Starting a New Business
Start-up businesses are the mainstay of the US economy. Each year thousands of new businesses are created. Some are capitalized on a shoe-string budget and others are multimillion dollar investments by large corporations and other wealthy investors.
Once the idea is formed and the basic financial arrangements are agreed upon, it is time to engage an attorney to form the entity. This should be done immediately, before any agreements are entered into or operations started to insure the owners are protected from personal liability. If the entity is not created, the venture will be presumed to be a partnership for legal purposes and each owner will have joint and several liability for obligations of the new business.
Yes, it is quicker and cheaper to jump online and form the entity. However, the online services do not insure that you have satisfied all the legal requirements, do not tailor the entity to your specific needs and are not there to assist you with the variety of other questions that arise when starting a new business. Often times DeAngelis Legal is hired to clean up these entities. Alternatively, give us a call in the beginning so you start off on the right foot.
Which Entity is right for Your Business?
Which entity is right for your business? Corporations, Limited Liability Companies, Registered Limited Liability Companies all are viable selections, depending on the circumstances. In addition, the tax characteristics are important. Regardless of the type of entity, each entity can be taxed as a partnership, s-corporation or c-corporation. Single member LLCs can be disregarded for tax purposes. The purpose and characteristics of the entity determine the preferred type of entity and tax classification. For example, entities holding real estate generally use LLCs taxed as a partnership. The answer to which entity is right for you depends on the purpose of the entity and its ownership structure. Give DeAngelis Legal a call to discuss how we can assist you sort through the alternatives and select an entity to avoid a legal or tax issue in the future.
What Documents are Required?
Once the entity is selected, the initial operational documents should be created. These documents govern the financial and voting relationships of the owners and the managers and often times overrule default provisions of the law which may lead to an adverse result under certain circumstances. These documents should address issues such as voting, tax allocations, management, compensation, and equity transfer restrictions. Common documents for each entity include:
For closely held corporations:
- Articles of Incorporation
- Organizational Minutes
- Shareholder or Buy-Sell Agreement
For limited liability companies (LLCs):
- Articles of Organization
- Operating Agreement
For Registered Limited Liability Partnerships:
- Certificate of Formation
- Partnership Agreement
DeAngelis Legal is well versed in talking through the various alternatives and drafting the appropriate documents to fit the needs of your business. Call us today to get started.
What Type of Corporate Structure is Best?
For those client who have accumulated several entities over the years without a coordinated plan or updated structure, the entities become a tangled mess of management and legal headaches. Each entity was created for a purpose at the time of formation, but no-one took a step back and looked at the overall structure. Care must be taken to understand your current structure, sort through the relevant documents and create the new entity with an eye towards a structure that isolates liability risk and streamlines management in a tax efficient manner.
DeAngelis Legal can review alternatives and assist you in selecting a corporate structure that meets your objectives using what you already have in place. Clients are surprised at how much we can accomplish with a few changes to your corporate structure. Even if you are not creating a new entity, a review of your corporate structure may lead to surprising results. Call DeAngelis Legal to find out what your business structure looks like.