Process of Forming a Company: Everything You Need to Know

The process of forming a company depends on the type of company being formed.3 min read

The process of forming a company depends on the type of company being formed. Forming a new company can be broken down into four stages:

  • Promotion
  • Incorporation
  • Capital Subscription
  • Commencement of Business

What Decisions Have to Be Made to Form a Business?

Before you can establish a company, you will need to make several decisions. For example, you will need to determine:

  • The name of the company
  • How you want it to be incorporated (LLC, s-corp, c-corp, partnership, sole proprietorship, etc.)

A business can change its legal form at any time. The formation of each business type provides a different legal framework, including how it conducts its activities and its tax liability. When a private company or a public company with no share capital is formed, promotion and incorporation are the only steps that must be taken before starting its operations.

While all new companies have various steps to take during the formation process, a private company is able to commence business immediately after they have received a certificate of incorporation. A company with share capital will go through additional steps before commencing business. Let's take a look at the process of forming a new company.


All companies start with promoters. This is the individual or individuals who take the initial steps necessary to begin the formation process. When an individual or individuals discover a business opportunity and then invest with funds, property, and managerial skills for the purpose of earning income, this would be a promotion.

Another example of promotion would be participating in the startup of an enterprise. It involves all activities that are a part of the startup process. Promotion begins as early as when an individual seriously starts considering the formation of the company, according to H.E. Heagland. In addition, once the business is up and running, promotion comes to an end, Heagland adds. Likewise, Guthmann and Dougall agree that promotion begins at the conception of the idea and carries on until the business is operating.