Should I incorporate my new business? What are the advantages of doing this and how much will it cost?
If you are now running your business as a sole proprietor, incorporating your business will give you many protections not currently legally available to you. Chief among these protections are the protection of your personal assets, like your home, from confiscation by your business creditors. If we were to handle this for you, the cost of a simple incorporation or organization of a limited liability partnership or company would be around $1,000, which would include your Articles of Incorporation and By-laws or Certificate of Organization, Opening Minutes and filings with the state.
What is a buy-sell agreement?
A "buy-sell" agreement is the name given to the document that is intended to set forth the exit plan for shareholders or partners. A well written document will provide specific direction for an equity holder who needs to disentangle him or herself long before the only options are retirement, bankruptcy or an expensive business divorce.
The document will determine: if the exit or decision to cease operations has to be unanimous; if a purchase by co-shareholder or co-partner is required; how long a disabled shareholder or partner has to be carried; if a spouse or other family member can inherit an equity interest in the event of death of a shareholder or partner; and, if a transfer of equity to a third party is permitted without the consent of the surviving shareholder or partner. The decision to exit, or need to see your co-shareholder or co-partner exit, may not be voluntarily. If discussed and planned before the fact, it doesn't also have to be messy.
If we have a buy-sell agreement, do we need anything else?
Often the people with whom we start new businesses are friends, family members or former colleagues - no strangers. The relationship is already defined and comes with several (unwritten) rules. Unfortunately, everything changes when you are losing money, and sometimes even when you are making money and one person thinks they are entitled to more than they are getting.
Partnership or shareholder agreements which address more than buy-sell agreements are a must - not something to think about when you have more time or when a problem comes up. Who is "in control" and how equal will your equals be? What are your respective expectations with regard to time committed, money spent and daily operations? Who will get paid as an employee, and when? How will you resolve differences of opinion, and how involved can spouses or other family members be in your venture? Your best pal can become your worst enemy if everything falls apart. When all energies should be directed to finding quick solutions to unforeseen difficulties, a divided home team can precipitate a fatal move or worse - paralysis.
What is the difference between a corporation and an LLC?
There are a number of differences between a corporation and an LLC. There are also several different types of corporations. The differences affect how the company is taxed, how it operates, who can be a shareholder and a variety of other factors that are specific to each business. We would be happy to talk with you to discuss these differences as they relate to your business and help you decide what form your company should take.