Business Formation Questions
Do I need an attorney for a business formation?
• An attorney is not required for a business formation. However, even though many of filings, rules, and regulations governing business formations are accessible by all, it is highly advisable to seek the assistance of an experienced attorney. Experienced attorneys are knowledgeable in the complexities of the formation process and can help avoid many of the common pitfalls that can delay or prevent your successful business formation. Often an attorney can help you avoid issues that you may not even know about.
What are the disadvantages of forming an LLC?
• Limited Liability Companies (“LLC’s”) are relatively new business entities, but are widely accepted and are usually recommended as the business entity of choice. However, since each situation is different there may be more attractive options for a business formation than the LLC entity. In New York State, one disadvantage of forming an LLC is the newspaper publication requirement. This requirement increases the time and cost of the business formation process. This is just one of several possible disadvantages of forming an LLC in New York. Many other states do not have this requirement, but may have other requirements unique to that jurisdiction. It is best to seek the counsel of an experienced attorney to help you understand the benefits and the detriments of forming an LLC compared to other available business forms before choosing which entity is right for your business.
What is the best time of year to form a new business?
• A business formation can be done at any time of year. Generally, the fees are the same regardless of when a business is formed. There may be tax consequences associated with forming at a particular time of year that could be avoided at other time. These consequences are best addressed by your tax adviser in consultation with your attorney.
What is the cost of a business formation?
• The cost of a business formation depends on the services requested. The Law Offices of Robert G. Bruechert is very flexible and attempts to work within the client’s budget. This is done by advising what, if any, services can be done by the client and which are best performed by an experienced attorney. We even offer an advisory service whereby the client can do the filings themselves and have ready access to an experienced attorney for any related questions that arise.
Are there advantages to forming in New York vs. Delaware or some other state?
• Each state has its own rules and regulations which may either benefit or detriment a particular business depending on the particular circumstances. For example, some states favor majority shareholder, others minority shareholders. Some have favorable requirements when applied to a particular kind of business (e.g. real estate) that others do not. For these reasons, it is very difficult to give overall guidance as to which is state is “best” for your business formation. It is advisable to discuss your particular situation with an experienced attorney to explore which state is best suited for your business formation.
Can we put a several businesses under one company?
• As with most legal questions, the answer is: it depends. While many businesses may be placed under one company, some business entities cannot be combined with others. These generally require a “professional” designation and can be identified by the terms “Professional Corporation”, “P.C.”, Professional Limited Liability Company”, ” PLLC”, and the like. But even within these “professional” categories some combinations (multidisiplinary practices) are permitted.
Outside of this “professional” category, a company can be formed for “any lawful purpose” and engage in several businesses. However, just because the combination of several different businesses under one corporate structure is possible, it does not necessarily mean that it is desirable. It may be wise to compartmentalize potential liabilities by forming different entities for one or more of the businesses. Moreover, it may be advisable to own one business in a completely different entity structure than another for a variety of reasons (e.g. investment properties may be better held in an LLC and another business may be better held as an S-Corp.). For this reason it is advisable to consult with a qualified professional to see what is most appropriate for you given your circumstances.
Can I have limited liability if there is only one member in an LLC?
• Single member LLC’s are recognized limited liability entities. If formed, operated, and maintained properly it is highly likely to afford limited personal liability.
Can there be many members in an LLC?
• Multiple member LLC’s are also recognized limited liability entities. If formed, operated, and maintained properly it is highly likely to afford limited personal liability to all equity owners. It is advisable to discuss your particular situation with a qualified professional to explore whether other advantages or disadvantages exist.
After my business formation, what do I need to do to keep my business active and in compliance?
• Once the business is formed, there are numerous filings and activities that are required and many options that you may elect (that may or may not require filings) within certain periods of time. The Law Offices of Robert G. Bruechert generally sends out a letter to clients after the business formation is accomplished to help clients identify, understand, and perform these tasks. Remember, our goal is to put our clients in the best legal position as possible to successfully continue the operation of their business.