Business Formation: Deciding on the Right Entity

Limited liability entities, such as corporations and LLCs, foster entrepreneurship and innovation because, without the protections entities afford, few people would take the risk to start their own businesses. While the initial registration of a corporation or LLC is straightforward enough – usually consisting of filing articles of incorporation or organization (often as a standardized form) with the correct jurisdiction – the proper establishment of the entity entails additional steps often overlooked by both new and seasoned business owners.

The Formation Iceberg

As business formation attorneys, we frequently describe the entity formation process to our clients as an iceberg. The tip of the iceberg is the filing process – in California, for example, submitting the articles of incorporation or organization and applying for a federal EIN (Tax ID). The portion of the iceberg that lies beneath the surface—the portion that most people don’t see—is where hidden complexities might lie. 

Some important additional formation considerations include the following:

• Selecting the appropriate entity type, taking into consideration what the law compels for certain professions.
• For corporations, completing the organization of the company through the proper establishment of a Board of Directors, electing officers, and correctly issuing shares with applicable rights and restrictions.
• Accurately evidencing ownership in compliance with the California Corporations Code and applicable securities laws, commonly accomplished through stock certificates.
• For LLCs, determining whether the company should be managed by one or more managers or by the members, with a clear understanding of the difference. 
• Observe formalities to limit future liability (e.g., avoiding piercing the corporate veil), including keeping minutes. 
• Identify recommended ancillary documents (e.g., founder agreements, vesting arrangements, buy-sell agreements, IP assignments, etc.).
• Complying with state and federal securities laws.

A business formation is not truly complete without at least some of the above components, and it certainly doesn’t stop with the filing of articles of incorporation or organization. 

How Full Circle Business Law Can Help

Using attorneys for business formation for LLC or corporate formation can help businesses avoid many of the mistakes we see clients make as a business law firm. To start, our business entity lawyers help entrepreneurs find and form the right business entity from the outset. Our practical experience as business formation attorneys enables us to provide real-world advice about the pros and cons of your entity options and help dispel some of the myths or misinformation that sometimes accompanies the process. Our law firm helps you select the options that provide the protection you need without incurring unnecessary costs or leaving you vulnerable. 

We review all the factors that affect your business and build an entity tailored to your needs. We help:

• Determine the right or best entity type for you
• Assess and register the company name (or reserve it for a future filing), including trademark infringement and registration considerations
• Create foundational documents tailored to specific goals, including customized bylaws, operating agreements, and founder agreements
• Register the new company with appropriate government agencies
• Establish practices to comply with regulatory requirements
• Negotiate terms in financing documents
• And more…

We take the time to understand the features that make your business unique before developing articles of incorporation, shareholder agreements, employment contracts, and other critical foundational documents.

But creating custom documents for entrepreneurs is just the start. The formation attorneys at Full Circle Business Law also provide advice and negotiate agreements in a wide range of areas, including M&A and intellectual property.

To learn more about the ways we assist, contact us today.