Setting Up A New Business & Choice of Entity Decision
When setting up a new business, there are many considerations in selecting the appropriate type of business entity, depending on your objectives, including tax structure and liability protection. There are various business entities to consider, including:
- Limited Liability Company – Single Member.
- Limited Liability Company – Multi-Member.
- Corporation (S and C).
- Professional Corporations and Professional Limited Liability Companies.
- Partnerships, including Registered Limited Liability Partnerships.
Selecting the right type of entity requires a review of your business and tax objectives. However, selecting the type of entity is just a start. Other legal matters include, but are not limited to:
- Corporate Documents such as By-Laws, Stock Certificates, Minutes, etc.
- LLC Operating Agreements.
- Employment Agreements and Compensation Arrangements – including noncompete and nonsolicitation agreements for key employees.
- Buy-Sell Shareholder Agreements (which often include valuation formulas).
- Succession Planning.
Online Setup. Many people go online and set up a new business but don’t understand getting the Articles filed with the State Corporation Commission is just the start. There are other legal documents that need to be in place. When this is done, we sometimes encounter situations in which the wrong type of entity was set up because of misunderstanding about the type of entity involved. We assist clients on the “choice of entity” and other legal issues associated with business organization. We always recommend working closely with a qualified Certified Public Accountant in such matters.