- Do I need a business entity for a small business?
- What kind of business entity is right for my business?
- I found business formation forms online. Why do I need a lawyer to set up my business entity?
- What should I be aware of when buying a business?
- What should I be aware of when selling a business?
- What can I do if I’m not being paid for goods or services I provided?
1. Do I need a business entity for a small business?
It is almost always beneficial to have a business entity set up if you are engaged in any type of business. Many small business owners erroneously think that they don’t need a business entity because they are too small, or because their friends who do the same thing don’t have a business entity. At a minimum, having an appropriate business entity set up for your business helps you limit liability if something goes wrong. There are also certain tax benefits you can gain from operating under a business entity.
Having a business entity set up is especially important if the business is owned by two or more individuals. An innumerable number of businesses have failed because of disagreements between the owners. A properly organized business, with the appropriate formation documents, will prevent conflicts between the owners by setting out with specificity, and in writing, the terms on which the business will be operated, and providing for procedures in case of unexpected events, such as one of the owners wanting to sell his or her interest in the business.Top
2. What kind of business entity is right for my business?
This will depend on the nature of your business, and the purposes of setting up the business entity. However, in most cases, the appropriate business form is going to be a limited liability company (LLC). A LLC offers the limited liability of a corporation, but requires fewer formalities to be maintained in good standing. It also provides flexibility in how the owners are taxed. There are circumstances when a LLC may not be the best option, such as when the owner intends to seek numerous outside investments into the business. To determine what is right for your business, it is best to consult with a qualified attorney.Top
3. I found business formation forms online. Why do I need a lawyer to set up my business entity?
The short answer is you don’t need a lawyer. Using downloaded or purchased forms is fine, as long as you know exactly what you need, and the form you plan on using adequately covers all the issues you need covered. Simply put, a form is only as good as the lawyer who wrote it, and with almost all forms you find online, you do not know who wrote them, or if they were even written by a lawyer. A good lawyer will not simply give you a form, but will give you an opportunity to ask questions and understand why the document says what it says. More importantly, a good lawyer can help you anticipate and address legal risks that you yourself may not have considered.Top
4. What should I be aware of when buying a business?
There are numerous issues to consider when buying a business, some of which will be specific to the type of business being purchased. Some of the main issues include: how the assets will be transferred, whether there are leases to be assumed, whether there are licensing requirements and whether the licenses are transferable, whether collateral is required if the purchase is not all cash, whether personal guarantees will be required, whether a noncompete agreement is appropriate, and the tax implications of the transaction. In addition, before formalizing the purchase, it is important to conduct proper due diligence to determine the condition of the business and whether it comports with the seller’s representations—the nature of this due diligence will depend on the type and size of the business, but could involve a financial audit conducted by an accountant, inspection of the assets, interviews with customers, and so on.Top
5. What should I be aware of when selling a business?
Many of the considerations when selling a business are the same as when buying a business. In addition, if the sale is not all cash, due diligence must be conducted on the financial background of the buyer, and appropriate guarantees and security interests must be obtained to make sure that the seller can recover the sale price if the buyer stops making voluntary payments.Top
6. What can I do if I’m not being paid for goods or services I provided?
If you provided a customer with goods or services and have not been paid when due, the most important thing is to not delay in taking steps to collect. Of course, you don’t necessarily have to immediately hire a lawyer. Oftentimes, it may be sufficient to contact the customer and make a request that the bill be paid. However, if your request is ignored (especially if you made several attempts to contact the customer), or if the customer promises to pay but then fails to do so, then you should seek legal assistance. Generally, there are two categories of non-paying customers: those who have the ability to pay, and those who do not due to financial difficulties. With those who are able to pay, we can either make a formal demand for payment, if appropriate, or simply proceed with a court action to collect. With those who are unable to pay, we must also consider the possibility that the customer will file for bankruptcy. If that happens, we will evaluate whether it will be cost-effective to proceed with the collection efforts. This will depend on a number of factors, including on the type of bankruptcy filed. If you and we together determine that it makes sense to proceed, we will take steps to protect your rights in the bankruptcy proceeding.Top