I’m starting a business
When starting a business, many people wonder when the right time to hire an attorney is or if they really need an attorney? With a wealth of online legal services available, some may think they can go it alone and only hire a business attorney should a problem arise. The truth is, depending on the exact nature of your business, having an attorney involved assures that your start-up is done right. In addition, companies are not one size fits all, so blanket legal documents may not provide sufficiently for your specific needs.
What Can an Attorney Do For a Start-Up?
- Navigate the many forms and requirements in legal documents, such as incorporation documents, that can be difficult for those inexperienced in the legal field to understand.
- Provide peace of mind that the start-up is set up correctly and that the owner’s liability is limited.
- Enable the business owner to focus on other aspects of the business that need to be executed.
- Provide experienced support with specific tasks such as trademarking the business’s name, reviewing lease or rental agreements discussing ownership or legal structures, and preparing incorporation forms and documents.
Selecting a Business Entity
The first thing you should do is examine your business’s needs. There are four main types of business entities: sole proprietorship, partnership, corporation, and limited liability company (“LLC”). In determining which entity is best for you, you should consider a few things, such as tax implications, cost of formation and ongoing administration, flexibility, future needs, and legal liability. An attorney can assess your business’s needs and ensure the correct entity type is formed.
Corporations form a taxable and legally liable entity that shields its owner’s personal assets against business difficulties or lawsuits. Corporations must prepare bylaws, register with the State, follow strict record-keeping, and generally have a far more complicated ownership structure than other options. You will certainly want to involve a business attorney when setting up any corporation. When forming a corporation, an attorney can assist in considering the differences in business tax implications between an S-Corporation and a C-Corporation.
Partnerships and LLCs
Partnerships are a simple structure where two or more people own a business together and agree to share the profits and losses. Partnerships can be risky as each partner can be personally liable for other partners’ actions and financial obligations. LLCs are a hybrid entity that protects personal assets and shields the personal liability of their owners while offering individual tax benefits from the income or loss of the business. LLCs are a popular choice for medium-risk businesses.
Partnerships and LLCs must be registered with New York State. Documents such as a partnership agreement or an LLC operating agreement will need to be executed for both. In these instances, the counsel of a business attorney might be necessary; an attorney can draft the documents and ensure you have correctly registered your business with The State of New York.
A sole proprietorship is the simplest form of business and is standard for individual business owners. A sole proprietorship offers complete flexibility and control over the company. However, there are risks associated with sole proprietorships because they do not form a separate legal entity. This means that your business assets and liabilities are not different from your personal assets and liabilities, so the business owner can be held personally liable for the debts and obligations of the business. Nevertheless, a sole proprietorship can be suitable for a small, simple, low-risk business.