As the backbone of the American economy, small businesses play a major role in the everyday activities of Americans. From restaurants to grocery stores, small businesses are everywhere. So it is no wonder that many people dream about owning their own small business one day. For those ambitious few, starting a business is both exhilarating and nerve wracking. However, it is vital to the success of your business to start off on the right foot. Depending on the industry, each state and sometimes city, has different requirements, regulations and statutes you must comply with. For more information on the subject, it is important to seek the assistance of a business law attorney who specializes in such manners. “But, I am just starting a small company, why do I need an attorney?” Unfortunately, even small business are at risk for liability and as time goes on your business will grow and you will require assistance. So why not just start off with the assistance of a business law attorney.
One of the most common reasons a business owner will seek the assistance of an attorney is to form their company into one of the following : sole proprietorship, general partnership, limited liability partnership, corporation, and a limited liability company.
If you are starting your business on your own, this is one of the most common and easiest methods to form your business under. However, a sole proprietorship does come with many potential pitfalls if you aren’t prepared. Unlike other business formations, a sole proprietorship leaves you alone, responsible for every aspect of the business. Due to the personal risk involved in these ventures, it is typically recommended to only enter this formation if your business is at low risk and does not deal with potential hazards or legal pitfalls. It is typically recommended, that sole proprietorships invest in quality insurance to cover their increased risk.
This formation is reserved for people who are going into business together with equal standing. Starting a partnership is easy; there is no official documentation that you have to submit. However, it is typically recommended to get something on paper for a record as the businesses finances, responsibilities, and legal issues grow. To best protect your personal assets, consult a business law attorney to get started and iron out any details of a partnership or mediate problems that may arise. An attorney can help throughout the changes in your partnership and save relationships.
Limited Liability Partnership
Consisting of two or more people, this partnership requires at least one person who assumes personal responsibility, while the others assume limited liability. The limited partner or partners will not be personally responsible for debts in exchange for forfeiting the rights to be involved with the daily management of the business. Unlike the partnerships mentioned above, this form must be filed with the secretary of state.
Designed to provide protection for shareholders, filing as a corporation will limit the personal liability, instead passing on that responsibility to the corporation itself. In exchange the members of the board, elected by a collection of shareholders, must uphold certain formalities. However, forming a corporation is not a solution for all businesses, since it does require quite a bit of ongoing housekeeping and potential increase in taxes.
Limited Liability Company
Depending on your industry an LLC may be the solution for you. More flexible than a corporation, LLC’s take many of the burdens of sole proprietorship off of the owners and come with some other extra perks. Unfortunately, they often come with more tax liability and they can be a bit trickier to successfully set up, as the laws vary greatly by state.
For more information, or to get started forming your new business, Contact Sachs Law today!