Do I Need A Business Lawyer When Starting A Business?

Starting a business is an exciting venture but comes with legal steps before it can get up and running. Many new business owners find it helpful to work with a business lawyer for advice. This is to ensure that all the necessary paperwork is understood thoroughly, every legal requirement is met, and all applicable laws are followed.

If you’re thinking of starting your own company, read on to learn more about how a business lawyer can help you navigate the process, choose the right business structure, handle registration and tax requirements, and protect your interests from day one.

Why You Need a Business Lawyer When Starting a Business

From leasing the building to agreements among partners and investors, business lawyers have invaluable knowledge and expertise to help you get started. The business landscape has shifted and there has been a boom in the number of startups in the United States. When forming a business, there are several different structures to consider, and hiring the services of an experienced business lawyer allows business owners to make the best decision for legal protection and profit.

Your business lawyer can help in the following ways:

• Drafting and reviewing all contracts involved in your new venture
• Explaining registration, licensing, and permit requirements
• Helping you choose the right business formation
• Ensuring strict conformity with state laws to maintain liability protections
• Understanding all the money issues, including raising capital
• Explaining tax liability and obtaining your employer identification number
• Helping you avoid additional legal issues down the road

No one wants to consider potential risky situations when starting a new business venture, but it’s a reality that must be dealt with. A business lawyer will help explain liability issues and how to protect yourself from them. Their job is to make sure you’re aware of the laws that apply to your business and to prepare you for the legal ramifications so your business remains valid and protected.

Choosing the Right Business Structure

Every business has its own structure, which dictates the responsibilities you have as a business owner. It also affects the way your business will be taxed. Choosing the wrong business entity can have serious ramifications, which is all the more reason to consult a business attorney.

A few examples of business structures include:

Sole Proprietorship

A sole proprietor is someone who, as the name implies, is the sole business owner. This is the simplest business structure, but it does not provide separation between your personal assets and business liabilities. That means if your business incurs debts or legal claims, your personal property could be at risk. While a sole proprietorship involves less paperwork and lower startup costs, it carries the highest level of personal exposure.

Partnership

A partnership is an agreement between two or more people to start a business, with each party contributing labor, skills, property, and other shares into the business. Partnerships allow for shared responsibility and resources, but each partner may also share in the liabilities. A business lawyer can help draft partnership agreements that clearly define each party’s contributions, responsibilities, and protections.

Limited Liability Company (LLC)

A Limited Liability Company, or LLC, is a legal entity and business structure that combines the best parts of various other business structures, such as corporations, sole proprietorships, and partnerships. The business structure is determined by regulations set by the state. Ownership is generally not restricted, so the business owners could be multiple individuals, other LLCs, or corporations. However, an LLC can also have a single owner.

The most important feature of an LLC is that it gives protection of the owner’s personal assets from being liable or being placed at risk due to the operation of the business of the LLC. Like a corporation, the LLC affords you protection of your personal assets if your business encounters financial or liability problems.

When Is an LLC the Best Choice?

How do you decide between forming an LLC or a corporation, partnership, or another type of business structure? An LLC is an excellent choice for small businesses that want to limit personal liability for business debts. An LLC offers several benefits, making it a top choice for small businesses:

• Flexible management structure
• Tax advantages, such as pass-through taxation
• Simple and hassle-free formation
• Personal liability protection for the owners

LLC Drawbacks to Consider

While there are many benefits of forming an LLC, there are also a couple of drawbacks to consider. For some, these factors won’t be an issue, but they still need consideration. The first is the cost of forming and operating an LLC, which can be more than a sole proprietorship or partnership. The second is that LLCs are not usually the structure of choice for investors. If you plan to seek investment, then an LLC may not be your best option. Your business lawyer will be able to discuss these considerations in depth.

Questions to Ask Your LLC Attorney

Are you ready to take the next step and form an LLC? Before you sign the dotted line, it’s important to ask your attorney a few questions to make sure that you’ve covered all of your bases:

What are the state requirements for starting an LLC? While you can start your LLC in any state, each state has its own set of requirements. Each requires that articles of organization are filed with the appropriate agency. As each state’s requirements differ slightly, a legal expert can offer the guidance that’s needed.

