Help In Choosing The Form Of The Legal Entity
By Thomas Rose |
Mon, 3 Nov 2008
One of the first issues which entrepreneurs must address when
considering the formation of a new Texas-based business will be
carefully selecting the business law attorney and the certified public
accountant to guide them through the complicated process of business
formation. The importance of these two professionals cannot be
overstated. They must work together with their mutual client to
clearly present the business alternatives, point out the differences
between the possible choices, then ultimately permit their client to
make the many start-up decisions relating to forming a new business (or
changing and converting the type of existing legal entity).
How can a Business Lawyer assist entrepreneurs?
The
business lawyer will carefully listen to the entrepreneurs business
plan and goals, and then address issues such as (a) limiting the
personal liability of the owners and investors; (b) management and
control of the entity; (c) minimization of federal taxes and state
taxes; (d) flexibility in allocating among the investors and owners
distributions of profits, losses, and capital; (e) start-up costs and
administrative costs associated with a particular type of legal entity;
(f) flexibility in making partial liquidations and complete
liquidations to the owners and investors; (g) transferability of
ownership interests; (h) continuity of existence; (i) methods for
getting money out of the entity; and (j) asset protection.
What are the Primary Business entities?
These are the primary forms of business entities organized by
Houston business lawyers for their clients: (a) sole proprietorships
owned by an individual (no limitation of liability, no entity formed);
(b) general partnerships (two or more general partners, no limitation
of liability); (c) C corporations; (d) S corporations; (e) limited
partnerships; (f) limited liability companies; and (g) limited
liability partnerships.
Each form of entity presents its own
advantages and its own disadvantages. One of the many roles of the
business law attorney and the certified public accountant will be to
have a good working understanding of their clients proposed business,
and with that knowledge guide the entrepreneur in making start-up
decisions which will impact the new company for many future fiscal
years.
In closing.
In summary, organizing a new business venture involves much more
than incorporation or purchasing a preprinted record book, software, or
Internet forms. The nuances of face to face conversations and the
information gained from interaction with a seasoned lawyer who
regularly practices in the Texas business law arena are invaluable. I
hope to hear from you soon!