Starting a new business is an exciting venture filled with potential and possibilities. However, it also involves navigating a complex web of legal requirements and decisions that can significantly impact the future of your enterprise. Working with an attorney through what can sometimes be an overwhelming process can help ensure each decision made is thoughtfully considered.  

Here are several reasons why engaging an attorney is not just beneficial but often essential. 

CHOOSING THE RIGHT BUSINESS STRUCTURE 

One of the first and most critical decisions you’ll make is choosing the right business structure. The options include sole proprietorship, partnership, limited liability company (LLC), and corporation (further divided into S corporation or C corporation). Each has distinct legal and tax implications: 

• Sole Proprietorship: Simple and easy to form but offers no personal liability protection. 

• Partnership: Allows for shared resources but involves joint liability and potential for disputes. Owners are referred to as partners.  

• LLC: Provides liability protection and flexible management but is a relatively new type of entity structure. Owners are referred to as members.  

• Corporation: Offers robust liability protection and ease of raising capital. Owners are referred to as shareholders.  

From a taxation perspective, partnerships and LLCs (with more than one member) pass through the income to the owners and do not pay tax at the entity level. A single member LLC is disregarded for income tax purposes and report any taxes are reported and paid on the owner’s personal Form 1040. 

Whereas a C corporation (“C” and “S” refer to the subchapter of the internal revenue code governing taxation of corporation) is considered a separate entity. The corporation will be taxed on its income, and any compensation paid to the shareholders will be reported and paid on their personal tax return. This tax treatment is referred to as “double taxation” and has historically been subject to tax rates less favorable to taxpayers.  

If a corporation meets certain requirements, it can elect to be taxed as an S corporation, and the company’s income will “pass through” to the shareholder, with this income reported and paid on their personal tax return (like a partnership). 

An attorney can help you weigh the pros and cons of each structure in the context of your specific business goals, risks, and operational needs, ensuring you make an informed decision. 

NAVIGATING REGULATORY REQUIREMENTS 

Starting a business involves complying with numerous federal, state, and local regulations. These can include: 

• Business licenses and permits: Required for operating legally within your industry and location. 

• Zoning laws: Governing where you can operate your business. 

• Environmental regulations: Especially relevant for industries like manufacturing and construction. 

An attorney can help you identify all the necessary licenses and permits, ensure compliance with zoning laws, and navigate any industry-specific regulations. This not only helps you avoid costly fines and legal disputes but also ensures a smooth start for your business. 

DRAFTING AND REVIEWING CONTRACTS 

Contracts are the lifeblood of any business. Whether it’s agreements with suppliers, clients, employees, or partners, having clear, enforceable contracts is crucial. An attorney can: 

• Draft contracts: Tailored to your specific needs, protecting your interests and minimizing risks. 

• Review contracts: Identifying potential pitfalls and ensuring terms are fair and favorable. 

• Negotiate contracts: Using their legal expertise to secure better terms and resolve disputes. 

Well-drafted contracts can prevent misunderstandings and legal issues down the road, providing a solid foundation for your business relationships. 

PROTECTING INTELLECTUAL PROPERTY 

Your business’s intellectual property (IP) — including trademarks, copyrights, patents, and trade secrets — is a valuable asset. Protecting it properly is essential to maintaining your competitive edge. An attorney can: 

• Conduct IP searches: To ensure your ideas are original and don’t infringe on existing rights. 

• File applications: For trademarks, copyrights, and patents, ensuring they are completed accurately and comprehensively. 

• Enforce IP rights: Helping you take action against infringement and defend your rights in disputes. 

By securing your IP, you safeguard your brand and innovations, which are critical to your business’s success and growth. 

ENSURING COMPLIANCE WITH EMPLOYMENT LAWS 

If you plan to hire employees, compliance with employment laws is non-negotiable. These laws cover a wide range of areas, including: 

• Wages and hours: Ensuring fair pay and working conditions. 

• Anti-discrimination: Protecting employees from discrimination and harassment. 

• Safety regulations: Ensuring a safe and healthy workplace. 

An attorney can help you navigate these complex laws, draft employee handbooks and policies, and handle any disputes that arise. This not only protects your business from costly lawsuits but also fosters a positive work environment. 

MANAGING LIABILITY AND RISK 

Every business faces risks, from potential lawsuits to operational hazards. An attorney can help you identify and mitigate these risks through: 

• Insurance: Advising on the types and amounts of coverage needed. 

• Compliance programs: Implementing policies and procedures to reduce liability. 

• Dispute resolution: Providing strategies for handling conflicts and litigation. 

By proactively managing risks, you protect your business’s assets and reputation, ensuring long-term stability and success. 

STRATEGIC BUSINESS ADVICE 

Beyond legal compliance, attorneys can provide strategic advice on various aspects of your business, including: 

• Financing options: Navigating funding sources and investor agreements. 

• Expansion plans: Structuring mergers, acquisitions, or franchising deals. 

• Succession planning: Ensuring a smooth transition when it’s time to pass the business on. 

With their legal expertise and business acumen, attorneys can help you make informed decisions that align with your long-term goals. 

CONCLUSION 

Engaging an attorney when creating and structuring your new business is an investment in your venture’s future. From choosing the right business structure and ensuring regulatory compliance to protecting intellectual property and managing risks, an attorney’s expertise can provide invaluable support and peace of mind. By partnering with a legal professional, you can focus on growing your business, confident that the legal aspects are in capable hands.