If you’re starting up a small business, or currently own one, you might find yourself dealing with things that are more complex than anticipated. Small business owners often forget that an attorney can be a wonderful asset for managing a business, especially when you’re just getting started.
What Does a Small Business Attorney Do?
He or she can facilitate a numerous amount of services. This might include helping you to choose the best corporate structure, sales, or protecting your intellectual property. There are many ways in which a small business attorney can benefit you.
3 Things You Didn’t Know a Small Business Attorney Did
While there are many ways in which a small business attorney can benefit your business, there are probably a few that you didn’t know about. He or she can help you choose the right corporate structure, sell your business, and protect your intellectual property.
Choose the Right Business Entity
One of the many steps that you must follow as a small business owner is choosing which business entity to establish. You can choose from a partnership, corporation, and limited liability company, among others.
The business entity that you choose will have important implication on your business’s tax and liability obligations. Knowing which type of entity is right for your business can be difficult without the help of a small business attorney who understands the legal nuances of each entity.
One of the choices for your business entity is a partnership. If you’re interested in forming a partnership, it’s important to understand that there are two types of partnership: general and limited.
To form a partnership (either kind) you need at least two owners. The major difference between a general and limited partnership is the involvement of the owners. In a general partnership, all owners actively manage the business while in a limited partnership some partners are solely investors, not active in day-to-day management of the business. The liability implications among general and limited partners also vary.
Depending on which type of partnership you choose, you may need to file paperwork to register your business with the state.
LLC vs. Corporation: What’s the Difference?
It’s common for a business to add “LLC” or “Inc” to the name. While it may seem like these are added for effect, they serve to act as a way to distinguish how the company was structured. LLC is an abbreviation for “limited liability corporation” while INC is an abbreviation for “incorporated.” Similarly, both entities are formed by filing the required paperwork with the California Secretary of State’s Office. Both structures are designed to protect the directors from certain liabilities. By contrast, they function very differently at the tax and management level.
Corporations are authorized to sell shares of stock to investors. The corporate structure allows stockholders to transfer stocks easily to other owners without a lot of red tape. That’s why this structure is a popular choice for organizations that are going after investment income.
The owners of an LLC are called “members,” and instead of shares, each member owns a designated portion of the company called “interests.” Interests in an LLC may be more difficult to move than shares in a corporation. An LLC’s operating agreement will generally define the terms that must be followed
Distinction Between LLC and Corporation Taxation
Corporations are taxed in one or two ways. By default, they are taxed as C corporations. They pay federal income tax on their corporate earnings, and shareholders pay taxes on any dividends they get. Considering that the dividend amounts are taxed at both the corporate and individual level, this is often described as “double taxation.”
Corporations that have 100 or fewer shareholders, while meeting other requirements, can prevent double taxation by selecting to be taxed as an S corporation. An S corporation does not pay business income tax; however, the corporation’s profits are attached to the shareholders’ individual tax returns, and each shareholder pays tax on his or her share of the profits.
LLCs have a more versatile tax structure. By default, a single-member LLC is taxed like a sole proprietorship and a multi-member LLC is taxed like a partner. That means that the LLC’s members report and pay tax on company earnings as part of their individual income tax return. LLC members– unlike corporate investors– might be liable for self-employment taxes.
Sell a Business
For most small business owners, their ownership of their business is one of their greatest assets and achievements. For that reason, considering the sale of a business can be stressful and emotional. On top of that, there are many legal complications that must be followed specifically and precisely.
A small business attorney has experience in how to sell a business and can be a support mechanism to help owners see the ultimate goal and value of selling their small business.
Selling a business while following all laws is important so that owners properly remove their liability and all ties from the business and receive no surprises after they think they’ve sold the business. The only way to ensure that is to get the help of a small business attorney.
Selling a business is a big life change. At Kam Law Firm, we can help you through many of life’s big changes, not only when you need to sell a business. Anytime you go through a life change such as starting or selling a business, aging, or getting married, it’s important to assess your estate plan, or, if you don’t have one, to create one.
Protect Intellectual Property
The third thing you might not know that a small business attorney does is they protect intellectual property. Most small businesses have certain elements of the business that are private and need to be protected. This often falls under the category of law surrounding intellectual property.
In its simplest form, intellectual property laws are a form of protection offered by the United States government to owners of a product, idea, concept, or marketing element that is uniquely created by one person or entity. Intellectual property can be protected through application to the government for a trademark, patent, or copyright. As well, some creative works are automatically protected under intellectual property laws.
To understand exactly which elements of your business fall under intellectual property laws and can be protected, you’ll want the help of a small business attorney.
If you’re interested in learning more about what a small business attorney can do for your small business or simply need some small business legal advice, you can get a free consultation at the Kam Law Firm. In addition to being able to give you legal advice for your small business, the Kam Law firm also has an estate planning attorney on staff if you need any legal advice on how your business will change hands or be inherited upon your death.