Starting a new business can involve a range of complex legal considerations, including taxation, liability, and how to resolve potential disputes. As you embark on this process, you deserve experienced legal counsel that can prevent you from feeling overwhelmed by your choices and help you make the right ones for your future. An attorney can also help you avoid the common mistakes that may put your business and personal interests at risk.

Ready to get the help you need? Then contact Yaqubie Law for an initial case evaluation with a business lawyer in Garden City, NY. We’re here to talk about your options for business formation and to help you choose the appropriate structure for your new company. 

Why Business Formation Matters

What you do at the beginning of your business endeavor can help you avoid costly and time-consuming headaches in the future. Setting up a legal structure for a new company will put you on the right path and protect you from pitfalls that could jeopardize your business or your personal interests. Skipping or delaying a formal structuring of a new business can lead to:

  • Exposure to personal liability for the business’s debts
  • Potential tax inefficiencies that may reduce your profit or take-home pay
  • Ownership disputes, if you start a business with co-founders or partners
  • Compliance or licensing issues

Creating a formal legal structure for a new business can help bolster your credibility with financial institutions, investors, and customers. Your first step in this process is choosing a suitable structure for their company. 

Choosing the Right Business Entity

You may have multiple options for the legal structure of a new business, including:

  • Sole proprietorship: A sole proprietorship does not require filing paperwork with the state or formal governance, but offers no liability protection.
  • Partnership: A partnership allows for equal management rights among general partners, who also share liability for the company’s losses or debts. Partners in limited liability partnerships have no liability beyond their investment, but also have limited or no governance rights.
  • Limited liability company: LLCs offer flexibility in structuring equity, management, and taxation, while also providing liability protection for owners.
  • Corporation: Corporations provide liability protection but require formal governance procedures, which outside investors may find attractive.

An attorney can help you determine which structure best serves your needs, business goals, risk tolerance, growth plans, and personal circumstances. 

Key Steps in Forming a Business

Forming a business involves multiple steps, the specifics of which will depend on which type of entity you choose to structure as and whether you have co-founders or business partners. Some of the key steps in forming a new business include:

  • Choosing a legal structure
  • Selecting a business name, which should involve checking state registration records to ensure that another entity does not already have the name, and trademark databases to see if a proposed name might violate another company’s rights
  • Completing and filing formation documents when structuring as a formal legal entity
  • Drafting foundational and governance documents, such as bylaws, operating agreements, or partnership agreements
  • Requesting an employer identification number and registering with state and federal tax authorities to remit payroll, sales, or excise taxes
  • Obtaining required licenses and permits from federal, state, or local authorities
  • Opening financial accounts
  • Securing required insurance, such as workers’ comp or liability coverage

Avoiding Common Business Formation Mistakes

Hiring legal counsel to assist you with business formation can help you avoid oversights or mistakes that can create legal issues down the road. Some of the most common errors that entrepreneurs make when starting their businesses include: 

  • Choosing the wrong legal structure: An owner might select an unsuitable legal structure for their business because they overlooked issues such as taxation or liability protection, or because they misunderstood how a particular legal structure affected those issues. 
  • Failing to document ownership or management roles: Co-founders may start working on their business without first establishing their ownership/equity split or the management roles each founder will assume. These oversights can lead to disputes when founders believe they deserve a particular share of the company’s equity or conflicts over decision-making. 
  • Neglecting compliance filings: Formally organized business entities have ongoing compliance requirements, including filing annual reports or paying franchise fees/taxes to the state. Failing to meet these requirements can lead the state to cancel the entity’s registration, potentially resulting in legal complications or personal liability for the owners. 
  • Commingling personal and company finances: Business owners who fail to keep personal and company finances separate risk undermining the liability protection offered by LLCs or corporations. 
  • Using generic online templates or DIY services: Entrepreneurs may attempt to save costs on business formation by using online templates or DIY services, but these options often fail to provide a customized business structure tailored to their specific needs. 

These mistakes can result in serious problems, such as disputes between you and your co-founders or partners, unforeseen tax obligations, or personal liability for your business’s debts or losses. An attorney can walk you through each step of the business formation process and beyond to prevent you from making critical errors that jeopardize your or your business’s interests. 

How a Business Formation Attorney Helps

When you turn to Yaqubie Law to assist with the business formation process, you can expect an experienced lawyer from our firm to help you by:

  • Sitting down with you to discuss your objectives, concerns, needs, goals, and personal circumstances, then offering tailored advice about legal form, ownership structure, and liability protection
  • Drafting and reviewing formation and governance documents so that your company meets your needs and agreements with co-founders or partners
  • Confirming that your new company complies with applicable local, state, and federal laws and regulations
  • Advising you on tax classification (if your chosen form offers options) and personal tax implications for your choice
  • Assisting with amendments, entity restructuring, or expansion, including when bringing in other partners or outside investors

Having an attorney to assist you during and after the business formation may prove to be one of the most critical investments you make in your company’s long-term stability and success.  

Contact a Business Formation Lawyer Today

Are you on the threshold of forming a new business? If so, experienced legal counsel can help you avoid the oversights or mistakes that can hamstring or jeopardize your new company from the outset. Contact Yaqubie Law today for a confidential consultation with a business attorney in Garden City, NY. We’ll discuss how our firm can assist you with the business formation process and help you structure your company to meet your needs and objectives for your new enterprise.