Business Formation – Starting a Business

When forming a new business, a client must consider a variety of aspects, including but not limited to, possible tax implications, liability consequences, and potential co-owner controversies. The Firm assists business owners in reviewing these issues and provides our clients with the insight and knowledge they need to choose the appropriate type of entity to create with the State of New Jersey and establish the necessary documents to facilitate the operation of the business. Once formation is completed, the Firm can assist the client in their daily legal needs encountered through running a business.

Do I need to create and file a formal business entity?

Forming a formal business entity can provide a business owner with a layer of liability protection from personal exposure to legal claims for injuries and financial claims.

Does creating a formal business entity either as a corporation or limited liability company expose me to additional tax consequences which would not effect a sole proprietorship?

Forming a business as a limited liability company, or corporation designated as an S-corporation, usually does not expose a business owner to the double taxation predicament historically encountered. Specific situations may deviate from this rule and clients are additionally encouraged to review tax issues with their accountant.

Does my business need a formal set of written rules, called By-Laws for a corporation, or Operating Agreement for a limited liability company?

Frequently, business owners take only the initial step in creating the formal entity, without preparing a formal set of rules which establishes how the entity will operate. This is especially troublesome in the instance where the small business entity is owned by several individuals. The owners frequently do not anticipate issues such as transfer of interest of one of the owners, or death/ divorce of one of the owners, which can have catastrophic consequences if the owners have not established a proper set of rules under which the entity will operate.

Business owners will encounter numerous pitfalls in endeavoring to complete a transaction related to their business. There exists myriad regulatory matters which pervade almost all commercial transactions, including those related to tax, environmental, and land use issues. Moreover, there will frequently arise a need to negotiate real property aspects of a transaction. The Firm has extensive experience in addressing the issues which may arise throughout a transaction and can assist clients in successfully navigating these potentially terminal issues for their transaction.

Do I need a formal specialized Contract when buying or selling my business rather than a form from a stationary store?

While a party may save some money by skipping the drafting of a formal, comprehensive contract, it is important to remember that the a business is often one of the most important and significant asset a person has. The possible underlying problems which may be encountered by the failure to draft a detailed contract are too numerous to list. The sale/purchase of a business will include liability issues, regulatory issues, tax issues and in many cases, issues related to real property, such as environmental issues. In turn, the potential for devastating loss is substantial. The contract is the foundation upon which the transaction is built and is paramount to successful completion of any purchase or sale of a business.

When I am buying a business, do I need to have lien/tax searches done?

Once again, skipping this process may save a few dollars, but can be extremely costly if not undertaken. The Firm will take care of ordering the necessary searches and making sure the appropriate tax clearances are applied for from the State of New Jersey.