According to the US Bureau of Census, 550,000 new businesses were formed in 2002. It is not known how many were incorporated. There were approximately 22.9 million businesses in the US. These are small businesses that form the backbone of the American economy. Small businesses represent 99.7% of all employers and create more than 50% of non-farm private gross domestic product.

Most businesses start out small. In the beginning, data reveals that 82% of the small businesses are financed by personal loans or savings and loans from friends and relatives. Hence, when these firms grow large, it is important that easier access to finance from banks and the public is available. Moreover, the owners liabilities have to be reduced to decrease personal and business risk.

A checklist for starting a business runs like this: select a business structure, choose a tax year, select accounting method and payment of business taxes. The need for incorporation arises if the business structure chosen is either a LLC or corporation. Either of these requires mandatory filing with state authorities. If it is sole proprietorship and partnership, registration is not required, and business activities may begin immediately. In the cases of LLC and corporation, a lot of legal counsel, understanding the filing procedure, tax compliances, formation of business structure as per the type of corporation and the role of management and members are required.

The actual filing procedure is filling out proper forms and handing them over to state authorities where incorporation is done. Filing the papers can be done by hiring the services of an incorporating agency. These agencies file the papers in all the states required and provide some value added services including information of fees and duration calendars that vary from state to state. States like Nevada and Delaware are corporate friendly; therefore, most firms incorporate in either of these states.