subject: A Lawyer Can Lend Expertise To A New Business [print this page] Embarking on a new business venture emboldens many entrepreneurs. With a solid business plan and capital assured, opening a new business promises new freedom. Simultaneously, many new businesses owners also feel somewhat overwhelmed. The key for initial success is careful planning.
Choosing the best organizational strategy for a new business creates long-lasting consequences. The choice should optimize ease of operation, protect personal assets, and remain affordable. Owners may consider an assortment of options. Each option includes a full complement of advantages and disadvantages.
The assistance of a skilled business lawyer provides new owners with keen professional insight and a ready source of expert answers for all legal questions. For example, a new owner may consider a sole proprietorship. In the most basic sense, a sole proprietorship is easy to maintain. Yet it provides little protection from personal liability and potential claims.
Operating a business as an individual may initially seem economical since you don't need to spend as much money setting it up. However, the long-term costs of selecting a sole proprietorship can be substantial. Sole proprietors have unlimited personal liability for business actives and the actions of all employees. In addition, tax-planning options are limited.
Multiple owners often consider a simple general partnership because of affordability since it does not require registration. Income earned by a partnership passes through to individual partners according to an agreement. Drafting a partnership agreement quickly becomes complex when partners desire to alter equal distribution of income, joint and several liability, or management authority. The best way to avoid future complications is to discuss agreement options with a competent commercial lawyer.
Corporations remain highly popular because of ironclad protection of personal assets and operational flexibility. A board of directors may delegate authority as needed and change profit distribution at will. Tax planning options and benefits also expand when using a corporation. Because of extensive regulation, consider the assistance of a commercial lawyer whose expertise is essential for legal compliance and maintaining all available benefits.
Limited partnerships include at least one general partner and additionally allow an unlimited number of limited partners. Frequently, a corporation becomes the general partner and individuals contribute capital for business formation. Limited partners are responsible up to but no more than the extent of their registered capital investment but have no management authority. New business owners may find this high degree of flexibility useful while limiting personal responsibility for business liability.
Limited liability companies are distinctly different from limited partnerships. A limited liability company passes income through similarly to a general partnership, but also insulates owners from liability similar to a corporation. The IRS does not consider a limited liability company as a taxable entity because of the pass-through feature. Frequently, with careful planning, a limited liability company may combine the best features of a general partnership and corporate protection while avoiding many disadvantages of both entities.
The advice and assistance of a business lawyer is vital when forming a limited liability company. In a few situations, a lawyer is not necessary to start a business, nevertheless, the prudent choice is to begin the operation all new businesses properly from day one. The risk of loss from legal noncompliance is simply too great. A single mistake could void all benefits and expose owners to unlimited liability and asset loss.
