Business Formation

Begin with Business Formation Advice from
Colorado Business Attorney Elizabeth Lewis

Starting a new business is a complex process that involves addressing a variety of important legal matters. It’s critical to handle these items properly to minimize legal risks down the road and set your business up for long-term success. Working with an experienced business formation lawyer is essential to ensure your new company’s legal structure, tax structure, legal paperwork, and basic contracts with vendors, clients and employees are handled correctly.

Denver business attorney Elizabeth Lewis has worked with hundreds of small businesses and can provide you with the expert business formation advice you need to navigate this complex process. Elizabeth knows the state and federal regulations governing the formation of new businesses, and she can ensure you comply with these regulations while providing important legal protections your business will need now and into the future.

Why Do You Need a Lawyer to Start Your Business?

The legal hurdles associated with starting a new business can be overwhelming. Working with an experienced business formation attorney is critical to ensure every aspect of this process is addressed in adherence with Colorado law (or for those clients in North Carolina, North Carolina law). You’ll experience a variety of benefits when you work with a business formation lawyer:

• Compliance – It’s critical for your business to remain compliant with all local, state, and federal laws. Without intimate knowledge of these laws, you may be at greater risk of incurring costly legal penalties associated with noncompliance.
• Liability – Operating a business exposes you to significant liability. Having the assistance of a business formation attorney will help limit this liability in the event that you face a lawsuit or audit by a government agency down the road.
• Risk management – There are many legal risks associated with starting a business, as every interaction with employees, customers, vendors and guests on your premises can expose you to legal action. An experienced business formation lawyer can help you identify these risks in advance to minimize your exposure once your business is up and running.
• Tax liability – The tax laws governing businesses are highly complex, and it’s critical that you remain compliant with all regulations. An experienced business formation lawyer can help you understand the taxes you’re required to pay, the deductions and reimbursements you may be entitled to, and the best approach for staying on top of your tax filings. In addition, Elizabeth Lewis has a network of CPAs and bookkeepers that she works with that she can recommend to make sure that your legal and accounting team have a good working relationship both with you and each other.
• Contracts and agreements – When you start a new business, you’ll need to draft a variety of contracts and other legal documents governing various relationships with others who work with your business. Having these agreements crafted by an experienced business formation attorney will ensure they clearly state the roles and expectations of everyone involved, reducing the risk of potential legal issues down the road.

Selecting the Legal Structure of Your New Company

A well written and thorough business plan is essential when forming any business. However, this plan can only serve as a road map to the future if it is built on the solid foundation of a well thought out legal structure and includes the correct business formation documentation. You may need to file with a variety of entities, including:

• The State of Colorado
• The IRS
• Other state and federal agencies (depending on the nature of your business)

Choosing your business structure has implications for ownership issues, including:

• Disputes between owners
• Whether you have limited liability
• How your company is seen through the eyes of the law
• How the company can be taxed
• How owners compensation is treated for tax purposes

After you choose a business structure, you will have documents that outline the owner’s rights and responsibilities. The documents that you enter into between yourself, the company and the other owners can have long lasting effects on your business. Discussing your vision for the future with an attorney who is experienced in writing these documents can make the difference between a successful company and a failing one.

If you are already operating and wondering if the structure you chose was the right one for you, you may want to speak with a Denver business lawyer about whether you should convert your current business structure into something more appropriate for your needs moving forward. If you haven’t selected a business structure yet, make sure you speak with a small business attorney before you do.

What Are the 4 Main Types of For-Profit Business Structures?

There are several ways to structure a for-profit business:

• Sole Proprietorship
• Partnership
• Limited Liability Company (LLC)
• Corporation

There may also be additional structures if you are non-profit or want to provide benefits to others as well as the owners of the company (benefit corporations).

Sole Proprietorship

A sole proprietorship is a non-registered, unincorporated business run solely by one individual with no distinction between the business and the owner. In a sole proprietorship, you’re entitled to all profits, but you’re also responsible for all the debts, liabilities and losses associated with the business. In addition, your business assets and liabilities are comingled with your personal assets and liabilities, so you can be held personally liable for any debts and obligations associated with the business.

This business structure may be a good option if you have a low-risk business or if you want to test your business idea before forming a more formal business. However, because you are personally liable for any issues that occur with the business, you will want to speak to a business attorney prior to operating this way.

Partnership

A partnership is the simplest and most straightforward business structure in situations where two or more people own the business together. There are two different types of partnership structures:

• Limited partnerships – These businesses have one general partner with unlimited liability, while all other partners have limited liability. In most instances, the partners with limited liability will have less control over the company than the general partner, and the amount of control each partner wields will be clearly stated in a partnership agreement.
• Limited liability partnerships – In these businesses, every owner has limited liability. This protects each partner from debts against the partnership and shields everyone from liability for the actions of the other partners.

This business structure may be a good option if your business has multiple owners, or if you are a professional group (such as attorneys). However, because with general partnerships you are liable for anything the partnership does, again, you will want to speak with a business attorney to determine if this structure is right for you.

Limited Liability Company (LLC)

A limited liability company (LLC) combines the benefits of corporation and partnership business structures:

• The owners’ personal assets are protected from liability in most incidents
• Profits and losses can be passed through to your personal income without facing corporate taxes depending on the tax structure of the business

This business structure may be a good option for medium- or high-risk businesses, or when owners have significant personal assets that they want to protect from liability.

Corporation

A corporation makes your company a legal entity that is separate from its owners. It provides the strongest protection to owners against personal liability. However, the formation costs are higher and there is more extensive reporting, operational processes and record keeping required.

This business structure may be a good option for medium- or high-risk businesses, businesses that plan to go public in the future, or businesses that need to raise money from investors.

Get Advice Before Starting Your New Business

Getting advice on how to start your business can set your new company up for success both now and into the future as your business grows and changes. Elizabeth Lewis has been helping small and medium sized businesses in Denver and throughout Colorado with the legal matters associated with business formation since 2007. She understands the complex legal issues associated with forming a business, and she knows the state and federal regulations governing this process. This extensive expertise will ensure your new business has the important legal protections it needs to navigate the multitude of challenges that may lie ahead.

If you are starting a new business in Colorado, contact the Law Office of E.C. Lewis today to schedule a consultation. Elizabeth Lewis is a business formation lawyer serving Denver and throughout Colorado.