September 5, 2012 Comments Off on BUSINESS FORMATIONS AND WHY BUSINESS OWNERS SHOULD CONSULT A LAWYER
Forming a corporation, a limited liability company, or a partnership can be exhilarating, frightening, and frustrating—all at the same time. But experienced businesspeople know that this anxiety can be reduced by consulting a lawyer early in the process because it can help avoid or minimize the problems related to running the business and working with partners.
You’re probably thinking, “Why should I talk to a lawyer—they’re expensive, I’m trying to start a business, and I need to control costs. Besides, the lawyer is just going to fill out a form and file it with the State of Arizona.”
First, consulting a lawyer is probably not as expensive as you think. Although big law firms will charge big law firm prices (some well over $1,000), many sole practitioners and small firms provide services to start-up businesses at very reasonable prices. And the relatively small up-front expense can avoid or minimize much more expensive problems as a later time. Pay a little now, or risk paying a lot later.
Second, a lawyer should be consulted early in the start-up process because the lawyer will do more than fill in a form. Lawyers are trained to understand how corporations, limited liability companies (LLCs), and partnerships structure the relationships between those involved in the business. A lawyer can help determine which type of business entity is appropriate based on the nature of the business venture. They also understand how corporations, LLCs, and partnerships differ in terms of the tax consequences and the potential for liability to third parties.
Third, consultation with a lawyer is valuable because the lawyer can draft articles and bylaws, an operating agreement, or a partnership agreement that fits the needs of clients. This is particularly important when two or more individuals want to work together as co-owners of a business. These documents structure the business relationship between the individuals and determine their rights and obligations if a business dispute develops between them or the business is found liable to a third party.
Finally, experienced businesspeople consult lawyers when starting a business because it establishes a relationship with a business lawyer. A lawyer will take the time to discuss the proposed business with the entrepreneurs involved and the best way to structure the relationship between them. Using a document preparer or simply completing a form supplied by the state does not address these issues. In addition, the entrepreneurs may need assistance determining whether the business is subject to regulation by the state or federal government. And it’s always possible that, at a later time, the owners of the business may need assistance with understanding and negotiating a contract or resolving a dispute with a third party.
When starting a business, think about consulting a lawyer. Doing so can avoid or minimize certain problems that can arise in running a business and working with partners—which will save money in the long run. If you’d like to learn more about starting a business, please contact the Law Office of James D. Griffith, P.L.L.C. using one of the contact options available on the firm’s website.