Launching a new business is exciting, but there are many complicated legal issues to consider. A business attorney can be instrumental in the process, helping you to set up the right business entity to accomplish your goals, understand applicable tax laws, obtain required permits and licenses, negotiate lease agreements and other contracts, comply with applicable employment laws, file for trademarks, copyrights, and patents, and many other aspects of starting and operating a business.

If you are a business owner—or you are planning to start a business soon—you may wish to review this list of questions that we frequently hear from our clients. And if you have additional questions or concerns, a specific issue you need help resolving, or need assistance developing a customized business plan that meets your unique needs, please call our office to schedule a no-obligation confidential consultation today.

Q: Why should I hire a business lawyer?
A: First and foremost, you must have a team around you when you start a business, consisting of an accountant, financial adviser, insurance agent, and a business lawyer. Your lawyer is an incredibly important member of the team who makes sure you and your family are protected from the potential liability pitfalls of starting a new business. In addition, your attorney will make sure you’re within the statutes and tax laws set out regarding each venture or issue you face.
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Q: Is it important to consult a business law attorney before I start a new business?
A: Absolutely! Depending upon the type and size of the business, your attorney can advise you on starting your business and the many pitfalls to avoid. Our team will educate you on the best path for opening your business and financial and liability issues so your business, your family, and you can succeed.
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Q: Does an attorney need to prepare my contracts?
A: No, but why play with fire? Not having an attorney prepare or review your contracts is like going on the web and self-diagnosing your illness. You do not technically need an attorney to prepare your contracts or a doctor to diagnose your illness. However, using form contracts found on the internet or attempting to draft your own contracts may have serious implications. Only a qualified attorney will be able to help you draft contracts that help protect you from liability in your business dealings. Attorney fees may seem costly, but it is always more costly to fix the screw-up rather than getting it right from the beginning.
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Q: Does my business need a separate tax identification number?
A: Yes. A tax identification number must be obtained from the IRS for your business entity to ensure that your business is treated as a business separate from yourself.
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Q: Do I need a membership restriction agreement?
A: Any business with more than one shareholder or owner should consider a membership restriction agreement. If a shareholder or owner dies, divorces, becomes disabled, or is removed from employment, the business needs to be adequately prepared for such an incident. A membership restriction agreement will provide a plan of action and minimize any problems that may pop up. Additionally, a membership restriction agreement can contain provisions to help limit who may become an owner of the business.
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Q: What type of business entity should I form?
A: It depends! This response is not meant to be flippant, but there are a wide variety of factors that go into what type of entity would best suit your business model. Those factors include the number of owners, whether you will have employees, your primary business activity, investors, and other owners not active in management.
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Q: What is a limited liability company (LLC)?
A: The LLC structure is a state law approved entity that limits the liability of the owners and is often an easier business entity to manage under state law. The owner of the LLC cannot be held personally liable, like a sole proprietor, so long as the owners of the LLC are following the legal formalities of the LLC and not using the LLC as a sham for their personal gain. However, the owners of an LLC can be held personally liable if they commit a personal act that is negligent or illegal under the guise of the LLC.
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Q: What is a corporation?
A: A corporation is a legally independent entity from its owners or shareholders. Formed under state law, a corporation can be taxed, enter into contracts, and incur gains and losses. Because a corporation is treated as separate from those who own or manage the company, it can shelter them from liability and protect their personal assets.
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Q: What is an S Corporation?
A: An S corporation, also known as an LLC, is a business entity that has a special type of tax treatment by the IRS—business gains and losses are reported on the owner’s personal tax return and taxed at the individual’s tax rate to avoid the “double taxation” that C corporations typically face. To be elect this type of tax treatment, the company must have fewer than 100 owners, and all of them must be U.S. citizens.
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Q: What is a C Corporation?
A: A C corporation is a separate tax-paying entity from its owners. C corporations are allowed an unlimited number of owners and can thus raise capital more easily. However, C corporations may be subject to “double taxation,” which means that the C corporation will file its own separate tax return (Form 1120) and pay a corporate tax rate. If the C corporation income is distributed to the business owners through dividends, then the owners’ receipt of the dividends will most likely be taxed.
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Q: What is a non-profit corporation?
A: A Non-Profit corporation is a type of corporation that is tax-exempt. To qualify as a non-profit corporation, the corporation must be organized in a way that 1) benefits the public, 2) benefits a specific group of individuals, or 3) benefits the membership of the non-profit.

Contrary to the name, a non-profit corporation can be for-profit. However, making a profit cannot be their sole purpose.
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Q: What is a statutory agent?
A: In the United States, if someone files suit against your business, they must provide notification so the lawsuit can move forward. And while corporations are viewed as pseudo-individuals in many ways, service of process (lawsuit notification) must be served to a statutory agent—a person or business that will accept notification on behalf of your company. This statutory agent, also known as a registered agent, is appointed when you set up the corporation.
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Q: What is the difference between a copyright, trademark, and patent?
A: Copyrights, trademarks, and patents are all devices used to protect intellectual property, but each one serves a very different purpose. Following is a brief summary of these important business tools:

  • Copyright. A copyright protects a person’s right to reproduce, publish, or sell their original works. Used to protect creations including books, scores, plays, artwork, architecture, and software, the copyright protects tangible creations—not the concepts, techniques, or facts used to create the works.
  • Trademark. A trademark is used to protect a symbol, logo, or phrase that is used to represent a company or product. Owners have exclusive rights to use their trademarks, and they can prevent other companies from using marks that are similar.
  • Patent. A patent protects property rights related to an invention—such as a machine, chemical, or manufactured item—for a specific amount of time, and it prevents others from using the invention during that time. Typically, a patent is good for 20 years from the date on which the application was filed.
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Q: What kind of permits, licenses, or registrations do I need for my business?
A: The kinds of permits, licenses, and registrations you will need to operate is dependent upon your type and kind of business. The following are examples of different documents you may need to operate your business:

  • Zoning Permits
  • Business Permit
  • Health Department Permits
  • Employer Identification Number (EIN)
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Q: What happens to by business after I die?
A: Many business owners do not think about what might happen to their business after they die or become incapacitated. However, it is something that all business owners need to plan for. If you put your business into a will or do not draft any estate planning documents, then your business will pass through probate court like all of your other assets. Your business will then be liquidated in a few short months and sold off, with the proceeds going to your beneficiaries.

This process can be stressful for everyone involved if you have not created an adequate succession plan. Our team will work with your team of accountants, financial advisers, and insurance agents to make sure you have the right succession plan in place so your business and family are protected in case something happens to you.
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