What are the alternatives to an LLC? If you want to be confident in your decision to form an LLC, then it’s important to understand the pros and cons, as well as what your other options include. Getting to grips with the best structure for your business is one of the benefits of hiring a business attorney.

How can I minimize financial risks? One of the perks of an LLC is the tax benefit and personal liability protection that the structure offers, but what are the risks? An experienced LLC attorney will be able to advise on the financial risks of starting a business and how to protect your assets.

How should I establish ownership responsibility? An LLC offers a very flexible ownership structure, which can be confusing to some. The format of ownership will determine the pass-through taxation benefits, the profit-sharing, and more. It’s important to understand these responsibilities in the planning phase.

Should I get an attorney for drafting internal bylaws and the operating agreement? A business attorney is a great asset in ironing out internal legal agreements. Serving as a mediator and knowledgeable expert, it’s worth asking a legal expert to guide the process of outlining policies and responsibilities when forming an LLC. If there is more than one member of the LLC, you will need an operating agreement, which, among other things, sets forth the rights and duties of the members, what happens if one of the members dies or becomes disabled, what happens if a member wants to retire or sell his or her membership share, or if the current members wish to take in another member.

Corporation

Different shareholders exchange money or property (often both) in order to form a corporation, thus building capital stock. Some deductions are taken as a sole proprietorship in order to determine taxable income. Corporations, like limited liability companies, give protection to personal assets of the shareholders. If you plan to seek investment or issue stock, a corporate structure may be the right fit for your business.

Each type of business has its own responsibilities and liabilities. A business attorney will help you evaluate the advantages and disadvantages of each structure and guide you toward the formation that best fits your goals.

Registration, Licensing, and Permits

All businesses are required to register with the city, county, and state in order to be recognized as legal and valid. There are many business types and structures, but even those without formal registration still have to obtain certain permits and licenses. Registration and renewal can be confusing when you’re just starting out, especially if your business structure requires multiple registration processes.

If you’re unsure which type of registration your business requires or even which business type you have (it could be more than one!), a business lawyer can help you be compliant with state laws. Forming an LLC, for example, requires articles of organization to be filed with the state, and each state has its own specific requirements. While it is one of the easier processes to perform, it is still recommended to get professional help.

Strict Conformity Requirements

Certain business entities require strict conformity to laws regarding business forms. That means an LLC’s articles of organization need to be filed, along with filing fees. A registered agent with the state is required to be appointed, but a business lawyer can ensure that your business aligns with the appropriate state laws. Otherwise, the business could lose certain benefits and protections, particularly those that have to do with liability.

Your business attorney will look out for the best interests of your business, making sure it’s protected every step of the way.

Getting Your EIN (Employer Identification Number)

Otherwise known as an employer identification number or EIN, a business tax identification number is a nine-digit number that the IRS uses to identify your business. Business owners need this unique identifier to get a business license, apply for business loans, file taxes, and even to open a bank account for their company.

Having a valid employer identification number from the IRS is a requirement and will be obtained for you by your attorney while he or she is creating the legal entity that you choose to operate under. New businesses should always designate a representative for their company who acts as a registered agent. The registered agent is the person responsible for applying for the EIN. Your business must have an EIN before making a bank deposit, performing any actions that are tax-related, or filing a tax return. You should always have this number readily available or memorize it.

How to Obtain an EIN

The fastest way to obtain an EIN is to apply online at www.irs.gov. You can also call the IRS at 1-800-829-4933. Another option is to fill out Form SS-4 and fax it to the IRS at 1-859-669-5760.

Lost or Forgotten EIN

There are a few ways that you can find your business tax ID number if you’ve forgotten or misplaced it. First, it’s located on the confirmation notice that you received from the IRS after applying for your EIN. Your EIN also appears on all of the paperwork associated with your business including applications for state and local licenses and bank accounts.

You can also contact the IRS at the same number listed above, if you’re unable to find it. The IRS will require information to release your EIN but it shouldn’t be a complicated process.

