Creating a New Business, Looking for Legal Help?


Creating a new business, you shouldn’t mess around with what you don’t fully understand. The electrical wiring in your home is a pretty good example of this wisdom, but you might not think it extends to your business.

After all, you may be an experienced business owner who’s gone through business formation before. At the time, you may not have needed help from a consultant to make certain choices or fill out and file all of the necessary legal paperwork. You could have encountered manageable hurdles along the way or you may have never had a problem at all.

The truth about trying to “DIY” electrical work and your company’s legal affairs is that it’s not always going to end badly – but if it does, you could be in for a serious shock. Business formation for your new company is critically important because it carries with it significant personal liability and tax implications. If you choose the wrong entity for the kind of business you’re in, you could expose your personal assets to creditors and risk losing everything.

It’s no joke trying to haphazardly establish a business without understanding the full potential consequences of doing so – namely, exposure to persona liability and taxation. This is why many experienced business owners consult with an attorney throughout the business formation process, and why you should as well.

Key Considerations During Business Formation

If this is your first time going through the business formation process, it’s an experience that can be as exciting and rewarding as it can be stressful and confusing. This is because there are many interweaving factors at play that must all be taken into account before you complete this process.

Key considerations for the business formation process include the following:

  • How is capital raised?
  • Is There Any Liability Protection?
  • How Is Ownership Transferred?
  • How Simple Is Formation?

How Is Capital Raised?

Raising capital is important for any business, but it can be significantly regulated depending upon the entity you select. C Corporations offer the greatest amount of flexibility when it comes to raising capital, whereas a partnership will encounter less abundant opportunities. Likewise, an S formation can provide some of the same flexibility that a C Corporation might, but the number of individual shareholders is limited.

Is There Liability Protection?

Limited liability companies (LLCs), limited partnerships, and corporations are all important for entrepreneurs who want to minimize the risk of becoming liable for their company’s debts. The legal separation between a business owner and the business entity they create can shield them against personal responsibility for a lawsuit brought against the company (unless something such as a personal guarantee pierces the corporate veil) or its other debts.

The same can’t be said for sole proprietorships or partnerships, where the business and its owner(s) are legally indistinguishable. That means a business partner or sole proprietor can be on the hook if their company is sued; likewise, it means that such an individual could endanger their business assets if they are sued.

How Is Ownership Transferred?

If transferring ownership is important for the future, you may want to consider forming a corporation where ownership is wholly based upon held shares that can be bought and sold. Transferring ownership involving an LLC, partnership, and sole proprietorship can be a much more complicated legal process, sometimes requiring the termination of previous business agreements (as is the case for partnerships) or a total sale of ownership (as is the case for sole proprietorships).

How Simple Is the Formation Process?

Some businesses are simpler to establish for others – especially sole proprietorships, which can involve little more than registering your business activities under a “doing business as” (DBA) name. Still, as we hope we’ve impressed by now, there are many other considerations to take into account when forming your new company. Sometimes enduring a more complicated formation process can mean getting liability and tax benefits.

Do You Need Help with Business Formation?

If you’ve decided that messing around with business formation without legal guidance isn’t for you, turn to The South Texas Business Lawyers for the assistance you need. Our attorney has helped many clients do what’s necessary to launch their companies with confidence and assurance for the future. Find out what we can do for you by scheduling an initial consultation today.

Get in touch with us to arrange your consultation by calling (210) 761-6294 or by submitting an online contact form.

Disclaimer: This article is made available for educational purposes only, to give you general information and a general understanding of the law, not to provide specific legal advice. By using this article, you understand and acknowledge that no attorney-client relationship is formed between you and The South Texas Business Lawyers, nor should any such relationship be implied. This article should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.
Share To: