At the beginning of your business venture, it is important to decide what legal structure is best suited for your business and what governance documents are required. For these decisions, we encourage that you work with an attorney and your tax and financial professionals to determine what structure suits your needs.
The most common legal structures for a business are: (1) Sole Proprietorship; (2) Partnership; (3) Limited Liability Company; and (4) Corporation. When a business owner is starting out and deciding which structure will work best for the business, some of the most important factors to consider are: (1) flexibility; (2) liability; (3) complexity; (4) taxes; (5) control; and (6) whether the business will require, desire or need funding. All of these factors are important to determine which structure is appropriate and each state has its own regulations for each type of business.
If you decide to form a partnership, it is so important to have a written partnership agreement, which should be, at a minimum, reviewed by an attorney.
If you decide to form a limited liability, you have an attorney prepare an operating agreement which will outline the details of the business and the relationships between the members.
If you decide to organize a corporation, you may consider having a shareholders agreement prepared on your behalf.
Before you decide which structure is appropriate for your business, it is important to sit down and write out what your business plan is, what your goals are, and what your vision is for the company. What factors are most important to you – is it flexibility? Tax benefits? Protection from personal liability? Once you know the answers to these questions, and you consult with an attorney AND an accountant, you can make the best decision as to what structure is the most appropriate for your business.
Disclaimer: The information contained in this post is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls and communications. Contacting us, however, does not create an attorney-client relationship