Everyone in business knows that survival requires careful financial planning, yet few fully realize the importance of selecting the best legal form for the business. Small businesses have little need for the sophisticated organizational structures utilized in large, publicly traded corporations, but since all entrepreneurs must pay taxes, obtain loans, and expose themselves to potential liability with every sale they make, it only makes sense to structure one’s business so as to address
these issues.
Every business has an organizational form best suited to it. When I counsel people on organizing their businesses, I usually adopt a two-step approach. First, we discuss various aspects of taxes and liability in order to decide which of the basic legal structures is best. There are only a handful of basic forms—the sole proprietorship, the partnership, the corporation, the limited liability company, the limited liability partnership, and a few hybrids. Once we have decided which of these is most appropriate, we go into the organizational documents, such as partnership agreements, corporate bylaws, or operating agreements. These documents define the day-to-day operations of a business and must be tailored to individual situations.
What I offer here is an explanation of the features of each of these kinds of organizations, including their advantages and disadvantages. This should give you an idea of which form might be best for your business. I discuss potential problems, but since I cannot go into a full discussion of the more intricate details cannot be had here, you should consult an experienced business attorney before deciding to adopt any particular structure. My purpose is to facilitate your communication with your lawyer and to enable you to better understand the choices available.
these issues.
Every business has an organizational form best suited to it. When I counsel people on organizing their businesses, I usually adopt a two-step approach. First, we discuss various aspects of taxes and liability in order to decide which of the basic legal structures is best. There are only a handful of basic forms—the sole proprietorship, the partnership, the corporation, the limited liability company, the limited liability partnership, and a few hybrids. Once we have decided which of these is most appropriate, we go into the organizational documents, such as partnership agreements, corporate bylaws, or operating agreements. These documents define the day-to-day operations of a business and must be tailored to individual situations.
What I offer here is an explanation of the features of each of these kinds of organizations, including their advantages and disadvantages. This should give you an idea of which form might be best for your business. I discuss potential problems, but since I cannot go into a full discussion of the more intricate details cannot be had here, you should consult an experienced business attorney before deciding to adopt any particular structure. My purpose is to facilitate your communication with your lawyer and to enable you to better understand the choices available.
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