Grand Rapids Business Formations Attorneys
When you decide to start a new business, you may find the business formation process daunting and stressful. The good news is that hiring legal counsel to walk you through the process can help you form a new business entity tailored to your needs and objectives. Contact SBS Law PLC for a case evaluation with a business law attorney to discuss your options for entity selection and structure and to get help setting up your new business for success.
Common Business Formation Options
Entrepreneurs have multiple options for structuring their new business. Each type of business structure has different benefits and disadvantages that can make specific options optimal based on a founder’s needs and goals. Common choices for business formation include:
- Sole Proprietorships – Solo founders may choose to organize their business as a sole proprietorship. Sole proprietorships have the benefit of simplicity, as founders do not need to register a sole proprietorship or follow specific legal procedures to manage the business. Tax laws also treat the sole proprietorship’s income and losses as the owner’s income and losses, making tax filings more straightforward. However, sole proprietorships do not offer limited liability protections that other types of business structures do.
- Partnerships – Two or more people who go into business together may structure their new company as a partnership. Partnerships ensure that each partner has a say in the business’s operations and that partners cannot sell their interests to third parties without the knowledge or consent of their other partners. However, these rules can make operating partnerships less flexible than other kinds of business forms.
- Limited Liability Companies – A limited liability company combines the features of partnerships and corporations. An LLC’s owners – called members – have flexibility in how they wish to structure the company. LLCs can function like partnerships, or they can operate more like corporations. LLCs also provide members with limited liability protection, which means that a member has no liability for the company’s debts except to the extent that the member may lose their investment in the company if its liabilities exceed its assets.
- Corporations – A corporation creates a legal entity separate from its owners. The corporate form affords its owners (called shareholders) limited liability protection. However, corporations have complex management procedures, including having a board of directors responsible for managing the business and requiring votes of the board and the shareholders to approve various actions by the corporation. Corporations also undergo double taxation (Subchapter C taxation) by default, with the corporation taxed on its profits and shareholders then taxed again on any profits distributed by the corporation. However, some corporations may qualify for pass-through taxation (Subchapter S taxation).
The Process of Forming and Structuring a Business
Setting up a new business can involve several steps. First, an entrepreneur or founder group must decide what type of legal structure – sole proprietorship, partnership, corporation, or LLC – to use for their business. Founders will also need to decide on a name for their new business (unless operating as a sole proprietorship under the founder’s legal name). Choosing a business name will require searching the state’s business records to ensure that another business does not already have the name, along with trademark databases to see if using the name could potentially result in a trademark infringement claim.
After deciding which form they want to use, founders must next structure the business by drafting the company’s governance documents. Depending on which legal form the business takes, it may need various types of governance documents, such as bylaws, stock purchase agreements, and shareholders’ agreements for a corporation, a partnership agreement for a partnership, or an operating agreement for an LLC. When a company has two or more founders, the founding team must negotiate among themselves to decide how they want to structure the management and operations of the business.
Finally, founders may need to file registration paperwork with the state to form their new business, such as articles of incorporation or formation for a corporation or LLC, or a DBA certificate for a sole proprietorship operating under a trade name.
Key Considerations of Business Formation
When founders decide what legal form they want their business to take and how to structure the entity’s management and operations, they must evaluate various factors to ensure that the structure they choose best serves their needs and goals. Key considerations that entrepreneurs should keep in mind when going through the business formation process include:
- Management Style – Each type of business form has different rules for management, making it necessary for founders to consider whether to pick a form that matches their preferred style (i.e., formal versus informal)
- Liability Protection – Depending on the industry the business will enter, founders may prefer limited liability protection to avoid personal liability for the business’s debts.
- Taxes – The type of business entity will determine how the government taxes it and its owners, making tax implications a critical consideration for founders.
- Investment – Founders should also consider whether their new business might solicit outside investment, since certain legal forms can make it easier to bring in new investors.
How Can an Attorney Help With the Business Formation Process?
Starting a business can seem daunting, especially for a first-time founder. Hiring an experienced attorney can provide entrepreneurs with a seasoned advisor who can walk them through each step of the formation process to ensure that founders leave no stone unturned and avoid mistakes that can cause legal issues down the road. An attorney can help you with the business formation process by:
- Sitting down with you to discuss your needs, concerns, and goals to advise you on the most ideal options for the legal form of your new business
- Working with a founder or business partners to draft governance documents that outline how they will manage the business
- Checking proposed business names to ensure that founders can use their preferred name with minimal legal risk
- Filing registration paperwork with the state
- Ensuring the execution of documents needed to legally form and fund the business
Why Choose SBS Law PLC?
Because business formation can involve challenging legal questions for founders to answer, choosing legal counsel to assist with the formation process can make setting up a new company less stressful. Turn to SBS Law PLC for assistance with business formation because:
- We Dedicate All Our Resources to Your Case from the Start – Our attorneys maintain a responsive, attentive, caring approach, while bringing a sense of urgency to every case to help you get the results or solutions you need sooner.
- We Offer Big Service with a Small Firm Approach – We combine the personal attention of a small firm with the knowledge and resources of a bigger firm. When you choose us to assist you with a business formation matter, you can trust our attorneys to work with you at each step and tackle the challenges your case may involve.
- We Emphasize Pure Professionalism – Our firm maintains an atmosphere of seriousness, compassion, and helpfulness. We dedicate ourselves to helping every client who walks through our doors and treating them with the dignity and respect they deserve.
- You Can Rely on Our Experience – Our attorneys have substantial legal knowledge and experience across a wide range of business law matters, which enables us to tackle unique or complex issues that can arise during your business formation matter.
- We Provide Thorough Case Reviews – We conduct in-depth case evaluations to understand our clients’ needs, goals, and concerns.
Contact Our Firm Today for Advice and Support as You Start Your New Business
Starting a new business can involve various complex legal issues, so getting knowledgeable counsel from an attorney is critical to avoiding pitfalls that can jeopardize your new enterprise from the outset. Contact SBS Law PLC Law today for an initial consultation with our experienced legal team to learn more about how we can assist you with business formation and discuss your options.
