5 Questions to Ask Your Lawyer Before Starting a Business
Congratulations on your new venture! There are many parts to the process of starting a business. Before you jump in with both feet, we want to make sure that you are checking every box and protecting yourself, your clients, and your livelihood. The experienced business attorneys at McFarland Ritter Law Firm in Boise, Idaho can help you do that.
The last thing you want in a new business is to face legal pitfalls while still trying to balance your new responsibilities. Here are 5 important questions to ask your lawyer before you start a business:
1. What Business Structure is Best for My Company?
When starting a business, one of the most important things to note is which business structure you will take. The options you have include:
Sole Proprietorship - A sole proprietorship is a business where one single individual owns and operates the entire business. This means there is no distinction legally between the owner and the business itself. The owner is personally liable for all debts and profits.
Examples may include freelance writers, beauticians, plumbers, graphic designers–anything where you are not working for anyone but yourself.
L.L.C. - An LLC, or limited liability company, is a structure that protects the owners from personal liability and allows for pass-through taxation. This means the business's income “passes through” to the owners or investors. LLCs are created according to state statute.
Partnership - A partnership is a business arrangement where two or more people share responsibilities and profits, as well as losses and liability. Partners in a partnership can be individuals, businesses, interest-based organizations, schools, governments, or any combination of these. There are also 3 different types of partnerships:
- General Partnership: All partners share equally and have unlimited liability.
- Limited Partnership: Made up of general partners whose liability is limited to the amount of money they have contributed. This is usually passive investors.
- Incorporated Limited Partnership (ILP): Must include at least 1 general partner with unlimited liability. The other partners can have limited liability for the business debts.
Corporation - This is a legal entity completely separate from its owners. This structure allows for the delineation of profit, taxation, and legal liability. Corporations are usually used by large businesses.
Business attorneys like the experts at McFarland Ritter can not only help you know and understand which structure is the best for your business but can also help you create an LLC or other respective business type. They will get you registered in all the right places.
2. What Licenses, Permits, And Contracts Do I Need?
Having a business can require many licenses and permits. In Idaho, this depends on which business structure you take on, what your company does, and where your business operates from.
You are required to register your business in the state of Idaho. Depending on the industry you will need tax permits, insurance accounts, county or city business licenses, or even professional licenses. The business law attorneys at McFarland Ritter know everything there is to know about business licenses and permits and are sure to set you up well.
Along with licenses and permits, some contracts are necessary to keep you and your business safe. Contracts can protect your business relationships and clarify expectations with all partners, employees, vendors, and customers. This could include operating agreements, employment contracts, and non-disclosure agreements (NDA).
3. How Can I Protect My Business from Liability?
Understanding risk management, insurance needs, and legal compliance helps prevent lawsuits. A business lawyer can guide you on best practices for limiting personal liability and avoiding disputes. They can also help you build strong contracts to negotiate things with your employees, vendors, and client agreements.
Things like trademarks, copyrights, and patents can all protect your business, brand, creative work, or inventions. Knowing which one you’ll need is the expertise of the business law attorneys at McFarland Ritter.
4. What Are My Tax Obligations?
Different business structures have different federal, state, and local tax liabilities and reporting requirements. Ensuring compliance helps avoid costly penalties. (Please note this is a summary and not tax advice for any individual or business.)
- In a sole proprietorship, income is reported on the owner’s Form 1040.
- In a partnership, corporate taxes aren’t paid. Rather, profits and losses pass through to the partners. This means it is required to file a Form 1065. Each partner will receive a Schedule K-1 to report their share of income. They also typically pay self-employment taxes.
- An LLC can be treated as a sole proprietorship or a partnership depending on the amount of company owners. The owners must pay self-employment tax on the earnings and LLCs can elect to be taxed as an S-Corp or C-Corp for potential tax benefits.
It is important to discuss these options and requirements with your business attorney to know the best course of action for you and your business.
5. How Can I Protect My Intellectual Property?
Your intellectual property can be anything from ideas, inventions, or creative work. It can be a vital asset to your business depending on your market. As mentioned before, you can protect your intellectual property with legal documents like trademarks, copyrights, and patents. Experienced business attorneys at McFarland Ritter in Boise, ID are the experts and can help you know which is the best option for your intellectual property.
Start Your Idaho Business The Right Way
From creating an LLC to ensuring you have all the licenses and permits squared away, our experienced team of business lawyers at McFarland Ritter is the best place to start with your new business idea. In this new and exciting time in your life, let them ensure you, your business, and your livelihood are taken care of. Contact McFarland Ritter Law Firm today to get your business started the right way. Build and protect your business and your future.