When a business is formed, it is important that a solid foundation is laid in order to support the legal structure of that business. If that foundation is shaky, it can affect every aspect of the business’s future. As a result, it is vitally important that the process of entity selection is taken seriously. It is similarly important that if a business’s foundation has not been correctly constructed that business owners consider reorganizing that business under a new entity formation.
Entity selection helps a business determine what kind of legal foundation will provide the basis for the business from a legal perspective. In general, businesses may be formed as corporations, limited liability companies, limited partnerships, family limited partnerships, limited liability partnerships and sole proprietorships. If a business is initially formed as one type of entity and then needs to evolve, that business can be reorganized to reflect the changing nature of the business.
Once business owners have gone through the initial entity selection process, attorneys will work with them to draft necessary companion documents. Depending on the nature of the entity selection process, shareholder agreements, partnership agreements or other companion documents may need to be drafted and filed.
If you are thinking about starting a business, or if you feel that your business could significantly benefit from a reorganization, please speak to an experienced business attorney about entity selection. This particular process should be taken seriously, as it provides the very legal foundations upon which your business will soon operate.