Helping Your Business
Starting, or operating, a business is more than having a service or product that customers will pay you for. Having a desired product is important, of course, but so is forming the right type of business entity and running it according to the law. Not having the right form of business for your circumstances can, in addition to other problems, expose you to paying more in taxes than you should and hinder growth opportunities. Additionally, once your business is formed it is important to run it properly else you risk personal liability for the debts and actions of the company and the state could terminate the business.
The Law Office of Craig Yankes can assist in determining the proper business form to fit your needs, creating the business, and notifying you of upcoming events or deadlines that the law requires from your business.
Why Form a Business?
Businesses are legal entities similar to people. A business can own property, take on debts, hire employees, buy materials, sell products, etc., just as individuals can. The two main reasons for forming a business instead of performing all of these actions as an individual are to gain a shield against personal liability and to simplify expanding the business by raising money through letting other people buy part of it.
Liability shield: A properly created and run business is its own legal entity separate from you. This lets you, as the manager of the business, take risks on behalf of the company that you might not be comfortable taking yourself. For example, a small manufacturing company might need a larger facility costing several million dollars. Presuming that the business has been in existence long enough to prove its financial stability, the business would be able to borrow the money for the new building instead of the owner personally taking on this debt. The difference is best shown if the company does not succeed. If the business took on the debt, the lender will get back only the percentage of money available through the business bankruptcy. If, however, the owner had personally taken on the debt, the owner would still remain liable for paying it back even if the "business" closed. Looking back in history, one of the main reasons for the law recognizing corporations was to encourage people to benefit society through their risk-taking (bringing a new invention to market, for example) while helping to shield them from business failures.
Initial funding and expansion: If a "business" could only have a single owner, it would often be difficult to raise enough money to initially fund the business or to allow it to expand. The second historic reason for businesses coming into existence, therefore, was to allow many people to put their money or talents together in the business and to share in the profits. The effect today is to allow some people to contribute ideas to the company, while others can contribute money and experience and together have the ingredients needed to start a successful company. Similarly, today's business law allows companies to take on new investors or sell stock to raise money for expansions.
Forming a business and operating it properly, therefore, allows you to be shielded from the business liabilities and can simplify both the initial funding and future expansion of the business. To read about the different types of business entities in Massachusetts, click "Business Types" in the left column.
Contact Attorney Yankes for assistance in determining the right business type for you and to help create the business.