It would exhaustive in this overview to outline the advantages and disadvantages of each business entity, but certainly each one has tax and protection benefits. Too often people make rash decisions about business formation and, unfortunately, those decisions can lead to dramatic and harmful consequences. For that reason, a client should not come into our office with a pre-conceived notion of what business entity is appropriate. Instead, it is important to allow the attorney to assist you in evaluating the nature of your business and what business entity is the best fit.
In order to determine which entity is best under your particular circumstance, the following questions must be considered:
1. What happens upon death of one of the parties?
2. What if one wants to buy out the other’s interest?
3. What if the venture is not profitable and one wants to leave?
4. How would a lawsuit against one party affect the business entity?
5. How does one allow others to buy into the venture?
6. What if the entity committed some negligence, how would this affect the individuals?
7. How are the profits distributed?
8. Should there be a manager who is paid to manage the entity?
9. How are decisions made as to distributions of capital or profit?
10. What if one party has less money to contribute than the other(s)?
11. What is the arrangement if one party has the idea or talent and the other(s) has the capital?
12. Can a party loan money from or to the entity?
13. Would one party be responsible for the actions and decisions of the other?
14. How does the entity terminate; what is its life
15. Who shall decide what other business areas the entity should be involved in?
16. What is the remedy if one is producing more product or capital than the other?
17. Who has the power to write the checks, and are limits on this power?
18. Can one make purchases without the consent of the other?
19. What if one files for bankruptcy?
20. Are the profits of the entity fully taxable?
21. What depreciation schedule should be applied to the assets of the entity?
22. Who chooses the accountant or the attorney for the entity?