Cary Business Formation Illustration
Andrew is a recent graduate of North Carolina State University who wishes to establish his own start-up in the tech industry. After spending the past four years developing a cloud computing software, Andrew is ready to bring his innovation to users. Unsure of where to begin, he turns to a Cary business formation attorney at NC Planning for guidance. Together, Andrew and his attorney selected a business structure for his startup, successfully incorporated his company, and completed formal agreements for his independent contractors. In the two years since establishing his business, Andrew’s revenue has doubled, and he plans to hire an employee to assist with software development.
Common Business Structures
Selecting a business structure for your company is an important decision. You have the opportunity to set a solid foundation for your business and establish fruitful practices that will continue to benefit your company for years to come. The structure that you choose will impact the responsibilities of owners and the amount of personal liability assumed by all parties involved. Your business structure dictates how your business is taxed, your ability to raise money, and the rules and regulations that you must follow for regulatory compliance.
When forming a business, there are several business structures that you can choose from, depending on your goals and objectives. Some of the most common business structures include the following:
- Sole proprietorship & partnership: a sole proprietorship is an informal business entity created by one person. Sole proprietors assume all liability for business expenses and debts.
- Limited Liability Company (LLC): created by filing Articles of Organization in adherence with the North Carolina Limited Liability Company Act, LLCs limit the liability of their members based on their capital contributions. LLCs can be thought of as a hybrid, encompassing elements of the less formal sole proprietorship and more formal corporation.
- Professional Limited Liability Company (PLLC): North Carolina law allows for a specific LLC structure for professional services including dentistry, veterinary medicine, physician practices, and attorney practices, to name a few. This business structure is available to licensed professionals in North Carolina and protects the practitioner personally from the liabilities of the practice.
- Corporation: Forming a corporation offers specific tax benefits and liability protections that many businesses find appealing. This option allows stocks to be sold to raise capital and is considered a separate entity for taxes. It also offers the strongest protection to its owners from personal liability. However, forming a corporation requires detailed record-keeping and reporting as well as detailed operational processes to ensure compliance, especially where stocks are issued. Given the complexity of this structure, speaking with an experienced Cary business formation attorney is advisable to ensure a full understanding of the tax obligations and personal liability associated with forming a corporation.
Company Governance Documents
Organizing a business can take many forms, but two of the most popular are the Limited Liability Company (LLC) and the Corporation. In both cases, there are certain company governance documents that help with how the operations of the company are governed by and between owners/managers/directors etc.
LLC Operating Agreements
In a Limited Liability Company, this document is known as an Operating Agreement. This agreement outlines the rights and responsibilities of each member of the LLC and it serves to define the relationship between members in terms of ownership shares, profit distribution, management roles and decision making processes, dispute resolution procedures, capital contributions and more. It also defines what will happen in case a member wishes to sell their interest in the Limited Liability Company or if one or more members decide to dissolve the LLC.
Shareholder Agreements and By-Laws
In a Corporation, company governance documents consist of two parts: Shareholder Agreements and By-Laws. The Shareholder Agreement outlines how shares in the corporation will be allocated among shareholders; any restrictions on transfer of shares; rules governing shareholder meetings; voting procedures; issues related to dividend payments; buy-sell agreements applicable to shareholders; requirements for future sale or dissolution of the corporation; details related to additional capital contributions by shareholders as well as other matters relevant to operations of such entity. The By-Laws are also important corporate documents which provide guidelines regarding corporate structure (e.g., board composition); directors’ duties, officers’ authority, meeting protocols for board members & shareholders; indemnification & insurance provisions for officers & directors etc.
The primary purpose of these documents is not only to protect individual interests within a business organization but also establish uniformity among all members regarding rights and obligations associated with their membership status or ownership stake in an entity. These legally binding documents compile all aspects related to governance into single comprehensive set of regulations which may vary depending on size and complexity of an organization but essentially remain same regardless type or shape it takes – whether a sole proprietorship, LLC or Corporation – all need some kind document outlining its internal structures designed to facilitate smooth functioning while protecting interests involved parties at same time.
These agreements serve/compliance purposes but they must be drafted carefully taking into account specific laws governing respective type organization operating within particular jurisdiction under consideration. It’s essential for all business owners who have either organized themselves as an LLC or incorporated their business as a corporation to understand these important corporate governance documents thoroughly so that they can make informed decisions about their businesses.
Licensing and Trademarks
Depending on the nature of the business and industry of operation, you may need to consider licenses and trademarks. For individuals who wish to establish a practice for their professional services – for instance dentists, veterinarians, or attorneys – licensure is imperative. In fact, according to § 55B-4 of the Professional Corporation Act, at least one incorporator of the practice must be licensed in the state of North Carolina.
At NC Planning, we pride ourselves on the comprehensive services that we offer to business owners and entrepreneurs. Understanding the importance of unique ideas and intellectual property, we help our clients obtain trademark registration to protect their business’s branding. We also handle all aspects of licensing agreements for business owners who wish to profit further off their intellectual property.
The Value of Your Start-Up Attorney
Start-up attorneys are there to help you protect your new business and optimize the chance of success and growth long-term. Seeking legal assistance with the formation of your company can be a profitable early investment into your business. Your startup attorney will be able to assist with the formation of your business and the drafting of key initial documents. They can review contracts and evaluate employee stock options to scale your business as time passes. Securing legal counsel early in your start-up’s formation can have a lasting impact on the success of your company.
How to Choose the Best Business Formation Attorney for Your Start-Up
The business formation attorney that you choose for your start-up will impact the quality of your contracts, the strength of initial formation documents, protection for your intellectual property and how inevitable disputes are handled. For this reason, it is important to carefully choose the right attorney for your needs and goals. During your initial consultation, the following questions can be helpful:
- Does the lawyer have experience working with start-ups in your field of business?
- What services does the attorney offer and are they able to address your unique challenges?
- How does the attorney suggest you minimize risk and personal liability when forming your business?
- What fee structure does the attorney utilize?
- Do you feel comfortable with the attorney and confident in their ability to uphold your interests?
- Does the attorney have experience creating a roadmap for your goals?
Whether your goals are to grow your business, leave it to your heirs, create a succession plan or sell your business, NC Planning is qualified to see your plan through.
Planning for the Road Ahead with Cary Business Formation Attorneys at NC Planning
The process of forming a business is riddled with legal complexities. Missteps during the formation process can have serious financial and legal consequences down the line, including unexpected tax obligations or disputes among stakeholders. Through the guidance of an experienced Cary business formation attorney, it is possible to mitigate the likelihood of these undue consequences. To learn more, consider scheduling a consultation with our team at (919) 900-4720 today.