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If you are starting a new business, there are a few questions to ask your attorney up front: Q: Does it matter what kind of entity to make it? A: It depends on your goals. The most common choices are C corporation, S corporation, limited liability company, general partnership and limited partnership. Each has its advantages and disadvantages. Some give you greater control, some give you greater asset protection, some give you tax advantages and some give you greater flexibility. Q: What state should I form it in? A: It depends, again, on your goals. If you are building something up that will one day need venture capital financing, you may be better off in Delaware. If you are starting a business that will stay local, your own state might be best. Q: What papers do I need? A: Different entities have different paperwork needs. For example, the basic documents for a corporation are a certificate of incorporation filed with the state, bylaws that are not, many pages of corporate resolutions, a stock ledger and stock certificates, plus a couple of tax filings. On the other hand, general partnerships can legally exist with no paperwork at all (although most lawyers would not recommend that). Q: I will be working with a partner. Do we need to do anything special? A: You can probably benefit from a shareholders or partnership agreement. These documents address a number of common situations such as control of the business and restrictions on transfer. Q: I will be working with my spouse. Do we need to do anything special? A: You should talk this over with both your business attorney and estate attorney. Your particular circumstances may create reasons to structure the ownership and operation in particular ways. For instance, it may be best to put the business in only one of your names or in a trust. Q: How do I show that I have put money in to the business? A: You may need to issue stock certificates, or may be able to be done as a book entry. It depends on the choice of entity, whether you have partners and other factors. Q: What kinds of regulations apply to starting my business? A: For some businesses, none. For others, local business permits. For still others, federal, state or local licenses. Your attorney should be able to give you general guidance. Q: How soon can we get going? A: Most businesses that do not have special regulations can be formed within a few days, depending on the backlog in your state filing office. If you need special approval, it depends on how long the regulators take. Also, businesses with complicated capital or ownership structures can take longer to document. Q: How much will it cost? A: Ask this up front. Some lawyers charge by the hour. Others will do basic work for a fixed fee, then add on fees for extra bells and whistles. There are also online services that can do basic business formation with off-the-shelf documents. Since your business is not off-the-shelf, though, you are better off having a lawyer at least take a look to make sure you are covered for what you want to do. Jeffrey Fink is an attorney in Wellesley, Massachusetts who helps businesses and families resolve disputes as a mediator, arbitrator, settlement counsel and collaborative attorney. Contact Jeffrey Fink at 781-237-0338 or visit http://www.jfinklawadr.com.
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