So, you have a great business idea, but have no clue as to where to begin to start your own business. Well, unless you plan on starting a sole proprietorship or a basic form of a general partnership, typically you must comply with certain state and federal laws in order to establish the business and receive proper liability protection. Welcome to being an entrepreneur, lets get started!
Before you start a business, first you must decide which type of business is best. Unfortunately, that is is not as simple as it seems as there are wide variety of business formations, such as:
- Sole proprietorships,
- General partnerships (GPs)
- Joint ventures (JVs)
- Limited liability partnerships (LLPs)
- Limited partnerships (LPs)
- Limited liability limited partnerships (LLLPs)
- Limited liability companies (LLCs)
- Corporations (including C corporations and S corporations)
- Non-profit corporations.
As you can see, there are a number of different business formation options and each type of business has its advantages and disadvantages. For more information on these please visit our page on types of businesses here. As an entrepreneur and future business owner, you should seek advice from an business attorney for the best structure that fits your business model, while at the same time limits your personal liability and taxes. If the business is not formed the proper way, you and your co-founders could be risking all your personal assets to potential creditors of the newly formed business.
After you have selected the best formation for your business, each entity (besides sole proprietorships and basic forms of general partnerships) must file certain documents with the state they are doing business in. The type of forms and information required vary depending on the type of the business. A business attorney will file these documents with any states you expect to conduct business.
If you have or are planning on receiving investment dollars for your business, even if it just friends or family members, they will most likely want to review and execute an investor agreement which is discussed in further detail here.
It should be noted that a business attorney will know how to advise you about buying commercial property as well. There are certain protections that can be implemented to make sure your business and you are protected in case something happens on the property either to an employee or a customer. Too many businesses fail because an injury occurred on their property. Seek counsel to protect your company, your family, and your assets.
Additional Internal Documents To Starting A Business
A business law attorney will draft internal agreements that outline how your company is managed. An example is the popular LLC operating agreement which governs how the owner(s)’ of the company will share profits and losses, make managerial and purchasing decisions, transfer ownership rights, and much more. This document should not be rushed into or drafted without the oversight of a business lawyer because the costs for doing so could be disastrous. Additional documents that may be needed for your company include:
- Investor agreements,
- Purchase agreements,
- Indemnity agreements,
- Employment agreements,
- Employee handbooks,
- Independent contractor agreements,
- Non-compete Agreements,
- Non-disclosure agreements,
- Bills of sale,
- Security agreements,
- Franchise agreements,
- Stock-purchase agreements, and
- Property or equipment leases.
Advantages of Hiring an Attorney
Other advantages a business lawyer can provide to your business include, but are certainly not limited to:
- Helping you decide which business formation is most appropriate for you taking into consideration taxes, liabilities, and management structure;
- Being familiar with the particular laws of your state and the ability to advise you regarding the best course of conduct for your business in order to stay compliant with those laws;
- Having experience with business contracts, especially which agreements are necessary and which are not, how to structure the actual documents themselves, proper terminology, and ways to avoid contract pitfalls such as contract ambiguity allowing the relationship between the parties to prosper well into the future;
- Knowing how to scale the business with your desired outcomes;
- Being able to represent your interests when it comes time to negotiate contracts;
- Protect intellectual property;
- Provide protection from disgruntled employees;
- Ensure proper conduct between the partners; and
- Preventing unnecessary litigation!