So you've written all your plans, you've got any financing you need, and you're just about ready to set up your company. Um, wait a sec ... how exactly do you do that?

The Basics

A company is an entity, separate from you, that you need to create before you can do business. You decide what type of company it will be, give it a name, and then you send off all the relevant papers to your government and pay any fees that need to be paid.

Even for a one-person work from home business, it's good to form a company — it keeps the finances apart, and means you can sell your company to someone else someday if you want to. Besides, it's quite possible this might be a legal requirement where you live.

Before you do anything else, you should send or pick up the forms you need to start a company — in the US, for example, you would talk to the SBA (Small Business Administration), while in the UK you would need to get in touch with Companies House. If you're not sure, your local Chamber of Commerce or your lawyer should be able to advise you.

Types of Company

The chances are that you will want your company to be 'limited', which means that your own liability when it comes to debts and other legal issues is limited to a certain amount, usually the amount you've invested. While it's possible to start an 'unlimited' company, it offers no real benefit — it just means you take much more legal risk.

The choice between 'private' and 'public' companies should be equally easy to determine. A private company can be any size, and it's owned only by the people who started it.

A public company, on the other hand, is one that can be traded publicly, and may be listed on the stock market. There will be a high minimum share issue requirement for this type of company that will put it well out of your reach, and formal qualifications may also be required.

So the kind of company you need is very probably a limited liability company, usually abbreviated as 'LLC'.

Legal Requirements

There are a few legal requirements you need to complete before you can start a company. You probably need to be over 18 and otherwise permitted to enter into contracts. You must not have been disqualified from being the director of a company, and you also can't currently be bankrupt.

Simple so far, right? One last necessity is that you'll usually need two people to act as the directors of your company, not just one — you might have to ask your partner or a lawyer to be another director, or to act as a 'secretary'.

Fee Time

You're likely going to fork over for lots of fees as you go through the process of setting up your company, but none of them should be very large. There'll be a company registration fee, as well as a witnessing fee and perhaps some charges for stationery. You may be able to pay extra to have your company registered more quickly.

An Alternative

If you think getting a company set up sounds like hard work, you'll be relieved to know that there are people who offer comprehensive company registration services at a reasonable price. You should expect to pay about double the standard do-it-yourself fees, but it's not that much to pay, and it will save you a lot of trouble both now and later because everything will get done properly. If you decide to take this route, speak to a lawyer, accountant, or even a specialized 'company formation agent'.

Your Obligations

Finally, be aware that from the moment you set up a company, you will likely have obligations placed on you. First, and most important, is tax reporting — you'll be required to send in a tax report every tax year. Forgetting to deal with tax issues could result in a fine or worse, so make sure you understand exactly what you've signed up for.

You might also have to do things like putting a small sign with your business' name in the front of your business premises (your house), or to start writing your company registration number on business-related letters you send out.

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