Transformation of the distribution network, integrated with Distributed Energy Resources (DER), into a MicroGrid (MG) is an attractive approach in improving the reliability and resilience of the network. In this paper, by introducing the important and necessary aspects of the MG formation problem, an effective methodology for transformation of a distribution network into the MG is proposed. In the presented methodology, optimal allocation of DERs within MG is obtained by optimization of power losses and voltage stabilization along feeders. Moreover, the short-circuit constraints are also taken into account simultaneously while allocating DERs. The reason for the latter is that the integration of DERs alters the amplitude and direction of the short circuit current, which can cause the overall fault current to exceed the designed fault-level capability of the circuit breakers. This issue may put CBs at risk of failure and degrading MG resilience. In this regard, resilience-oriented evaluation of the MG formation, from the perspective of considering short circuit level and coordination of OCRs, is also performed. Another advantage of short circuit studies is devising complete and economic overcurrent-based protection plan for MG in both operating modes (grid-connected and islanded). It should be pointed out that adopting an appropriate control routine is a key element in the MG formation. Hence, a control strategy, based on Energy Storage System (ESS) utilization, is suggested in this paper. This feature, which is another contribution of the paper, will guarantee seamless transition to island mode and stable operation of the MG. The proposed formulation of the MG formation is solved using a modified multi-objective PSO and the Pareto-optimal set is obtained. However, since the optimal solutions are nondominated to each other, a Fuzzy Satisfaction Method (FSM) is utilized to find the optimal solution among the Pareto-set. Utilization of the proposed methodology leads to the successful transformation of the distribution network into a MG, which not only considers the load flow constraints but also preserves the optimal coordination of the protective relays and resilience of the MG. In addition, seamless transition and stable operation of the MG in island mode is achieved.