Why Establishing a New Entity Correctly is Crucial and How an Attorney Can Help Protect Your Rights as a Business Owner
By Andrew Huber, Partner, Smith Pauley
Starting a new business is both exciting and challenging. One of the most critical steps in the process is establishing your business entity correctly, as it will have a significant impact on your legal rights, tax obligations, and overall success. In this post, I examine the importance of establishing a new entity correctly and how an attorney can help protect your rights as a business owner.
The Importance of Establishing a New Entity Correctly
Legal Protection - Choosing the right entity structure can help protect you from personal liability for business debts and obligations. By properly establishing a separate legal entity, such as a corporation or limited liability company (LLC), you can separate your personal assets from your business assets, ensuring that your personal finances are protected in case of any legal issues or financial difficulties.
Tax Benefits - Different business entities come with varying tax implications. By selecting the most suitable entity for your business, you can take advantage of potential tax benefits, such as pass-through taxation for LLCs or S-corporations, and avoid double taxation that may occur with C-corporations.
Business Credibility - Properly establishing a new entity can enhance your business's credibility, making it more attractive to potential customers, investors, and partners. A well-structured entity demonstrates professionalism, commitment, and compliance with legal and regulatory requirements.
Ease of Ownership Transfer and Business Continuity - Establishing a new entity correctly allows for smoother ownership transfers and ensures the continuity of your business in case of any changes in ownership or management. This is particularly important for businesses planning to grow, merge, or sell in the future.
How an Attorney Can Help
Setting up a new business entity can be a complex process with numerous legal, tax, and regulatory considerations. Engaging an attorney experienced in business formation can help you navigate these complexities and protect your rights as a business owner.
Choosing the Right Entity - An attorney can help you evaluate your business needs and goals, advising you on the most appropriate entity structure for your specific situation. They can explain the advantages and disadvantages of various entity types, such as sole proprietorships, partnerships, LLCs, and corporations, and guide you in making an informed decision.
Compliance with Legal Requirements - An attorney can ensure that your new entity is set up in compliance with federal, state, and local laws and regulations. They can help you prepare and file the necessary formation documents, such as a certificate of organization or articles of incorporation, and obtain required licenses and permits.
Drafting and Reviewing Essential Agreements - A knowledgeable attorney can draft or review crucial legal documents for your new entity, such as operating agreements, bylaws, and shareholder agreements. These documents outline the rules and procedures for managing your business and protect your rights and interests as a business owner.
Ongoing Legal Support - As your business grows and evolves, an attorney can provide ongoing legal support and advice to ensure that your entity continues to operate in compliance with applicable laws and regulations. They can also assist with any legal issues that may arise, such as contract disputes, employment law matters, or intellectual property concerns.
Establishing a new entity correctly is crucial for protecting your rights as a business owner and setting your business up for long-term success. By working with an experienced attorney during the formation process, you can ensure that your business is structured optimally and complies with all legal and regulatory requirements.
When you are ready to consult with a qualified attorney to help you navigate the complexities of business formation and safeguard your interests as a business owner, we at Smith Pauley are here to help. Contact us today at 402-392-0101.
Andrew Huber is a Partner with Smith Pauley. He develops and implements estate and business plans that are customized for clients at all levels of wealth and stages of life using an interdisciplinary approach. Andrew focuses on traditional estate plans (e.g., wills, trusts and powers of attorney) to more complex estate planning techniques, such as wealth transfer planning, asset protection planning, and closely-held business succession planning.