Which Business Entity Is Right For You?
“Let’s partner and offer our services. I can do the structural renovations, and you can do the painting.”
Sounds like a plan; two people combining their talents and offering services to a third party. Not so fast. It might be a plan; however, it may have some hidden nuances.
If the entity is not established correctly, the contractors may be in for an unfortunate surprise. Those providing services in a “teaming” approach, should make sure that they understand the liability nuances of a “partnership” – one that is formed verbally, or one that is formed through the mere appearances of a “partnership.”
The focus of identifying an entity that works well for you is the protection against liability – constructing a wall that makes it very challenging for someone to reach over that wall and into your personal assets.
If you anticipate being part of the stream of commerce by providing services or offering a product, protect your interests – protect your assets. Establish an entity with a strong foundation at the forefront of doing business.
Consider forming a limited liability company, better known as an LLC. LLCs are considered a hybrid between a “partnership” and a corporation. They were established during the late 1990s, and as LUSOL’s Professor Chrisman would state, “LLC’s are [and have remained] the new king of the hill.” An LLC provides the benefits of limited liability, as well as pass-thru taxation.
Characteristics of a well-formed LLC include, but are not limited to, uniqueness of name and branding, a well-drafted operating agreement, and a team of trusted advisors – legal counsel, a CPA, and a financial advisor.
Steps of forming an LLC include, but are not limited to, submitting Articles of Organization to the State Corporation Commission (SCC), applying for a Federal Employee Identification Number (FEIN), opening a business checking account, and executing an Operating Agreement.
If you are planning to start a business and have questions about which business entity is right for you and your situation, call the Estate Law Center, PLLC, at 540-827-4395 or get in touch with us online through our contact form.