What is the form of your business?
Operating your small business is likely complex. You have to deal with many different tasks, from hiring employees to overseeing orders and deliveries. Most weeks, it may not seem like there are enough hours in the day to complete everything you need to get done. While it may be difficult to do, sometimes it is worthwhile to step back and reassess elements of your operation.
One area to consider is your businesses’ legal organization. You may have started small, just you and maybe a few part-time employees. A sole proprietorship may have been the easiest form to assume, as it required the least amount of regulatory paperwork. Like many start-ups and nascent businesses, you may have decided it was better to test the waters and actually try operating your business rather than spending endless hours debating how to do things.
This impatience can help you take that first step, but once you are up and running you may find that there are concerns or limitations with the form. With a sole proprietorship, you can save many organizational expenses, but you are constantly at risk of litigation and potential liability. You are personally responsible for the debts and liabilities of the business, and that is a risk, once you get to a certain size of operation, that may not be safe or comfortable.
That’s when it’s time to sit down with your attorney and decide which form makes the most economic and structural sense. A partnership or Limited Liability Company are both flexible and can protect you from risk, as can a traditional corporation, but you need to learn which type will best suit your business. Your attorney can explain the costs and benefits of each form and help you to create a legal superstructure that can support your business and protect you from economic disaster.