What is the Role of a Business Formation Attorney?
A business formation attorney is a vital resource for anyone looking to establish a new commercial entity. These attorneys specialize in the many different legal requirements that new businesses must navigate as they get on their feet. Whether you are starting a brand new business or are converting an existing professional entity, developing the right structure for your business is a process that takes careful consideration and planning. One of the most important things a business formation attorney will assist you with is determining which kind of entity will be most beneficial to you. Depending on a variety of factors including the type of business you operate, your intended market, and how you and your business partners plan to divide profits, the legal structure your company adopts could be completely different than the one you might intuitively select. Because these structures have such a large impact on how your business is operated, it’s important to do everything right—there’s no going back if the wrong decision is made. You may need to register your new business with your state to officially recognize it as a legal entity and to allow it to conduct business without issue. Your business formation attorney will file all of the paperwork necessary to accomplish this goal and help you avoid any costly mistakes. If your business is going to need a license to operate, your business formation attorney can advise you on whether or not you will need to apply for an individual license , a company license or both. If you do need a license, your attorney can also assist you with navigating the licensing application process for you and determine whether there are any recurring fees you will need to be aware of. Another major function of the business formation attorney is handling all of the initial legal documents associated with setting up your business. This may include drafting a partnership agreement, filing a certificate of incorporation or articles of organization, opening a business bank account, applying for any applicable tax or identification numbers and applying for any required employee identification numbers. Beyond these immediate functions, your business formation attorney can also help you determine whether you have any other immediate needs before the business gets off the ground, such as liability coverage options, income projection analysis or employment contracts for your early hires. A well-planned business structure is crucial for the future prosperity of your venture. A business formation attorney can help you not only initially form your new company, but to ensure it has everything it needs to remain legally and financially sound throughout its many years of operation. The options that may be available to you are many, so work closely with an attorney you trust and respect to determine the path forward that will provide you with the greatest chance at future success.
Factors In Favor of Hiring a Local Business Attorney
Proximity can be a deciding factor when hiring a business formation lawyer near you. Consider the following advantages that local entrepreneurs experience:
Convenience
Most new businesses are opportunity-driven and may not have a clear idea of what their needs are yet. When faced with the challenge of finding an experienced startup attorney, meeting with a number of candidates may be daunting – especially if you have to battle traffic to reach their offices. In all likelihood, you will end up meeting attorneys individually for lengthy consultations, going over details of your business plans multiple times. This realization may deter you from taking the plunge.
A closer startup lawyer can relieve at least part of the burden if you are short on time. By hiring a local attorney, you won’t have to drive far for meetings or submit to a lawyer’s schedule. Plus, you won’t feel pressured to decide on representation when you go for a consultation. Sitting in traffic on the way to a meeting can make you feel desperate and even more susceptible to pressure tactics.
Local Legal Knowledge
Although many areas of business law are almost universal, certain issues require specialized knowledge. Hiring a local entrepreneur attorney with significant experience will benefit you.
Familiarity with local laws and courts is important for setting up your business for success. Finding a startup lawyer with a good track record who is based in your area makes you lucky. Don’t miss the opportunity to take advantage of the firm’s local connections and specialized knowledge when selecting a business formation attorney near you.
Familiarity with industry issues
If you haven’t noticed, local industries tend to cluster. In urban areas, large tracts of land may be given over to a single industry, or similar businesses may be found in one area. Category killer retail outfits, service providers, wholesalers, and distribution centers may all be located in a single area. Successful local businesses often grow a knowledgeable labor force that local entrepreneurs can hire.
Some industries exhibit strong ties between businesses. For example, a new car dealership is often located adjacent to an auto parts store and detailing service. In a retail environment, the local food store may be located alongside a sandwich or fast food shop. By getting to know and work with other businesses in your community, you can improve the level of service your enterprise offers customers.
Many legal issues are common to like-businesses in a local area. Choosing a business formation attorney close to your premises will better position them to assist you in mitigating risks. You’ll also benefit from the lawyer’s familiarity with other entrepreneurs and industry associations that promote your interests in the local political environment.
Finding a local business formation lawyer with experience in your area of the local economy can be the first of many benefits you may offer to fellow local business owners. As you grow your network, you may end up making a name for yourself in the community.
