LLP? LLC? LP? PC? CORP? It can be hard to sort through the alphabet soup when selecting and forming the right type of business entity. Our lawyers can help you determine the pros and cons of each entity type. And once you’ve decided, we can form the entity, draft the documents necessary for managing the entity and assist you in complying with the minimum formalities to maintain your limited liability protection.
Elaina M. Bauer
Associate
Donald J. Churnside
Of Counsel
Sally R. Claycomb
Partner
Nicholas M. Frost
Partner
Gerry Gaydos
Of Counsel
Katherine L. Moyer
Partner
Pablo J. Valentine
Partner
Selection. It is crucial that you select the correct type of business entity when starting your business. At best, the wrong business type will cause you more pain and expense than needed, and at worst, you might pay significantly extra in taxes. While taxes may be the biggest driver in selecting a business entity, it is also important to ensure you select an entity appropriate for your business purposes and that you consider compliance costs for maintaining your entity. Why do doctors, lawyers, accountants and other professionals sometimes form PCs, or LLPs, or LLCs? Why is real estate normally owned through LLCs? And why are many businesses formed as corporations? What’s the difference between an “S” corporation and a “C” corporation? Talk with our lawyers to understand your options.
Formation. While forming an entity with the Secretary of State is relatively straight-forward, it is important to ensure you meet the minimum requirements of formation to ensure a valid entity. In addition, many people wonder where to form their entity, and what steps are needed. Business entity formation does not stop, however, with registration at the Secretary of State. Once you have the business created, it is imperative that you have the correct documentation – such as bylaws, a partnership agreement, or an operating agreement—for business decision making, operations, and formalities. In addition, depending on your capital structure, a business lawyer will help you determine if compliance with state and federal securities laws are required and, if so, our securities law counsel can help ensure you meet the strict requirements for raising capital.
Maintaining the Formalities and Limited Liability Protection. Limited liability protection is one of the main reasons people form business entities. Once your business entity has been formed, you must ensure you take the appropriate steps to maintain the requisite formalities. If you don’t respect the basic and minimum requirements for maintaining your business entity, then the courts may not recognize the entity and instead may assess the liabilities and obligations of the business entity directly to the owners. In addition, businesses need to ensure that their representatives have the appropriate authority to act for the company and that majority owners and managers comply with their fiduciary duties to the owners of the business.
Family Planning. In addition to obtaining limited liability for owners, many business entities are formed for wealth preservation within a family, as well as to help ensure the successful transition of a business from one generation to the next. Family planning with business entities requires careful consideration as to the correct business entity to accomplish family plans in connection with state and federal gift, generation skipping and estate tax rules.
Business Sales. At some point, the owners of a business may decide it’s time to sell. Whether for retirement, a change in direction, or, best yet, an offer that’s too good to refuse, a business may face the opportunity to be sold. Or, a successful business may determine an acquisition is the best way to grow the business from its traditional core competencies or geographic scope. Our business lawyers can help you determine the best structure for a sale or acquisition, and, for an acquisition, how to mesh the new business into the existing business structure.
Reorganization and New Investment. At some point, it may become apparent that your current business structure needs to change, perhaps to attract additional capital for growth. Whether you want to change the form of entity, or change the rights of the various owners, our lawyers can help you determine the best way to accomplish the changes. In addition, if your capital reorganization is driven by new investment, it is imperative to comply with registration and disclosure requirements of state and federal securities laws. Otherwise, failure to adhere to these requirements can result in direct liability to owners and other promoters of the investments.
Winding Up. Inevitably, at some point, it will be time to wind up and liquidate a business. By following the formalities for winding up, liquidating and dissolving your business, you can minimize or avoid creditor claims on the assets of the business.
