Frequently Asked Questions
What are the Benefits of Having an Attorney Help with My Company’s Formation?
The choice of business structure, creation of necessary documents and agreements, and other decisions made in connection with the formation of a new business can have a significant impact on the future of the business. The involvement of an experienced attorney who understands both the legal requirements to form a business and the real-world significance of decisions made in the process is invaluable to business owners.
What Steps are Involved in Forming a Business?
- Choose a name and make sure you are permitted to use it.
- Determine the legal structure of your business and form and register the business with the state and local governments.
- Get a Federal Tax ID Number
- Obtain the necessary business permits and licenses. Depending on your business type and physical location, you may be required to have one or more business licenses or permits from the state, local or even federal level. Such licenses include: a general business operation license, zoning and land use permits, sales tax license, health department permits, and occupational or professional licenses.
- Open a Bank Account.
- Enter into a business operating agreement
- Establish policies and procedures for employment, operations, record keeping, and other important matters.
What are the Common Business Organization Forms, and What Factors Should be Considered When Choosing the Right Form for My Business?
The major business organization forms are: (1) Partnership, (2) Limited Liability Company, (3) Corporation and (4) Sole Proprietorship. Each has advantages and disadvantages. The most appropriate one for you will be determined by considering factors such as your desired tax treatment, how your business will be capitalized, the number of business owners, management structure and issues surrounding business owner liability.
Does My Business Need an Operating Agreement?
Absolutely. Your business’ operating agreement sets the groundwork for how your business will function and is arguably the most important document that will be created during the life of your business. Drafted properly, it will help to ensure a smooth operation. Drafted poorly, it could harm your business, expose you to liability and lead to protracted disputes with your business partners.
What Provisions Should Be Included In My Company’s Operating Agreement?
Your company’s bylaws or operating agreement will be shaped by many factors, including the type of business, the number of owners, the business structure, and your goals. Some of the common subjects included in most bylaws or operating agreement are:
- Company’s name, address and headquarters.
- The number of company officers and their duties.
- If the company has stock, the classes of stock and the types of shares issued by the company.
- The procedure for maintaining business records.
- The roles, duties, and responsibilities of each owner, partner, member, and corporate officer.
- The procedure for amending the bylaws and operating agreement.
- Interest owned by each member, partner, or owner.
- How to handle an emergency if one or more owners or key employees must be out of work for an extended time.
- When, where, and at what time shareholder and director meetings will be held.
- How many corporate officers and directors are required?
Do I Need a Buy-Sell Agreement?
If your business has two or more owners, you need a Buy-Sell Agreement. It permits retired, disabled or deceased owners or partners to receive value for their share of a business and may provide an exit strategy for the owner or partner who simply wants to leave the business. Without a Buy-Sell Agreement, a company could face internal discord and financial difficulties at a most inopportune time.
Does My Business Need Contracts?
With rare exception, a successful business requires written agreements to transact business and establish relationships. Contracts govern purchases and sales, the landlord-tenant relationship, rights and obligations of employers and their workers, the terms on which a loan is made. Contracts are also used with vendors, suppliers and service providers. Many other aspects of a company’s business rely on written agreements as well. Well-drafted, legally sound and enforceable agreements are a must.