A Guide to Different Types of Business Structures
The business formation attorney will be able to explain and assist in all these types of business structures: LLCs, Corporations, Partnerships, and Sole Proprietorships. LLCs have the benefit of being easy to manage, flexible, and offer some asset protection for the owners. The Corporation has asset protection features for its owners, but requires additional formalities including shareholder meetings and documented meetings to create a corporate record book. A Limited Liability Corporation is a cross between a Limited Partnership and a Corporation. A partnership is typically a 50-50 split between two business owners. The sole proprietorship is the simplest type of business entity, but it may expose the owners to personal liability because there is no sharp division between the business and the owner.
How to Locate a Competent Business Formation Attorney
There are a few different ways to find an attorney who focuses on business formation. One way is to simply go to the website of your local or state bar association and perform a search for "business law" or "corporation" along with the name of your location. This will give you lawyer names and contact information for those firms that have the necessary expertise in business formation in your area. Another way to locate a qualified business formation lawyer is to search legal sites on the internet. For instance, you could search for phrases like "business formation attorney [insert your city or county here]." You will then be presented with a list of firms and lawyers who focus on business formation in your area . More and more often, it’s actually easier to simply search online and find a respected firm that way, as many law firms have their own websites these days, so you don’t necessarily have to scour multiple lawyer directories online to find what you are looking for, but can instead search from your favorite browser. The final way to locate a business formation lawyer is relatively simple – just ask someone you know who has started a business. You could even ask someone who has gone through any type of business legal process, not just business formation. Many people have at least been involved in some type of business formation process in their lives and will be able to make solid recommendations for a business formation attorney near you. This is often the best way to get a reliable attorney, particularly one with a sterling reputation among clients – if they have helped someone you know who subsequently raves about them, then you can trust to the extent possible that they will be able to address your business formation needs.
Essential Questions to Pose to Your Business Attorney
When considering the future of your new business, it makes sense to find a business formation lawyer near you. And when you visit with potential attorneys, whether they have offices on Park Avenue, Wall Street or in Long Island or Westchester, make sure you get answers to these questions:
- Do I need a lawyer before I form my business? An experienced attorney can guide you through the various options you have for creating your new company. If you have not yet incorporated, you may lose some rights if you form the legal entity without consulting a lawyer.
- What type of formation do I need?
- What are the requirements to form an LLC, corporation, etc.? A good attorney will answer this question without over- or under-stating the regulations.
- Once I am formed, how will I re-incorporate, merge or separate if necessary? If your business is successful, there’s a good chance that reorganization and restructuring will occur. You want a lawyer who will plan ahead for your future.
- Will you be my sole attorney or part of a team of specialists? You want to know if your lawyer will personally handle all matters related to your account, or if you will be passed around among various associates.
Understanding How Legal Fees and Agreements Work
There are usually two ways the cost of hiring a business formation attorney will occur: an hourly rate or a flat fee. The hourly rate is what you may expect. You’ll be billed an hourly rate for the time spent on your case in 5 or 10 minute increments. A flat fee may sound attractive but it isn’t something you should count on. Setting up a business entity is rarely, if ever, a routine affair. There are lots of questions that require research, phone calls, letters and meetings. Your attorney should be able to provide you with a general estimate of the fees based on the information you provide.
Fee-Related Retainer Agreements
A portion of the total fee may be required in advance and placed in a special trust account. This money is part of a lawyer’s Fiduciary Duty which obliges the lawyer to hold the client’s money in trust for that client’s benefit until the lawyer’s work is completed . As work is completed, the attorney will withdraw the money in the account to pay itself. When the money is depleted, another retainer may be requested.
Cost-Related Retainer Agreements
There are some attorneys that request a fee in advance for specific services only. These are known as Cost-Related Retainers. The amount is paid in advance to be applied toward creation of documents, filings, and other services that will have a definite price associated with them. While it sounds like a flat fee and it may act like one, it isn’t one. It is a retainer for a specific task.
Unfortunately, there are some shady attorneys out there. There is an occasional rogue attorney who takes the client’s money and never does anything. So if you do go forward with paying a retainer, make sure you choose one that offers a fiduciary duty retainer agreement, and ask for and review the client ledger each time a portion of the retainer is withdrawn.