Few things can affect a business’s operations and potential for growth as much as choosing the right business formation. How a business owner structures the business “legally” can affect their liability, their costs, and even their tax obligations.
Choosing the right business formation means a business owner has the protection they need and a structure that allows them to grow the business for years to come. The wrong business formation, on the other hand, can be very costly. It can even lead to the closure of a business, or worse, unnecessary liability for the business owners.
Given the importance of proper business formation, it is critical for entrepreneurs to consult with an experienced law firm that handles business startup law matters regularly. Calabrese Law Associates is a trusted Boston-based law firm that represents business owners and new entrepreneurs in all phases of their business dealings.
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Table of Contents:
- What Business Formations Exist?
- Do You Need an Attorney to Start a Business?
- What Can a Business Startup Lawyer Do for You?
- Work With a Business Startup Lawyer Now
What Business Formations Exist?
In Massachusetts, the following basic business structures are available:
Limited Liability Company (LLC)
In Massachusetts, a limited liability company (LLC) is created by preparing and filing a Certificate of Organization with the Secretary of the Commonwealth of Massachusetts in Boston. An LLC is a legal entity that exists separate and apart from its owner or owners. Accordingly, an LLC may hold and maintain bank accounts, credit, and debts in its own name without causing the business owners to incur any personal liability.
The LLC may also file suit in its own name, but an attorney must represent the entity at all stages of litigation per Massachusetts law. There may also be tax benefits to choosing an LLC structure over a corporation, which business owners should have their accountants explain in advance of choosing one business structure over another.
General Partnership
A general partnership is formed when two or more persons agree to carry on a business as co-owners, sharing profits and losses. No documents are filed with the Secretary of the Commonwealth of Massachusetts to form a general partnership. The terms of a general partnership, including the precise allocation of profits and losses, are usually outlined in a “partnership agreement.”
Unlike an LLC, the partners in the general partnership assume responsibility for the partnership debts, legal liability, and other obligations.
Corporation
In Massachusetts, a domestic corporation is created by filing Articles of Organization with the Secretary of the Commonwealth of Massachusetts in Boston. With a corporation, the management and control of the business are vested in the board of directors. The Corporation refers to a “legal entity” that is separate from its shareholders, and property can be held in the corporate name.
Furthermore, a corporation more easily accommodates different ownership interests than a partnership or LLC as “shares” can be sold, which generates revenue for the corporate operations. Many companies choose to be structured as a corporation if they plan to “go public” at some point in the future. While corporations offer many legal and operational benefits, corporations are the most complex and expensive business structure to set up and maintain.
Do You Need an Attorney to Start a Business?
During the startup phase of a business, many new owners wonder when they need to hire a business start up attorney. You may need an attorney in the following situations:
- You want assurance that your startup is on the right path and being done correctly.
- You have many requirements to navigate on your legal documents.
- You want to outsource the legal aspects of your business so you can spend time on your other responsibilities, such as growing your business.
- You do not want to use the blanket legal documents provided by an online legal form provider.
- You want support with certain tasks, such as reviewing lease documents, preparing incorporation forms, trademarking your name, and discussing possible legal structures.
What Can a Boston Business Startup Lawyer Do for You?
A business startup lawyer can do a lot for you and your business. The laws that are applicable to a startup business vary depending on the specifics of your circumstances. Even if you decide to start your business without a partner, you have options to protect yourself from personal liability for your business’s obligations and debts. To do so, you may want to hire an experienced business start up attorney who can handle the following tasks and responsibilities for you:
- Business form choice: Whether you choose to register your business as a corporation, partnership, sole proprietorship, or LLC will dictate your potential liability and legal responsibilities, along with how your business operates. If you select the wrong business form, you may be held personally liable for your partner’s or employees’ wrongs.
- Licensing and registering: To be recognized as a business entity, you may have to register with your state. You may be required to obtain a permit or license even if you are not required to register your business, so a lawyer’s expertise here can be crucial.
- Taxes: Depending on the business form you choose, you can expect differing tax benefits and disadvantages. Understanding how taxes will work for your business is essential for ensuring you are proceeding in a way that maximizes your benefits.
- Contracts: Many businesses deal with contracts for supplies, services, and space. Through your business, you will likely have agreements between employees, partners, and investors, and it is essential to get these contracts right so you can avoid ending up in court.
If your business is like most startups, you will need the services of an experienced attorney who can advise you on the best decisions for your business.
Work With the Business Startup Lawyers at Calabrese Law Associates
Choosing the proper business structure is an important yet difficult decision for many experienced business owners as well as new entrepreneurs. The business formation attorneys at Calabrese Law Associates advise business clients on selecting the correct business structure, considering the nature of the business and the clients’ liability protection needs. It is vital to involve an experienced attorney as early in the process as possible to avoid any future complications.
At Calabrese Law Associates, our attorneys are experts in Massachusetts business law. Our firm’s business attorneys understand the nuances among the various business structures and bring that knowledge to bear for every business law client. For clients who already know how they would like to structure their current business or new company, we can assure their business filings are properly prepared.
For all your business formation questions, contact us at Calabrese Law Associates for a free consultation with a business startup attorney. We’re proud to serve businesses small and large in the Greater Boston Area and throughout Massachusetts.
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*This publication and its contents are not to be construed as legal advice nor a recommendation to you as to how to proceed. Please consult with a local licensed attorney directly before taking any action that could have legal consequences. This publication and its content do not create an attorney-client relationship and are being provided for general informational purposes only.
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