Looking Up Another Business’s EIN

Occasionally, you may need to locate another company’s EIN. You may need it to verify a client or new supplier’s information. You will usually need the authorization of the company whose EIN you are looking for, in which case, the easiest thing to do is just ask for the company’s EIN. Here are some other ways to look up a company’s EIN:

• Get that business’s credit report: Credit bureaus such as Equifax, Transunion, or sites like Nav let you buy your own company’s credit report or look at another business’s for a fee. These reports usually show their EIN.
• Use a paid database: Paid EIN databases charge a specific fee to access company EINs. Some of these commercial databases include links to company information as well.
• Ask the business: Often, the company’s accounting department can provide that information to you if you simply contact them.
• Search the SEC website: If the business is publicly traded, you can search the Securities and Exchange Commission website by entering the name of the company. Filings with the SEC should include the EIN.

Drafting Contracts and Agreements

There are many contracts involved in starting a business. There’s paperwork for leasing a building for the place of business, as well as employment guidelines and other legal matters. Whether your business is big or small, there are agreements that must be made among anyone partnering, investing, or employed by your business. These agreements include LLC operating agreements, loan contracts, and other disclaimers.

A business lawyer can help you review all of these contracts to ensure that everyone’s rights are being protected. Having a lawyer to guide you during this process can help you avoid any legal issues once your business is up and running. A business attorney is also a great asset in ironing out internal legal agreements, serving as a mediator and knowledgeable expert when outlining policies and responsibilities.

For more information on how contracts work in Florida, read our guide on understanding the basics of Florida contract law.

Understanding Tax Liability

Taxes are always a certainty with any type of business. There are different advantages and disadvantages for certain business types, so it’s crucial to have a business lawyer explain each one. Your business lawyer can explain Florida’s business tax laws so you fully understand the requirements and ramifications.

Before your business can start making money, you first need money in order to start the business. You should always keep records of income, donations, and distributions for full financial accountability. The procedure for raising capital will depend on the business entity. A business lawyer will be aware of the requirements for each entity type. This will help you avoid tax issues and liabilities.

In addition, your lawyer will help you draft a business plan that communicates all the goals you want to accomplish, which you can present to your potential investors. An LLC, for example, offers pass-through taxation, meaning the business itself is not taxed separately. Instead, profits and losses pass through to the individual owners’ tax returns. The format of ownership will determine the pass-through taxation benefits, the profit-sharing, and more.

Understanding State Business Laws

In many states, “uniform laws” fill the gaps that different business entities are silent on. That means your corporation or LLC could be subject to a set of laws or regulations that you might not be aware of. However, your business lawyer will be. Their job is to make sure you’re aware of these laws and to prepare you for the legal ramifications so your business remains valid and protected.

While you can start your LLC in any state, each state has its own set of requirements. Each requires that articles of organization are filed with the appropriate agency. As each state’s requirements differ slightly, a legal expert can offer the guidance that’s needed. It’s in your best interest to hire a Florida attorney that can assist you with important business paperwork to properly form your legal entity (whether a corporation, trust, estate, or limited liability company) if your business is located here. An attorney will ensure that the proper paperwork is filed and that all legal requirements are met.

It takes a great deal of stress off of you as a business owner to turn legal matters like this over to an attorney that understands Florida law.

Protecting Your Business From Legal Issues

There are different risks and protections associated with different business formations, owners, and investors. No matter what type of business you have, personal liability is the biggest factor to consider. A business lawyer will help explain liability issues and how to protect yourself from them.

One of the perks of forming an LLC or corporation is the personal liability protection that the structure offers. Your personal assets are shielded from business debts and legal claims. However, maintaining that protection requires strict conformity to state laws and proper documentation. If the proper paperwork is not filed, or if the business is not operated in accordance with the law, the business could lose certain benefits and protections, particularly those that have to do with liability.

An experienced business attorney will be able to advise on the financial risks of starting a business and how to protect your assets. Whether you are protecting your success as an established business or just getting started, having legal guidance is essential to avoiding costly mistakes.

Business Lawyers in South Florida

Starting a business is exciting but can also be complex and confusing. Let the business lawyers at Handin Law help get you started so you don’t have to decipher confusingly worded documents by yourself. Our expertise has helped many Floridians start and run their own successful businesses. With more than 50 years of experience in New York and Florida, we offer exceptional legal representation to every one of our valued clients. We are excited to partner with you in this new venture.

For questions about our business law services, call the Law Offices of Gary I. Handin, P.A. today at 954-796-9600 or toll-free at 1-877-815-4560. You can also contact Handin Law online to schedule a consultation.