Starting a business is a dream for so many people, and it is an incredibly exciting time. However, forming a business is also time-consuming and many obstacles may arise along the way. There are many legal issues someone will face when starting a business and while business owners are experts in their chosen industry, few are well-versed in the legalities involved.
Some business owners may worry about making a legal misstep, while others may not even consider the possibility. A Spartanburg business formation lawyer can help ensure these mistakes do not happen, and help owners form their business in a manner that is most optimal for them.
Considerations When Forming a Business Entity
Many businesses start small with just one owner and it is not uncommon for these business owners to assume they have to create a sole proprietorship. However, this may not always be the best option. Forming a corporation or LLC can offer many benefits that sole proprietorships do not.
Corporations and LLCs are treated as individuals in the eyes of the law. These businesses can own assets, sign contracts, and even take legal action when they need to file a lawsuit or defend themselves against one. This is an important distinction. When an LLC has a lawsuit filed against them, only the company is liable if the result is unfavorable. When a sole proprietor is sued, on the other hand, they can be held personally liable, which can place their own assets, such as their home, at risk.
What is Involved when Choosing a Business Entity?
Just as it is critical that business owners know the type of entity they want to form, it is just as important that business owners know what is involved in forming a specific type of entity.
Forming an LLC is often quite simple, but the process still has the potential to become complex quite quickly, particularly if the business has unique or intricate needs. Creating an LLC also involves some paperwork including the articles of organization, an operating agreement, and an EIN. A business formation lawyer can advise on the types of documents a business owner will need, and assist them with drafting and completion of these documents.
Forming a corporation is more time-consuming than forming an LLC, and there is much more documentation that is required. Still, corporations hold many benefits over LLCs for many business owners. For example, an LLC’s profits and losses must be reported on the owner’s personal tax return, while corporations pay taxes at the business level.
Without a full understanding of what is involved when forming a business, it becomes much more difficult for business owners to determine which type of entity is right for them. Our business formation lawyer can help a business make an appropriate decision.
What about Dissolution of a Business?
Businesses dissolve every day. Sometimes, a dissolution is voluntary while other times, an adversarial dispute results in the dissolution of a business. Regardless of the circumstances surrounding the dissolution of a business, it is always important to work with a Spartanburg business dissolution lawyer.
What is Business Dissolution?
In its simplest terms, business dissolution occurs when a business dissolves and no longer operates as a company. However, the steps and legalities involved are much more complex than that. When the dissolution of a business is quite straightforward, it is not usually necessary to go to court and have a judge determine certain terms of the dissolution. On the other hand, when partners or others involved in the business disagree on assets or control of the business, this is sometimes necessary.
Just like marriages, businesses dissolve for a number of reasons. Some businesses cannot pay their debts and end up filing for bankruptcy. Others may dissolve because a dispute arises that has no viable solution for the company. In most cases, businesses dissolve voluntarily.
Types of Voluntary Dissolution
Voluntary dissolutions occur for a number of reasons, and in a number of ways, depending on the type of entity. The most common types of voluntary dissolution are as follows:
- Corporate dissolution: Directors or shareholders may decide, usually by a majority vote, to dissolve the corporation.
- Partnership dissolution: One or more partners may decide to dissolve the business.
- LLC dissolution: Typically, the operating agreement or Articles of Organization will determine how to dissolve an LLC. In most cases, a majority vote by the LLC members is needed to dissolve an LLC.
Issues Involved in Business Dissolution
Business dissolution typically involves much more than simply shutting the doors and walking away. A number of issues can arise when dissolving a business, including:
- Shareholder disputes
- Partnership disputes, particularly when one partner wants to keep certain assets or clients
- Investor disputes regarding asset distribution and profits
- Property ownership disputes
- Obligations regarding commercial real estate leases
- Allegations of breach of contract
- Disputes regarding the allocation of debt responsibilities
The above are just a few of the issues involved when dissolving a business. They also highlight the importance of working with a business dissolution lawyer.
Filing with the Secretary of State
Businesses must file certain documents with the Secretary of State when dissolving a business. The type of documents filed depend on the business entity chosen during the formation of the business. Partnerships and LLCs must file forms with the Secretary of State that cancel their registration. Domestic corporations that were originally incorporated must file for dissolution. Foreign corporations that were not originally incorporated inside the state must file documents that surrender their registration with the Secretary of State.
Regardless of whether a business requires a cancellation, dissolution, or surrender, closing a business always raises legal issues. A business dissolution lawyer can help business owners avoid these issues, and resolve them when they arise.
Talk to Our Business Formation and Dissolution Lawyers
At A Business Law Firm, our lawyers understand that the very first and last steps you take as a business owner will greatly impact your company. We want to help you make an informed decision that will benefit you and your business now, and in the future. Call us today to schedule a consultation and to learn more about how we can help when forming or dissolving your business.