Type, “starting a new business” into a search engine and hundreds of ads for online services will appear offering you complete startup packages for a new business. These internet offers can be tempting. At first glance, they appear affordable and thorough, but it is important to read the small print. Effectively these web offers turn the entrepreneur into a do-it-yourself lawyer without any support from an actual attorney or any other qualified individual. Also, many websites lack the information a new businessperson needs when making decisions that can later make or break their venture, particularly when sorting out the differences between a partnership, an LLC, an S-Corp, etc. or when drafting the bylaws in its operating agreement. So, before you stake your future on a few mouse clicks, consider the following:
Unbiased on-line information is available
A solid self-education on business formation can be achieved online by visiting reliable, noncommercial Internet sources. For a general overview of entity types, registration requirements, licensing etc. see the U.S. Small Business Administration’s (SBA) web site, which thoroughly covers a variety of helpful topics. Also, because regulations vary nationally, you will need to have a decent understanding of the different corporate options in the state in which you are filing. Similarly states have different names for the agencies that govern business formation, such as “Secretary of State”, “Bureau of Corporations” and “State Corporation Commission”. Regardless of the name, the websites of these agencies often provide basic but helpful information you will need to make decisions about the legal structure of your new business.
Beware of the standardized form
Online business formation sites try to provide customers with standardized, one-size-fits-all legal documents. A good example is the operating agreement. State laws and agencies typically do not require submission of an operating agreement, so many entrepreneurs skip this step in the creation of their new business. An operating agreement is a crucial internal document consisting of the bylaws governing the day-to-day operations of a business as well as rules for handling future problems. Online sites often exclude operating agreements to make their products appear cheaper and simple. The operating agreements they do offer are often short, cookie cutter versions for a relatively high price, often three to four hundred dollars. These operating agreements can become obsolete from the first day of business because they never considered a business’s individual needs, especially as a company grows. Consequently business owners are left without important safeguards and liability protections. We recommend investing in a relationship with an attorney who will explore your short plans and long-term goals. Your attorney can then draft sound legal documents that are relevant for the creation of your new business as well as its future growth.
Tracking your ongoing obligations
Once you’ve gotten the incorporation of your business out of the way, you will experience the ‘rush’ that only private enterprise junkies understand. That rush is the desire you’ll feel to work harder than you’ve ever worked before, and almost certainly you will work harder than you ever have. Bear in mind there will be ongoing obligations associated with business ownership. Many states require yearly fees and updates. Almost all states require companies to maintain a registered agent to receive legal notices on your behalf. You will also need to update elements of your operating agreement on a regular basis during each year. And, of course, there are ongoing tax obligations. A do-it-yourself internet business incorporation could leave you unaware and ill-equipped for these responsibilities. A On the other hand, a lasting relationship with an attorney could provide you the ongoing support to help you avoid future problems.
Understand your taxes
One of the main reasons a small business owner legally incorporates a business is to take advantage of the associated tax benefits. Its important to identify a knowledgeable accountant who is qualified to meet the needs of you and your business. A qualified team of professionals can help you understand the interplay of the diverse factors affecting your new venture, such as your personal financial situation, the number of partners you have, and the type of business to be formed. Such tax and accounting matters should be addressed before the launch of any new business.
Liability is the name of the game
Regardless of profitability, liability can doom a business. Owning a company is an automatic exposure to lawsuits and prudent business owners will ensure all of the necessary safeguards are in place before they open their doors. To defend a business against liability, entrepreneurs will make sure they select a suitable corporate entity to protect themselves, their partners, and their investors. In this regard, the business owner should exercise care with employment contracts, lease agreements, licenses and waivers. A lawsuit can ruin a new business and rob it of its limited assets. The situation is more serious when a company is not properly formed and an angry plaintiff is able to seize the personal assets of a business owner. An attorney can help business owners shield themselves from liability, mitigate risk, and protect assets.
At Bergstrom Attorneys we help clients throughout the planning, launch, and ongoing protection of their businesses. Contact us to discuss your business needs, and we will be ready to offer you cost-effective solutions and responsive support for your business needs.