Starting a business is an exciting yet daunting prospect, and it requires careful consideration of many legal aspects.
Asking the right questions to your attorney before starting a business can help ensure you have all the information needed to properly protect yourself and your venture.
If you are unsure about what questions to ask, we are here to help.
In this blog post, we have listed the 5 most important questions to ask your attorney before starting your business.
5 Important Questions to Ask Your Attorney
Here are some questions you may want to ask your attorney before starting a business:
1. What Type of Business Entity Should I Form?
As the levels of risk, management, and tax liabilities depend on the business structure, this is one of the most important questions to ask attorneys when starting a business.
Here are the most common types of business entities to consider:
- Sole Proprietorship: This is the simplest and most common form of business structure, where a single person owns and operates the business and is personally liable for all debts and legal issues.
- Limited Liability Company (LLC): An LLC is a business structure that provides the owner with personal liability protection, meaning that their personal assets are protected in case of lawsuits or debt.
- Non-profit: Non-profit organizations are those that operate for a charitable, educational, scientific, religious, or other non-commercial purpose, and are exempt from paying certain taxes.
- C-Corporation: This is a type of business entity that can have an unlimited number of shareholders who need not be owners of the company. Corporation owners enjoy personal liability protection and profits are taxed at both the corporate and individual levels.
- S-Corporation: If your business has no more than 100 shareholders and issues only one class of stock, you can opt for an S-Corp status for your business.
- Partnership: In this structure, two or more owners manage the business together and are individually liable for the debts and legal issues that may arise.
2. What Are the Legal and Regulatory Requirements in My Industry?
Depending on the nature of your business, there may be specific legal and regulatory requirements that you must meet.
Your attorney can help you understand these requirements and ensure that you are in compliance.
While the legal and regulatory requirements vary, here are some of the common requirements:
- Seller’s permit: If your business is created to sell goods, you may need to apply for a seller’s permit in the respective state. It could look like this:
Image via Pacific Sports
- EIN: You will need to obtain an Employer Identification Number (EIN) to open a business bank account, hire employees, and apply for loans.
- General business license. In some states, businesses need to get a general business license.
- Regulatory permits/licenses: Businesses in sectors, such as construction, health, food service, etc., may need specific permits and licenses from state and federal agencies.
- Occupational/professional licenses: Tradespeople, healthcare professionals, real estate agents, and builders are some examples of businesses that require professional license.
3. What to Include in Corporate Bylaws or Operating Agreements?
The next on the list of questions to ask attorneys before starting a business is about corporate bylaws. Most states mandate forming corporate bylaws, including New York, Florida, Idaho, Oklahoma, New Jersey, and others.
Company bylaws are a set of rules and regulations that govern the operation of a corporation.
They provide a framework for how the company is run, outlining the roles and responsibilities of the board of directors, officers, and shareholders, as well as the procedures for making decisions, holding meetings, and so on.
Operating agreements serve the same purpose and are created by LLCs.
Your attorney will review the laws in your state regarding the requirements for corporate bylaws and specific provisions, if any, to be included in the bylaws or operating agreements.
They can help you understand what provisions to include based on the structure of the company, related to:
- The powers and duties of the Board of Directors
- The roles and responsibilities of officers
- The procedures for holding meetings, voting, and making decisions
- Managing finances
4. What Contracts and Agreements Are Required for My Business?
Some types of contracts and agreements your business requires include sales agreements, joint venture agreements, employee contracts, and non-compete agreements.
However, you may need additional contracts and agreements for your business. Asking questions about what specific agreements you need is vital to ensure your interests are protected.
While Incfile and other business formation companies offer contract templates, such as the non-competition agreement, you should always consult your attorney to verify these documents before finalizing them. Here’s an Incfile review by GovDocFiling to help you figure out if Incfile provides you with free attorney services too.
Image via Incfile
5. How Can I Minimize My Legal Risks?
Running a business comes with certain risks and liabilities, and it’s important to understand them and take steps to minimize them.
From contract disputes and employment issues to intellectual property disputes and regulatory compliance, the risks and liabilities can be in many forms.
Your attorney can advise you on best practices to adopt for risk management and liability protection.
For instance, you can ask questions related to different types of intellectual property protection, such as patents, trademarks, and copyrights. Attorneys will advise you on the best way to protect your unique business ideas too.
The questions listed in this blog post are just the starting point. The other questions you may need to ask your attorney before starting a business may vary depending on the nature and goals of your business.
Having these conversations upfront with your attorney will provide clarity and peace of mind as you embark on your entrepreneurial journey.
So, go ahead and start your journey to entrepreneurship.