What is Business Formation?
Committed to Protecting Your Business
All businesses are operating under some type of ownership. Many small businesses are called sole proprietors because they are owned solely by the proprietor who is operating the business. Other businesses are formed as a limited liability company (LLC) or a corporation. The legal action of creating an LLC or corporation is called business formation.
Reach out to our law office today at (618) 717-4409 to schedule a consultation with one of our experienced attorneys to get started on your case.
Why do I need to form a business?
The main purpose of formalizing a business into an LLC or a corporation is to limit the personal liability of the owners. Without the formal organization of a business, all liability falls to the owner. If you have a business partner, that liability extends to all partners both separately and jointly. This means that if you are involved in a lawsuit, all personal bank accounts, real estate, cars, and assets are at risk in addition to any business assets such as vehicles, equipment, and buildings – even if your partner is the one at fault.
I have umbrella insurance coverage, so why do I need to formalize my business?
Formalizing your business is all about protecting your assets just as your umbrella insurance is about protecting your assets. The difference being that by formalizing your business, you could prevent the need to file a claim with your umbrella coverage by limiting your liability at the company door before it passes to you. Furthermore, if your business is found to be in breach of contract, most umbrella policies will not cover your personal liability.
How will forming a business affect my income taxes?
If you form an LLC, the profit or loss from the business will pass directly to your personal income tax return and be taxed at your personal tax rate. If you form a corporation – depending on the type of corporation formed – you may pass the profit or loss directly to your personal return, or the profit or loss may be paid by the corporation, and you will only pay tax on what you earn by being an employee of the corporation. Either way, you (or the corporation) will still be responsible for paying income tax on the profits, but with an LLC or corporation in place, you will have limited your personal liability in the event of a lawsuit.
What about staying compliant with state and federal filing laws if I formalize my business?
At Levanti Law, we prepare and submit these required documents for you. Be it the initial documents necessary to formalize your business or the regular reporting documents necessary to stay compliant, we take that burden off your shoulders. Your business should be your business and we will make it easier for you to do that by handling the legal footwork for you.
Contact us online or call (618) 717-4409 to request a consultation with our Benton criminal defense attorney. Our firm proudly serves clients through Franklin County and the surrounding areas.
What is a business succession plan?
Every good business owner needs a plan for succession – a plan for the day when they are no longer willing or able to operate their business. Most business owners are so busy running the business now that they neglect to plan for when that day comes. Without a succession plan, potential buyers will no doubt be trying their best to buy your business as cheaply as possible. By having a succession plan in place, not only will you be better able to maximize your profit and provide better protection for your family – especially if you pass away – but your business and family will have a smoother transition.
Why would I want a business succession plan?
As the business owner and operator, the day will come when you want to retire, sell, move on to another business or employment, or stop working altogether due to economy, family, or health reasons. Your business may be passed to a co-owner, heir, key employee, or new buyer. Or it may be liquidated, and the profit distributed to the shareholders or beneficiaries. Regardless of the reason or method, it is inevitable that this day will come. Succession planning will not only maximize the value of your business now, but it will help to protect you and your family at the time when you (and they) may be most vulnerable. Without a succession plan, your business may be at the mercy of unscrupulous people or the standard government dispersal laws.
My business is in a trust. Do I still need a succession plan?
Absolutely. A business succession plan can work hand-in-hand with a trust, but it will go beyond the limitations of a trust to fulfill your intentions when moving into the next chapter of your business life. Furthermore, should you pass away, your family will have even greater protection with a succession plan already in place than with a trust alone.
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