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Business Startups & Entity Formation

Pleasanton Lawyer Representing Entrepreneurs

You may be starting a business alone or with other people. When others are involved, it is critical to consider what your goals are and the different organizational forms that might help you accomplish your goals. The business form that you choose can affect liability and taxation and financing methods, and it can determine whether there is a path to success. Business startups and entity formation benefit from the advice of seasoned legal counsel. If you are starting a business, you should consult with an experienced Pleasanton business formation lawyer at the Law Offices of Stephen M. Fuerch.

Risks Faced by Startups

Startups face numerous risks. Without appropriate legal counsel, founders may structure the business improperly for their objectives. They may put into place an inadequate founding agreement or shareholder or other ownership agreement. Sometimes improper documentation is used to sell shares. When tax law is insufficiently understood, a business may incur substantial back taxes and penalties. Numerous statutes and regulations may need to be considered to create proper documentation for the business. For instance, adequate warnings may need to be drafted when putting out a product that carries certain risks for consumers.

Intellectual property protection may be needed. For instance, it may be necessary to apply for a patent grant and trademark registration with the United States Patent and Trademark Office (USPTO). A startup may need to obtain permission to use copyrighted items or register a copyright to be able to pursue litigation later. A skilled business formation attorney in Pleasanton can address these complex issues for you.

Agreements

When a business is starting out, all that may be necessary is the founding agreement that lays out each founder’s role, obligations, and rights. However, as an idea for a business is developed, it may be wise to retain a lawyer experienced with business startups and entity formation to file necessary paperwork and draft a shareholder or buy-sell agreement. A buy-sell agreement memorializes each person’s expectations and specifies how issues like divorce or death among the founders will be handled. For instance, when four people found a closely held corporation, it may be necessary to specify a spousal waiver of community property rights in case of divorce and provide that spouses will not inherit ownership interests in the company in case of death.

When a startup has employees, it is important to put carefully drafted employment agreements and policies in place. Employment laws in California are complex. Issues that should be considered in developing agreements include compensation, terms and conditions of employment, employment classification, employee benefits, and the effect of anti-discrimination laws.

Choosing Your Business Form

A company’s risks may be mitigated based on its organizational structure. It may be organized as a sole proprietorship, a general partnership, a limited partnership, a limited liability partnership, or a corporation. Whether there are going to be multiple employees can factor into a decision about the form that a business should take. In general, corporations require the greatest adherence to certain formalities, but they also provide the greatest protection to owners. A Pleasanton business formation attorney can advise you on the benefits and drawbacks for each form.

The simplest form of business is a sole proprietorship. This is a form in which an individual owns the business, receives its profits, and is obliged to pay its taxes and liabilities. There is no protection for a business owner who organizes as a sole proprietorship. However, minimal registration paperwork is required.

Different types of partnerships may be appropriate when two or more people decide to start a business together. In a general partnership, the partners are jointly and severally liable for the entity’s obligations, and profits are taxed as personal income. However, one or more members may have limited liability in a limited partnership. People in certain professions, such as accountants or engineers, may form a limited liability partnership (LLP) for the purpose of securing insurance.

Limited liability companies (LLCs) provide some protection for owners, but less than corporations do. They are pass-through entities, which means that the responsibility for federal income taxes passes through the entity to each LLC member. To form an LLC, the owners will need to file Articles of Organization, along with an initial information statement.

Unlike the other business forms, a corporation is an entity that is distinct from its owners. This means that, except under certain circumstances, a litigant would not be able to reach each founder’s personal assets simply because they obtained a judgment against the corporation. Corporations must pay particularly close attention to adequate funding or capitalization and the requirements of securities laws, among other formalities.

Consult a Business Formation Lawyer in Pleasanton

Business startups and entity formation often require considering a wide range of legal issues. We can provide advice about which organizational structures are likely to make your business as successful as it can be. Call the Law Offices of Stephen M. Fuerch at (925) 463-2575 or complete our online form. We represent clients in Alameda and Contra Costa Counties.