If you run a small business or a non-profit, or are thinking of starting one, we can provide the legal support you need. We provide support in negotiating contracts, and we protect your ideas. Contact us for a consultation on how we can help your business thrive.
- Entity Formation
- Negotiating Contracts with Vendors
- Rules and Regulations Consultations
- Employment Contract Drafting and Review
- Commercial Transactions
In Jake's words...
I have a friend who left his job in finance to start his own company. He had a vision, drive, and experience. His background in finance allowed him to draft a business plan to aid him through the startup process. He knew that he should form a business entity to limit his personal and tax liability. Being savvy in business and mindful of his budget as a startup, he relied on his own know-how and the resources of Legalzoom to form his business entity. As the business grew and he started to get the attention of investors, he realized that he should have formed a corporation instead of a limited liability company (LLC). In the end, he wasted money and energy to fix a problem that could have been avoided with sound legal advice in the beginning. Because at the Court Square Law Project we are trying so hard to help our client's bottom lines, we buy into the old carpenter adage to measure twice and cut once. We know that you will pay more money down the road if it is done wrong in the first place. We believe this through all of our practices, but it is especially true when forming a business entity. So what entity should you be forming?
Entity formation is a combination of many variables. You should look at the industry you’re in, your business goals, your personality, how many people you will be forming the business with, and any other curve ball you can think of in relation to your industry. These variables will dictate what type of business entity you should be. Here is a look at the most common formations:
Sole Proprietorship: You do not have to do anything to start a sole proprietorship. As long as you are a single owner, you have created a sole proprietorship simply by executing business activities. A for-profit sole proprietorship doing business under a name other than your own must file a Certificate of Assumed Name in the county or counties where you are located for $25 and any additional county fees. Sole proprietorships are great, they are inexpensive, simple, and don’t require much additional tax preparation. The drawback of a sole proprietorship is that you can be held personally liable for actions of the business or its employees.
Partnerships: Similar to a sole proprietorship, except partnerships are created when more than one owner executes business activities. When creating a partnership you should have a partnership agreement outlining how business decisions are getting made, profit distribution, dispute resolution, and how the company will dissolve or take on new owners. You are not required to have a partnership agreement, but it will save you headaches as your business grows. Adding a partner may be a good way to pump some money into your business, but you will now be liable for both the actions of yourself and any of your partners. You can limit the liability of a partner by creating a limited partnership. A limited partner will be limited in liability and also limited in input. If you do create a limited partnership make sure the limited partner sticks to their limited role. If the limited partner extends themselves beyond their limited role they could lose the protection of the limited partnership.
If your business is starting to grow some real traction, it may be a good idea to form either a corporation or an LLC. Creating a corporation or LLC creates an independent legal entity that will be liable for actions and debts of the business, while protecting your personal assets from liability. There are different tax consequences and state requirements for specific entities.
Corporations: Creating a corporation requires doing a search to see if your business name is available, filing the certification of incorporation, obtaining a tax ID number, and creating your corporate bylaws. You are not required to file the bylaws with the secretary of state, but they should be on file at the principal place of business. You must create a board of directors, hold an organizational meeting, and an annual meeting. You can be a single member corporation or owned by many shareholders. A corporation receives “double-taxation;” the corporation will pay taxes on profits, and each shareholder will pay taxes on their salary, bonuses, or dividends. A corporation can avoid double-taxation by filing as an S-corp. An S-corp has specific filing requirements, but if you are eligible, you can avoid paying federal taxes at the corporate level. Profits and losses will pass through to shareholders and they will be required to pay taxes on any “reasonable” salaries, bonuses, or dividends. If you are looking to grow your business through outside investors it may be appropriate to form a corporation. Investors prefer corporations for tax purposes, and it is easier to buy and sell shares than it is to be a member of an LLC. When dealing with investors be certain to have an investor agreement in place. Investors are savvy businessmen; review all documents to make sure you’re not being taken advantage of.
LLCs: As you can see, there are many formalities to forming a corporation. A more flexible option is the LLC. An LLC creates limited liability to its members and provides the option to pay taxes either as an individual or a corporation. To form an LLC, you must search the availability of your business name, file the articles of organization, obtain a tax ID number, create your operating agreement, and publicize your formation. In New York, you are not required to have an operating agreement. However, if you are more than a single member LLC, you should have an operating agreement so that all members are on the same page. New York also has a publication requirement for LLCs. After filing your articles of organization you are required to publish your articles of organization in a daily and weekly publication in the county the LLC was formed, for six weeks, within 120 days of filing. The publication requirement can cost anywhere from $800-$2000. If you do not fulfill the publication requirement you will not have standing to bring a lawsuit and you will not be able to obtain a loan. However, if you decide to sue or get a loan after the 120 day requirement, you will have a right to cure, so you can file a lawsuit or apply for a loan. LLCs are a relatively new business entity, but is becoming more common every year.
These entities are not your only options. There are B-corps, professional corporations, professional limited liability companies, non-profits, and more. Give us a call to find the entity that is the best fit for your business.
Your Freelance Contract: 4 Questions to Consider
The Freelancers Union recently released a statistic that 71% of freelancers have had trouble being paid on time, and have suffered an average loss of $6000 in income because of late payments.
At the Court Square Law Project, we get that nearly every freelancer would love to have a standard contract that they could hand to every client, and we get that it’s something most freelancers feel is out of their reach.
What if you leave something out that comes back later to bite you?
What if the language is inadvertently offputting, and sours the relationship?
What if it won’t hold up in court?