maintain good standing. Otherwise, you risk administrative dissolution. Regulations, including fees and potential exceptions, vary by state.
22. Does Dappr cover every U.S. state and territory?
We support formations in all 50 states, plus Washington, D.C. We do not currently support formation in other U.S. territories or other countries.
23. What is an Operating Agreement?
An Operating Agreement sets out how your LLC is run, including ownership percentages, voting rights, and profit distribution. While not always legally required, it’s recommended to clarify roles and responsibilities among LLC members, and Dappr will help you set up and maintain an Operating Agreement as part of all packages and subscription plans.
24. Can I form a multi-member LLC on Dappr?
Yes. You can specify multiple members during the online formation process.
25. Is my personal credit affected when forming an LLC?
Forming an LLC doesn’t typically impact your personal credit unless you personally guarantee business loans or credit lines. However, maintaining good business credit is crucial as your company grows.
26. Does Dappr automatically issue stock certificates for corporations?
We help generate initial documentation, including essential corporate paperwork. However, you’re free to use digital or paper stock certificates based on your preference or the requirements of your investors. Dappr does only issue digital stock certificates.
27. How can I sign up for Dappr’s formation services?
Just head to our website, click Get Started and walk through the step-by-step process. Our interface will ask for your entity type, desired state, and other details.
28. Can I cancel my formation if I change my mind?
If your state filing is still pending, you may be able to cancel. However, once the documents are filed, you’ll need to formally dissolve or withdraw the entity to avoid ongoing fees. Orders are non-refundable after 14 days or when paperwork is filed with the authorities, whichever comes first. State fees remain refundable after 14 days if paperwork has not been filed, but refunds must be requested.
29. Does Dappr store my formation documents?
Yes, we keep digital copies of your filed formation documents, operating agreements, and other records in your account for quick reference and sharing.
30. Do I need separate licenses or permits after forming my business?
It depends on your industry and location. Common examples include health permits, professional licenses, or zoning approvals. Order Dappr's Business License Report during or after formation to get a clear picture of the compliance requirements for your industry and jurisdiction.
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