Wallis Law Firm, P.A. handles many business matters to assist you in maximizing the profitability of your business. We serve clients in Raleigh, Durham, Fuquay-Varina and surrounding areas.
Having a good business plan makes any business more profitable. Give us an opportunity to work with you as you set up your business. You need to spot the legal issues before they become problems—while they are still opportunities. Whenever you face a big decision or a possible problem, consider whether the advice of an attorney can help you avoid mistakes and put yourself in the best possible position.
You may be trying to decide what type of entity to use to set up your business. You may be negotiating a lease of space or equipment. You may be considering hiring employees.
You probably have many questions and have heard many opinions. You should get the facts from a lawyer and an accountant before you begin.
There are many different kinds of business entities; let us explain them and help you pick the one that is right for your business:
- Corporation (Sub-S or Sub-C)
- Limited Liability Company
- Sole proprietorship
- Limited partnership
- Limited liability partnership
- Professional corporation for a licensed profession
For more information on the most common forms of organization and considerations in choosing one or another, please see Business Entities below.
Purchase Agreements, Employment Agreement, Collections
Whatever the issues you are facing in your business endeavor, we can offer information, common sense and good advice. Make a list of your questions and call us for an appointment.
Deciding which entity is right as you begin a new business venture depends on your particular risk of liability, your tax goals, the number of partners, and many other factors. Some choices and considerations:
A corporation is created under state law to limit liability of the owners and to create certain tax results. It gives the business a unique name that sets it apart as an established, recognizable entity. Sometimes it is easier to obtain contracts and business from other corporations if your business is incorporated.
The choice between being a “C corp” or an “S corp” is just one of tax consequences. In a C corp., any retained earnings is taxed as income to the corporation; then when it is paid to the owners, it is taxed again as a dividend. In a small company, the way around this is to pay the principals a salary that is taxable earned income, but deductible to the company. This should distribute all of the company’s profit, leaving the company at roughly a zero income situation. The (potential) defect in this strategy is that all of the earned income is subject to FICA withholding (Social Security). There are other tax limitations in transferring assets out of the company. An advantage to this status is that 100% of benefits such as health insurance are deductible to the company without being income to the shareholders.
B. Limited Liability Company:
A limited liability company limits the personal liability of the owners in the same way that a corporation does. Its owners, however, may choose to be taxed as a subchapter S or as a partnership or sole proprietorship. The profits and losses can pass through to the owners with no tax effects at the company level. This may be a good choice for owning an asset such as a tract of real estate that will have capital gains or losses upon sale that could not be passed through to the owners of a corporation.
C. A General Partnership:
There a number of forms of partnerships. The common one is a general partnership. This is the basic form of two or more people getting together to undertake a business endeavor without filing any papers with any government entity. They should, and usually do, have a written agreement setting out the terms of their relationship. The defect in this form is that it doesn’t limit liability of the owners of the business. But it is very simple. The tax consequences are the same as a limited liability company. The creation is similar to, but simpler, quicker and cheaper than the limited liability company. One of the main benefits of creating a shareholders agreement for a corporation, an operating agreement for a limited liability company or a partnership agreement for a partnership, is that the owners must think and talk about their relationship. That usually strengthens things.