Business Formation Assistance at the Business Law Group
Are you interested in forming a business, but you need help figuring out where to start? Do you have questions about the right entity choice for your needs? You will be happy to learn that the Business Law Group assists clients with business formation. Our services include reviewing your needs, advising on your choice of entity type, preparing all important formation documents and agreements, helping with securities law compliance, and more.
You might be wondering why you need a lawyer to form a business. Online templates and pre-filled forms could tempt you to take shortcuts. When you engage the Business Law Group, you get much more than a template. Our highly experienced team tailors advice to your specific needs, even addressing future possible legal issues in custom formation documents and buy-sell agreements.
Business Formation: Corporations
We may advise forming a corporation for your business, depending on your situation. When you incorporate your business, you create an entity that can act much like a person would. Corporations can lend and borrow money similarly to how people can. They can sue others and be sued as well. Also, they can take actions such as purchasing and selling property.
Corporations have a few key stakeholders. First, shareholders own the corporation. They pay money in exchange for shares of stock, which represent ownership rights. The shareholders can vote on important matters at an annual shareholders' meeting and may receive dividends from corporate profits. Shareholders may choose to sell their stock or may receive the opportunity to buy more stock and increase their ownership percentage.
Second, corporate directors and officers handle decision-making for a corporation. The board of directors usually makes high-level decisions, such as purchasing real estate or issuing more shares of stock. The officers do more day-to-day work for the corporation, such as overseeing employees and planning marketing strategies.
Corporations provide several advantages for the various stakeholders. Shareholders receive limited personal liability exposure for corporate actions. Directors and officers also typically get protection from personal liability, provided that they use good business judgment in making decisions. However, keep in mind that corporations are subject to double taxation because they do not qualify for pass-through tax status (where owners pay taxes individually on behalf of a business entity). Moreover, some corporations must follow complicated securities laws relating to stock issuance and sale.
Business Formation: Limited Liability Companies and Partnerships
Alternatively, we may advise forming a limited liability company or limited liability partnership for your business. As the names indicate, both entity types provide some personal liability protection for owners. Limited liability companies (LLCs) are owned by one or more members. Some limited liability companies have members who all own equal amounts of the business and have control over its day-to-day operations. Others have member-managers who handle the day-to-day operations and also own part of the business, while one or more other members own part of the business but are not involved in operations.
To best protect yourself from personal liability on behalf of an LLC, it’s extremely important to observe business formalities. For example, you need a carefully prepared operating agreement and finances separate from the members' personal accounts. You also need to document transactions and business decisions carefully to safeguard against any personal liability for business actions.
Further, some businesses are best suited to using a limited liability partnership instead of a corporation or LLC. State laws may highly regulate your limited liability partnership (LLP) depending on where you form it. In some states, only professionals such as lawyers and accountants can form LLPs. A limited liability partnership is a general partnership structured so that every partner has limited personal liability for partnership debts. Partners may be liable for other partners’ contractual debts. However, LLPs are popular among professionals because each partner may not be liable for other partners’ tortious damages (such as damages from a lawsuit for malpractice). LLPs are also popular for professionals because we can customize how much control each partner has, as well as how much of the LLP proceeds each partner receives.
Business Formation: General and Limited Partnerships
Sometimes, you may wish to form a general or limited partnership instead of another business entity type. A general partnership (GP) is an association of two or more partners working together to make a profit. All general partners have personal liability for the partnership's actions. In other words, each partner can be liable for another partner's actions on behalf of the partnership. General partnerships have more flexibility than some other entity types: while the default is equal control by each partner, you can change this using your partnership agreement.
Limited partnerships provide more liability protection than general partnerships while remaining fairly flexible in structure. A limited partnership (LP) has at least one general partner. This partner has personal liability for their partners' actions. An LP also has one or more limited partners. Their liability is limited to the amount that they contribute to the partnership. Limited partners can invest in a business passively with fewer concerns about liability, while general partners usually have more control over LP operations.
There are pros and cons to all these entity types, from corporations to general partnerships. We strongly suggest that our clients obtain informed business advice about which type of entity will suit them best. At the Business Law Group, we are here to help with your business formation needs.
For Customized Business Formation and Maintenance, Call the Business Law Group
Do you need assistance forming a new business? Maybe you need advice on which type of entity to choose or how to protect your personal assets when starting a business. The Business Law Group’s highly experienced team would like to help you achieve your business goals. Our team has decades of experience with the business-related issues that matter the most to you. We advise both new and experienced California business owners about legal strategies to protect their business every day. Please contact us at your convenience to schedule an appointment. You can reach the Business Law Group by calling (408) 979-7800 or by filling out our Contact form.