Starting your own business is a huge step that requires setting it up correctly. Business formation requires several important decisions related to the business structure, licensing, employment agreements, and registration. You will also need to review essential contracts and create internal documents.
Services Provided by a Business Formation Attorney
Here’s how a business formation attorney can give you expert legal guidance for a smooth business formation. Make sure you choose your lawyer wisely, ensuring you get the right advice to get on with the operation side of your new enterprise.
1. Choosing Your Business Structure
When required to choose the proper business structure, several factors will influence the best way to run things.
Some of the most common business structures you can choose from include:
- Sole Proprietorship
- Limited Partnership
- General Partnership
- Limited Liability Company (LLC)
- Limited Liability Partnership (LLP)
- Professional Corporation (CA)
A business formation attorney has the knowledge to guide you through choosing a proper business structure according to your industry’s typical challenges, the current market, tax implications, business size, and goals.
Tax implications – Each business structure has a different tax designation, meaning you need advice on the best one for your startup. Business formation attorneys usually have excellent tax law knowledge or an in-house tax attorney to advise you on the various business structures’ different tax advantages and disadvantages.
Several factors will determine the best business structure and tax designation for your business type. These include your expected revenues, number of employees, and business operating costs.
It’s almost impossible to predict revenues at the best of times, especially if you are a trailblazer in a niche market. Business formation attorneys know how to navigate undefined predictions. Moreover, they are invaluable in helping you choose the correct tax designation to avoid unnecessary long-term costs and payments your business cannot afford.
Critical factors for choosing the proper business structure – A business formation lawyer will ask you to provide the answers to several questions to help them determine the correct business structure. These include the following:
- Who is the business owner?
- What limits of liability will owners and members have? (They will explain what limits of liability mean.)
- How will you distribute business income?
- Do you plan to hire employees, independent contractors, or both?
- Will employees get equity?
- Have you thought about the type of taxation for your business?
- What federal, state, and local regulations must your new business comply with?
- Are there any restrictions on advertising your business with the various business structures?
The wrong business entity could affect your legal responsibilities and liabilities, especially if one of your employees or members has legal entanglements.
A business formation lawyer knows all the current laws applying to all the questions above, meaning you won’t have to spend hours researching the implications of choosing a business structure.
2. Drafting and Reviewing Contracts
Some standard contracts businesses require include real estate leases, operating agreements, services, supplies, and employment contracts. These contracts protect everyone involved, meaning they need careful drafting and reviewing before signing.
You also need a contract with the other stakeholders in your business that will smooth the way if you want to remove one or dissolve a partnership.
A business formation attorney can protect all your rights, helping you avoid any future problems with expensive legal issues.
3. Registration, Licensing, and Permit Processes
Businesses have different license, permit, and registration requirements depending on the type of business and its structure. A business formation attorney can ensure you have a legal business by helping you meet the legal needs of your city, county, or state.
Once completing the registration processes, your attorney will inform you about the annual renewals required to maintain a compliant business.
4. Conforming to State Law
States have different laws for the filing requirements of each particular business entity. One example is the requirements for filing LLC articles of organization. In some states, these require a specific method of filing and payment of filing fees. Your attorney will also inform you of the laws concerning corporate meetings. Additionally, some states require the designation of a Registered Agent to the Secretary of State at regular intervals.
If you neglect to conform to these state laws, you may lose the benefits and protection provided by your chosen business structure (for example, limited liability protection). A business formation attorney will guide you, protecting your business.
Additionally, if you plan to take your business to other states, you will need legal advice to ensure it conforms to the regulations of each.
5. Understanding Capital and Financial Matters
When starting a business that requires capital from investors, you need a robust business plan that informs them of its needs and goals. Business attorneys have experience in drawing up the ultimate business plan that will communicate your business needs in a way understood by investors.
When you need to raise money for your business, your business structure dictates the way. The same applies to making profit distributions. Running a business responsibly regarding financial matters will help you avoid any possible tax issues or liability. Most people are not aware of the requirements for each business structure, and a business formation lawyer can provide guidance.
6. Asset and Property Protection
Businesses have several assets, including property, cash, and intellectual property. Protecting some remains easier than others. For example, you need to protect your intellectual property by ensuring you have copyright and trademark registrations. Your business formation attorney understands the importance of these and the procedures required.
In cases where businesses are open to the public, a liability waiver can protect them from any injuries caused to customers while on the property.
Additionally, suppose your business relies on outside consultants or contractors with access to sensitive information (prototypes, client lists, etc.). In that case, your business lawyer will insist you add a non-disclosure clause to their work contract.
Tips for Choosing the Right Business Formation Attorney
- Choosing a business formation lawyer who understands the type of business you are going into is essential. Additionally, they should have experience handling similar legal matters and know all applicable regulations.
- It’s also important to review their fees before signing a contract. Check if they offer discounted services or flexible payment options.
- Finally, talk to people whose opinions you trust and find out who they used for their business formation needs. Ask them to rate the experience and decide if the same lawyer suits your needs.
By taking all these measures, you can ensure that the right business formation attorney is there to help you every step of the way as your
According to NOLO, some steps required for creating a new business are more straightforward than others. However, starting a new business requires several important decisions that can affect its long-term success. A business lawyer can provide expert support and resources, making them valuable team members as your business scales and prospers.
What is a business formation attorney?
A business formation attorney is an expert in the legalities of forming a new business. They advise and assist with registering your chosen business structure, filing for necessary licenses and permits, drafting contracts and reviewing them for compliance with the law, protecting assets and property, understanding capital and financial needs, and conforming to state law.
How do I choose the right business formation attorney?
When choosing a business formation attorney, look for someone knowledgeable in the type of business you are creating and with experience with similar legal matters. Ask trusted contacts for their opinions and review their fees before signing a contract. It is also wise to check if they offer discounted services or flexible payment options.
What documents are required when forming a new business?
The requirements vary depending on the nature and structure of your business. Still, some standard documents needed include articles of organization (LLC), registration paperwork, operating agreements, real estate leases, contracts for services/supplies, employment contracts, liability waivers (for businesses open to the public), copyright and trademark registrations, and non-disclosure agreements.
An experienced business formation attorney can help you ensure all the documents are in place for your business to be legally compliant.
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