Business Blog Series - Part I
When creating a business, the first step is to determine what kind of business to create. If hiring an attorney to help navigate the creation of a business, it is important to come to the first meeting with certain things in mind. These things include: the business name, the business purpose, the growth model, and business plan. The more thorough the business plan, the higher the likelihood that common pitfalls associated with business ownership can be avoided. What kind of business one forms usually turns on these essential questions. There are many options available when choosing what type of business to create. An individual can choose between a limited liability company, a limited partnership, a general partnership, or one of the various types of corporations, for example, as an S-corporation. The type of corporation is determined by how many shares the corporation has. Usually, this choice is made with a tax document that is submitted with the help of a tax professional.
When picking a business type, many people opt for the corporation model. Usually, a lawyer will encourage incorporation of the business with the state to protect against personal liability on the part of the business owner. For some types of business, liability is so minimal that insurance could be sufficient. It is important to remember with insurance, though, that insurance companies will often do what they can to not have to pay a claim. Individuals with business insurance must make sure that they comply with all insurance policy requirements to avoid having to pay costs out of pocket. There must be a risk/reward analysis to determine if incorporation is right for your business. When deciding whether or not to incorporate, an individual thinking of starting their own business must always decide whether they want their personal assets exposed to liability, or if they would want that liability to stop at the business’s door. Usually within the first 3-5 years of a business, a liability issue arises for most businesses. The only way to avoid individual liability is to incorporate the business with the state. A lawyer can be instrumental in navigating these challenging decisions and explaining the implications of each choice to a prospective business owner.
Check out our Business Formation video from Hendersonville Chamber University, where we were joined with William Styles from Country Financial and Ken Lewellyn from TN Business Services to discuss all the essentials in starting a business: Insurance, Law, and Taxes.