WHAT BUSINESS STRUCTURE IS BEST FOR MY BUSINESS ENTITY?
In Massachusetts, there are a number of ways business owners can structure their business entity. Some examples include: Sole Proprietorship, General Partnership, Limited Partnership (LP), Limited Liability Partnership (LLP), Limited Liability Company (LLC), S Corporations and C Corporations. Although one could give an explanation of each and provide examples on how a particular business structure works for a particular entity, it is best to consult a business law attorney for many important reasons.
In order for a business law attorney to determine which business structure will best suit your needs, and the needs of the entity, there are several factors that must be reviewed: 1. What type of business are you starting? (sale of goods, services, financial consulting, etc.); 2. The level of risk involved in your business (i.e. a car wash & detail business is inherently less risky than a business that manufacturers and distributes all terrain vehicles); 3. What is the business relationship between you and your partner and how do YOU envision the structure of your business (i.e. will one partner put up the money while the other does most of the day-to-day work – a shared approach – or do you intend to hire managers for a multi-store operation); 4. Will your business require licensing or hold intellectual property? ; and 5. What is your end-game objective (i.e. is the business a web-based start up that you’ll need venture capital for to really make it work ultimately, do you intend to build up the business and sell it off, or is the business something you envision doing for the rest of your life, maybe making it a family/generational-type business?).
Only when you have worked out these details with an attorney who is familiar with the business-related laws in your state will you be able to determine the best type of entity to start your business. Obviously, many people don’t always take the time required to start up a business properly. Often things work out just fine, but often they do not–and when the cause is a failure of your business type, structure, planning etc., it can be disastrous, costly and/or lead to financial troubles and debt. Setting up your business properly the first time around can save you many big headaches down the road.
When starting or maintaining a business, it is always a smart idea to obtain legal advice. As always, an experienced attorney at THE JACOBS LAW, LLC can help you with the creation of a business or help draft articles or organization and agreements for business maintenance. We can also help you convert your business into any entity type that fits your needs. If you have any questions or wish to speak to a business attorney, feel free to contact THE JACOBS LAW, LLC at CONTACTUS@THEJACOBSLAW.com .