Launching a new business is an exciting endeavor. As you work your way from the spark of the initial idea to the day you open your business, you’ll face seemingly endless decisions and options for setting yourself up for success. From big-picture concepts like drafting your mission statement to minute details like choosing the color palette for your new website, the decisions you make will all impact your business in some way. Many people wonder whether it’s necessary to work with an attorney during this process, as the cost of legal services may seem daunting in light of the other expenses associated with this endeavor. Although it’s not required to work with a business lawyer when starting a new corporation, doing so is often advantageous and can save you considerable time and money in the long run. Let’s take a look at some of the benefits of working with a knowledgeable business law attorney when launching a new company.
Understanding Your Options
As you start building the foundation of your new business venture, you will quickly learn that there are several options available to you. While many websites and online resources make it possible to use a DIY approach, most people become overwhelmed by the sheer volume of information out there. Wading through websites full of legal jargon (not to mention sources that are unreliable, outdated, or misleading) may only lead to confusion. When you work with an experienced lawyer, you can trust that this legal professional will be able to assess your goals and provide you with reliable and effective guidance. Your attorney can distill the information you need and present it to you in a clear and concise manner, empowering you to make fully informed decisions with greater confidence.
Selecting the Most Suitable Business Structure
When you form your business, you will need to select a structure in order to register it with the state. The business structure you choose will affect your tax obligations, the type of paperwork you will need to file, the amount of personal liability you will carry, and your business’s ability to raise funds. Discussing the details of your situation with a trusted business attorney is the best way to ensure that you select the most appropriate and strategic structure to support your goals. Below are some of the most common types of business structures to discuss with your lawyer.
Sole Proprietorship
If you are going into business on your own, this structure may suit your needs. When you form a sole proprietorship, your business assets and liabilities are not considered separate from your personal assets and liabilities. This means that you may be held personally liable for any debts and obligations your business incurs. Sole proprietors work well for low-risk businesses and those wishing to “soft launch” their company before taking the leap to a full-fledged, formal business.
Partnership
When two or more people want to go into business together, they may elect to form a partnership. In general, there are two types of partnerships: limited partnerships (LPs) and limited liability partnerships (LLPs). Limited partnerships appoint only one general partner to retain unlimited liability, while the other partner(s) have limited liability. The general partner typically has the most control over the company. In contrast, LLPs protect each partner from debts against the partnership, with each partner having limited liability. Professional groups and businesses with multiple owners may determine that forming a partnership is the most suitable path forward.
Limited Liability Company (LLC)
There are several advantages to forming a limited liability company (LLC). First, this type of structure protects individuals from personal liability. The profits and losses your business receives will be passed through to your personal income without facing corporate taxes. However, LLC members are considered self-employed, subjecting them to self-employment taxes. If you are looking to form a slightly higher-risk business or you want to protect your personal assets from liability, this option may work best for you.
Corporations
Corporations provide the strongest protections to individual owners, protecting them from personal liability. However, forming a corporation can be expensive and more labor-intensive than other business structures. The tax obligations and record-keeping requirements tend to be more nuanced and complex, so enlisting the guidance of a knowledgeable business attorney is the best way to set you and your business endeavor up for success.
Keeping the Future Bright and Promising
Perhaps most importantly, working with a business lawyer can minimize the potential for legal disputes or major headaches in the future. Your attorney understands some of the most costly problems that new businesses may face, and they can employ strategies to reduce the likelihood of issues arising later on. Establishing clear and comprehensive business agreements, contracts, employment handbooks, and other strategies will protect your business and provide a solid foundation for your new business to grow and thrive.
If you have questions about launching a new business in Colorado, call Judex Law, LLC, today at (303) 523-4022 to speak with a friendly and experienced attorney.
