Wynn at Law, LLC counsels many business owners when a legal situation arises. However, the best opportunity for us to help a business happens at the front end, somewhere between the inspiration to start the business and the day the first customer arrives. We totally get the excitement and energy every business owner exudes when the lightbulb burns bright to start an enterprise.
Forming a general partnership doesn't require any legal paperwork, but it wouldn’t hurt to have a written agreement amongst partners. The fact is, partnerships are formed every day without even intending to do so if you and another person start working together on a business.
Other business structures require a bit more organization. A tax adviser is going to help with the tax advantages or disadvantages of organizing a business as a partnership, a limited liability corporation (LLC), or incorporate as an S-corp or a C-corp. I’ve listed these in order from the easiest to form to the more complex.
An attorney is your lifeline to help you form the business within the state guidelines while protecting your best interests. As one of my clients puts it, ‘Everything is great when it’s great… when it goes south you’re glad to have an operating agreement.’
She has an LLC, which needs an operating agreement among the LLC members. It governs the business and the members' financial and managerial rights and roles. For a corporation, they’re also known as by-laws.
Remember what the two L’s stand for: Limited Liability. The operating agreement separates the owner’s or owners’ liability from the business’ liability. In short, you separate your business finances and personal finances, shielding the liabilities of each from the other. That’s a huge deal, especially if a suit is brought against the business – or, just as crushing – at some point you face personal bankruptcy, a frequent topic of Wynn at Law LLC’s articles. (See our archive, below right, please)
*The content and material in this original post is for informational purposes only and does not constitute legal advice.
Photo by Andrew Lobov, used with permission.