Excerpt from February 2007 Upbeat Times
ORGANIZE YOUR BUSINESS, Part 2
We are continuing our discussion of how to get organized in the new year. Last month, I discussed the most common types of business organizations:
- Sole proprietorship
- Limited liability partnership
- Limited liability company (LLC)
- Corporation (both C type and S type)
Choosing the form of business organization that is best for you requires much forethought and consultation with your accountant and attorney. However, by answering the following questions, you will have a better idea of which two or three are best for you.
1. Are you a startup organization? If so, unless you plan to issue stock immediately or are concerned about an exposure to personal liability, you will probably want to start as a sole practitioner until your business is on its feet and growing.
2. Is there anyone else in business with you? If you are sharing responsibilities and risk with someone else, you should at least have a partnership agreement that sets out, among other things, the money and time that each will be contributing, the roles each will play, how job performances will be measured, how a partner can withdraw, and how the partnership will be dissolved.
3. Are the principals or employees driving during the day? The greatest exposure to liability is while driving. You may be a very careful driver, but accidents can happen at any time. If your employees drive, they may not be as careful as you are. And woe is the employer who allows an employee to drive who is impaired by alcohol or drugs. An LLC or corporation will shelter you from personal liability.
4. Are you in construction or other high-risk industries? If so, as soon as economically feasible, forming a corporation is a good idea (currently, contractors cannot form LLCs).
5. Do you have significant assets? If so, you may want to shelter your personal assets from risk with an LLC or corporation.
Your Upbeat Lawyer welcomes your questions about business, real estate, construction, and estate planning. E-mail your questions