What is a Business Attorney?They are legal experts who help to guide businesses through numerous federal and state laws that affect their businesses. Business attorneys assist with all issues involved with an entity (including forming a corporate or another type of entity, selling additional shares, corporate maintenance, dissolution, and stock option plans) contracts (negotiation, drafting, and review), disputes with various third parties, as well as other issues affecting your business, including regulatory compliance and employment issues. Making sure that your business has the right foundation can mean the difference between succeeding or failing. The Westchester business lawyers at Rosenbaum & Taylor have assisted numerous New Yorkers with starting their businesses and head them on the path towards success. Whatever industry you are involved in, our lawyers can help ensure you are solid ground. After we assist you with getting your business started, we also can help you address the numerous business law issues that you might be faced with. After we have helped you get your entity set up, our attorneys can continue working with you as your ongoing general counsel to ensure that your interests are protected at all times. Whenever a new business is formed, you must determine what kind of entity you want your business to be – and each of them have their own series of pros and cons. In order to determine the right entity for you, the following are the most common forms of entities that are available.
Limited Liability Company (LLC)A limited liability company does exactly that – it limits your liability. With an LLC, the assets and debts of your business are separate from all of your personal assets and finances, and the business assets are exempt from the owners’ creditors. Also, LLC’s allow ownership by entities and nonresident, unlike Subchapter S corporations. They also allow profits and losses to be creatively allocated among the owners who put up cash and those who put sweat equity. It was commonly thought many years ago that running a business as an LLC worked to inhibit growth by not being able to attract investors. However, as the Westchester business lawyers at Rosenbaum & Taylor have learned through their many years of experience, it actually is easier attracting equity to an LLC rather than a corporation due to how options are internally allocated and the easier procedures that are in place for perfecting the security interests of the owners.
C CorporationC Corporations, like LLCs, limit liability to officers, directors, employees, and shareholders. The main drawback is the possible double taxation. However, sometimes, it is advisable for a C corporation to have foreign ownership. But do point out, whether taxed as an S corporation or C corporation is a corporation still while LLCs have the option of being taxed as a corporation as well.
S CorporationAn S corporation is similar in many ways to a C corporation. They offer investment opportunities and limit liability. However, an S corporation is not subjected to double taxation the way a C corporation is. S corporation owners report their profit and loss shares on their own personal income tax returns which means this income is taxed just once. However, there are several limitations that are faced by S corporations. First of all, only entities that are wholly owned by permanent residents or legal U.S. citizens are able to file for the S corporation status. Also, S corporations can only have a maximum of 100 shareholders. There also can be higher IRS scrutiny faced by S corporations and they will have ongoing costs to maintain their S corporation status. Another thing about S corporations is they should not make real estate investments.
PartnershipIt is very easy to form and run a partnership. That makes them quite popular among small businesses, however, there are some downsides as well. Partners are still personally liable for the company’s debts and liabilities, including those that another partner has incurred. Unfortunately, a majority of partners never sign a partnership agreement. If something ends up going wrong, then there can be massive expenses in ending the business. Before you rush into a partnership, consider how your business could be impacted by future liabilities.
Sole ProprietorshipSole proprietorships, like partnerships, are also very easy to form and run and state filings are not required (although you are required to file a county dba for the assumed name for your business). However, the owner still will be liable for any debts or lawsuits against the company. So if you are starting a business on your own, you may choose a sole proprietorship since it is not as expensive compared to other entities. However, in the future, it can leave you very vulnerable to more expensive situations.
What Kind of Business Entity is Best for Me to Form?There are numerous corporate forms that are available under the law in Westchester, New York, including limited liability companies, partnerships, and corporations. In general, the major advantage that a corporation has that its officers are protected against personal liability for those debts that the corporation incurs. However, corporate officers may be subjected to double taxation with both personal income taxes and corporate taxes reducing their personal profits. A more advantageous and simplified tax structure is offered by partnerships, but having potential personal exposure from a business. A limited liability company may be seen as a hybrid of these two, which offers the tax advantages that a partnership provides along with a corporation’s liability protection. There are other important considerations in determining how to incorporate a business, including issues of control and management, financing, governance, and business succession. Review all of the options that are available to you with an experienced corporate attorney to ensure that you select an entity structure that meets all of your company’s goals and needs.
How can Business Disputes be Avoided?A majority of business disputes are about a difference of opinion about the application or interpretation of a contract that is between the two parties, formally known as contract disputes. Carefully drafting concise and clear contracts, to begin with, is the way that these disputes can be prevented from arising. The contract also must be written in such a way that protect the parties in case a dispute does occur, like ensuring that there is no waiver of important rights or that disadvantageous dispute resolution means are not written into a contract. In order to cover all of those bases sufficiently requires negotiation skills and thorough attention to detail when documents are being drafted or reviewed.
Which Is The Best Organizational Structure For My Business?Five major points need to be considered when selecting the organizational structure to use for your business, in addition to other considerations unique to you. Here are the five major points you need to consider:
- Your Company’s Management Structure
- If you are planning on issuing and trading stock
- Capitalization of your Business
- Tax Preferences