KBP LAW

Corporate Formation

So you want to start a business, or perhaps you have started a business and it's doing well. You want to bring your business to the next level, which is a great idea. This is America! Capitalism, is part of what this great country was founded on, so congratulations on that front. However, in order to get to that next level, you need a business entity. This is known as an area of law know as corporate formation.  The threshold issues is - What type of Corporation should I create? What type of entity do you need to establish now, in order for you to accomplish your business goals in the future?

There are multiple options. One of the most common being a limited liability company. You'll also hear it referred to as an LLC. What an LLC accomplishes is really two things; number one it limits the liability between you as an individual and the business itself. Two; it separates a distinct entity so that you're no longer doing business as a sole proprietor aka Individually. You are now transacting business via this entity. The second thing that it allows is for the entity to operate independently of its owner or owners. The LLC, via its Managers, can enter into leases, it can enter into contracts, it can take on investors, it can borrow and lend money, etc….. It can do that independent of you as an individual. Limited liability is a great mechanism and a very useful entity.

The second option which is quite common is partnership; this is where you'll have multiple investors and or members of the corporation at the outset. And you all want to get together and put in a clear concise partnership agreement. What are the expectations of everybody what the investment is required from everybody and who's responsible for what going forward. There are also other corporate entities that are available as well called the C corporation where you can issue shares and take on multiple investors down the road. If established properly, one can also create an S corporation which is a corporation, however, for tax treatment it's taxed as a partnership so it has some advantages on that front. All of these decisions are good to think about and necessary to think about on day one of you commencing the hopefully long journey with your new and hopefully fruitful business. If you look at proper corporate formation from the outset with a perspective of what you want to do for your Exit strategy (I know it sounds a little bit forward thinking) that analysis usually the best dictates the most favorable and best corporate entity for you. Once we decide on the entity the Law Offices of Kenneth B. Phillips can put the governing documents in place and then we register those with the various States you may be doing business in.