Like other aspects of life, businesses change and grow. If your business is evolving and you are considering changing your business entity, it is essential to understand the procedural requirements, tax implications, and liability considerations of each type. A corporate business attorney can evaluate your circumstances and advise you on which option will best meet your needs and protect your interests.
Why Change Your Business Structure?
For many small business owners, a sole proprietorship or informal partnership is appropriate when first starting out. Although these structures can be effective for a company with one or two people, if a business starts to grow, hires employees, or wishes to woo investors, an LLC, partnership, or corporation provides protections and benefits that make more sense.
Considerations for Choosing a Business Entity
Before changing your business structure, it is vital to consider several elements, including:
- Forms and fees
- Investment needs
- Operational continuity
All of these components should be taken into account when creating a business succession plan as well. Seeking the advice of an experienced business lawyer can help to ensure that important details are addressed so you do not choose a structure that could end up affecting your business negatively.
In rare cases, a business owner may decide to go from a more complex business structure to a simpler one, which can be challenging. An attorney can help you understand the common taxation, liability, and legal issues that may arise, depending on your specific situation.
A Lawyer Can Help with Paperwork and Procedures
If you are changing to a more complex structure like a corporation or LLC, you must register it with the state in which you do business. You may also need to update your Employer Identification Number (EIN) and file a DBA (doing business as) form. An attorney can help you complete this paperwork and send it to the proper government agencies.
In addition, LLCs and LLPs require formal operating agreements. These agreements outline the rights and responsibilities of the owners of the company. It is important to make sure these agreements are sound and all your legal bases are covered. A business lawyer in West Chester will know what is required by state and federal authorities like the IRS and can help you draft an agreement that includes all relevant information.
Changing to a Corporation
If you’re switching to a corporation, there are certain legal requirements that must be met. You must file articles of incorporation with the state and appoint officers of the company, such as a president and secretary. You will also need to choose a board of directors. Corporate bylaws, which lay the ground rules for operating your corporation, should also be prepared. Stock may be issued and a shareholders agreement must be created. Having an attorney help you draft this vital document ensures that the rights and responsibilities of the owners and other important information are clearly stated in the shareholder agreement.
Regardless of which type of entity you choose, the seasoned business attorneys at Carosella & Associates can help you get it right and provide the legal guidance you need throughout the process.