Starting and Forming a New Company
There is a difference between simply starting a business and building a foundation for a lasting enterprise. The fact that you have made it to this point means you are likely more interested in starting a new business or expanding your existing business. No matter the reason, we are here to help.
Starting a business is like sailing the open sea because getting lost can be easy but if you have your compass to navigate, you will never be off course. Here at Easler Law, we are your compass; we will guide you through every step of the way to ensure your business sails.
Our business planning and formation team is comprised of experienced entrepreneurs—those who have not only planned and formed businesses, but those who have followed through with growing businesses, deployed in multiple markets, raised capital, conducted mergers, and taken enterprises public.
We have a unique combination of legal theory and practical business experience that ultimately serves to benefit you.
Who Can Form a Company?
Unlike many countries in the world, there are few restrictions on who can form a company in the United States. There are no particular residency requirements for most business entities, and no restrictions on age. The S-Corporation does have restrictions on the number and types of shareholders in order to obtain and maintain its S-Corporation status.
While there are few restrictions on who can form a company, most businesses require licenses and permits to start in addition to registration with the appropriate authorities. For example, if you want to open a construction contracting company throughout Florida, you must have your Florida Contractor’s license as well as any applicable licenses issued by county and local authorities.
Choosing a Legal Structure
There are several different ways to structure your business. Each has its own advantages and disadvantages, so it is important to consider all relevant factors and discuss your plans for the future with your attorney before deciding on a structure. Factors to consider include:
How many partners you have or plan to have in the future,
Tax considerations,
Risk of the business operations and liability protections,
Burden of compliance,
How you plan to grow your business,
The type of business operations, and
The geographic reach of the business now and planned for in the future.
Common business entity structures include sole proprietorships, partnerships, limited liability companies, and corporations.
What are Incs, LLCs, and Partnerships?
Though there are several distinctions to be made between a partnership, a limited liability company (LLC) and a corporation (Inc.), they do share a common bond.
When an individual starts a business without filing any kind of paperwork to establish it as a separate entity, this is called a ‘sole proprietorship.” Though simple to start, this can create a great deal of liability for the proprietor, and it would be wise to prevent those liabilities by forming a distinct legal entity for the business that is separate from the individual.
LLCs, Incs, and partnerships are all variations in how businesses can be legally formed and structured. The business type you choose will impact its operations, tax considerations, compliance needs, and more. This is why it is critical to choose the right business structure for your unique needs at the outset, and why you should always consult an attorney who is experienced in corporate law for guidance.
What is a Sole Proprietorship?
An unincorporated business owned and conducted by one person is a sole proprietorship. This type of business is automatically created by default when a person establishes and carries on a business but fails to file the paperwork necessary to create a separate and distinct business entity. This type of structure does not pay federal income tax directly; instead, the sole proprietor would file taxes through their personal tax return. There are few advantages to owning a sole proprietorship such as easy formation, inexpensive compliance and operations, and having ultimate control over the business. These advantages are outweighed by the disadvantages.
The main disadvantage is that there is no liability shield. If the business is found liable (legally responsible) for any of its operations, the sole proprietor alone is responsible. Those costs will be attributed to the sole proprietor personally. This puts the business owner at risk of losing not only the business, losing property, and having judgments and/or liens. This type of business structure is not recommended due to the exposure to liability, difficulty in raising capital, and its inability to grow. Our goal is to prevent these common new business mistakes.
What is a Partnership?
Simply put, a partnership naturally occurs as soon as two or more individuals begin operating a business together as co-owners. A partnership can be agreed upon orally, in writing, or can be implied by the conduct of those involved. If no formal agreement exists, this is the default business structure. It operates similar to a sole proprietorship as far as taxes go: each partner would file profits and losses on their personal tax returns (typically using a Schedule E).
Sounds simple, right? So what are the drawbacks? For starters, without a legal partnership agreement, complications can easily arise when the co-owners disagree on business decisions, operations, changes, and more. Without documentation in writing that clearly outlines how decisions are made, a friendly partnership can quickly become quite complicated.
The lack of a liability shield is another downside of a general partnership, resulting in unlimited personal liability to each of the partners. This means personal assets outside of the business can be put at risk, though, on the bright side, creditors generally must exhaust partnership assets before attempting to recoup losses through personal assets.
For those wishing to avoid some of these complications and liabilities, a more formal business structure, like an LLC, may be an attractive option.
What is a Limited Liability Company (LLC)?
A limited liability company (LLC) is an extremely popular business structure here in Florida. The LLC is valued for being fairly simple and cost-effective to establish and maintain, while offering some of the liability protections that are lacking in a sole proprietorship or general partnership.
To register as an LLC in Florida, the business must first file Articles of Organization. There are several benefits to registering as an LLC, not the least of which is that the owners of the LLC are now shielded from personal liability for certain debts, torts, and other business obligations.
In addition, the LLC business construct is convenient when it comes to taxation, allowing for profits and losses to ‘pass through’ – or skip – the LLC entirely and simply be reported through the owners’ personal tax filings. This tactic avoids the double taxation faced by corporations. With an LLC, any income earned is just taxed once, through the owners’ tax filings, and not to both the owners and the LLC itself.
LLC’s also offer a great deal of flexibility when it comes to both governance and distributions. Owners, also called members, can choose to establish equal or unequal governing power. This means members could elect one person to manage the daily operations while the others are silent partners, or they can opt to equally distribute the responsibility.
The same goes for distributions, when the business transfers a portion of the profits to its members; those profits can be disbursed in either an equal or unequal fashion. However, the LLC is not quite as flexible when it comes to governmental and informational rights. For instance, a member would not be able to transfer their voting rights or the authority to inspect a record of the LLC’s finances without obtaining the relevant consent to do so.
Overall, an LLC is a smart choice for a small business, but it is important to consult an attorney to ensure the business is set up properly, with room for growth!
What is a Corporation (Inc.)?
Those who intend for their business to be larger in scope, to raise capital, and to have many owners will want to consider forming a corporation. This business structure offers greater liability protection and creates an opportunity to issue equity through stock. The first step in forming one is to weigh all the available options to make sure the company is set up the way you want it. The next step is to file the initial Articles of Incorporation.
The initial filing is done by the ‘incorporator’, who is responsible for some big decisions, including the name of the corporation, who sits on the Board of Directors, how many shares of stock will be issued, and more. (Once stock is issued, the company belongs to the shareholders). The directors will ultimately hire the C-suite of officers to manage the daily operations of the business.
To complicate matters, there are several different corporation types to consider, including:
For-Profit C-Corporation: The company’s purpose is to make a profit for shareholders through the company’s operations.
For-Profit S-Corporation: Similar to a C-Corporation, without the double taxation of a C-Corp. Qualifications include restrictions on the number of shareholders and where they live.
For-Profit Social Purpose Corporation: This fairly new business structure allows a company to take into consideration specific and narrow social purposes, in addition to profits, during the course of decision-making.
For-Profit Benefit Corporation: Corporate leadership can make business decisions based on the consideration of profits and social purpose, and may also include generalized public benefits in those strategies.
Non-Profit Corporation: Most commonly used for religious institutions and charitable organizations, this corporation type applies to a company with any purpose other than making a profit.
The formation of a corporation has many benefits attached to it, including liability protections (shareholder’s liabilities are limited to their investment), unique tax strategies that can offset the overall tax rate, the ability to raise capital by issuing stock, and business continuity should an owner or executive leave the company.
It’s critical to work with a professional attorney who can review all the pros and cons of each type of corporation, so you can make sure you end up with the right Inc. for you. The experienced team at Easler Law will walk you through all of your options to help you select and establish a partnership, LLC, or Inc.
What is a DBA?
DBA stands for “Doing Business As.” Sometimes also written as “D/B/A”, this is the business’s official trade name and is designed to put the public on notice that the company operates under that chosen name. This is also called a “fictitious name”; for most established business entities, advertising in a local newspaper and registering a fictitious name is required by Florida law.’
How to Prepare for Your Consultation
When you meet with us, we’re here to listen. We want to know the ins and outs of your business, if it’s already ongoing, and what your plans are for the future.
Come prepared with business plans or concepts, any records to-date, your target market, and the purpose of the endeavor. We’ll discuss your best options when it comes to tax structures, liabilities, compliance and more to get you on your way to achieving your business goals. Once we’ve chartered a course forward, we can take out all the guesswork by drafting and filing the necessary paperwork.
Schedule A Call Today
The earlier you speak with an attorney, the better. It’s our job to make sure your business is structured in a way that meets your unique and individual needs. The best time to get it right is at the very beginning. Reach out today!