BUSINESS ENTITY FORMATION
Whether you are just starting a new business or have been operating for years, there are big advantages to formalizing the business as a legal entity. We can help you choose and set up the type of entity that best suits your goals and the needs of your business. We can also explain how to preserve the advantages you gain from legal company formation.
Why Set Up a Legal Business Entity?
Asset Protection. Because no matter how careful you are, things sometimes go wrong. Good employees sometimes make mistakes that damage property or cause injuries. Pandemics can clog supply chains, delaying raw materials needed to fill customer orders. Unforeseeable events beyond your control can lead to lawsuits against your business and against you personally. If properly formed and maintained, certain types of business entities can generally shield you from personal liability, protecting your personal assets and the assets of any other businesses in which you may own an interest.
Tax Advantages. Forming a legal business entity can have significant tax advantages. Different types of entities are treated differently for tax reporting purposes. We can help you determine which type of entity would be beneficial for your situation with respect to taxes.
Customer Confidence. The indication that your business is a formal legal entity suggests to potential customers that your business is well established, reliable, and conducted with some degree of professionalism. This can draw new customers to your business.
Structured for Growth. Forming the right type of legal entity can enhance the growth potential of your business. It can provide a sound framework for determining rights and obligations of owners with respect to each other, structuring management roles, and adding employees.
How is a Legal Business Entity Formed?
This depends on the type of entity. Generally speaking, creating a formal business entity includes:
- Verifying the chosen company name is legally available for use.
- Filing relevant organization documents with the appropriate government authorities.
- Acquiring a tax identification number for the entity from the Internal Revenue Service.
- Creating bylaws, operating agreements, and/or other relevant documents that will provide the broad framework for internal governance and operation of the company.
- Designating the initial officers, directors, and/or managers, as the case may be.
- Issuing documentation verifying ownership, voting rights, and rights to profits of the company.
When we form a legal business entity for a client, we take the time to learn about the client’s situation and preferences. Then we recommend an entity type based on these factors and the unique needs of the client’s business. When the client is ready to move forward, we handle the legal work so our client can focus on running the business.
Keeping the Advantages of Forming Your Entity
Once the entity is formed, there are certain fundamental actions the client must do—and avoid doing—in order to maintain some of the major benefits of forming the legal entity, such as the limited personal liability and tax benefits. When we form a business entity for a client, we give our client the information needed to avoid losing these important advantages.