Before you embark on a new business venture, you need to identify the right structure so you can set up your business correctly and insulate yourself from potential legal issues. An experienced business formation lawyer in Missouri plays a crucial role in guiding you during this early but essential decision-making process.
In our comprehensive guide, you’ll learn how to choose the right business entity and protect your business assets with the support of an experienced attorney.
Choosing the Right Legal Structure With a Missouri Business Formation Lawyer
One of the first and most important tasks when starting a business is deciding on its legal structure. A Missouri startup attorney can help you weigh the pros and cons of different business structures. Some of the options available to you are:
- Sole proprietorship
- Limited liability companies
- Limited liability partnerships
- Corporations
The Missouri business registration requirements vary slightly depending on which type of business entity you choose to form. Each of these business structures comes with different implications for taxation, liability, and management. Choosing incorrectly could expose your personal assets to undue risk and lead to financial strain.
For example, some new entrepreneurs default to a sole proprietorship due to its simplicity. In reality, a limited liability company (LLC) would provide better protection and flexibility. Seeking legal help for starting a business in Missouri can help you avoid these mistakes and protect yourself from liability from the outset of your new venture.
Understanding Missouri’s Business Landscape
Missouri has a welcoming climate for small businesses and startups, but the legal requirements can be confusing. An LLC formation lawyer in Missouri understands both the state-specific and federal laws that apply to your industry.
For example, Missouri offers incentives to businesses in certain sectors. However, you must register properly with the Missouri Secretary of State and meet all licensing requirements to qualify.
Certain business structures can also provide your organization with benefits regardless of the sector in which it operates. For instance, you may be able to avoid double taxation by filing as an S corporation.
Legal Steps to Form a Business Entity in Missouri
The steps you’ll have to follow to start a business in Missouri will vary depending on the entity type. However, there are some general processes that you’ll have to navigate for virtually any type of entity. Here are the key business formation steps to found an entity in Missouri:
- Choose a business name
- File formation documents with the Secretary of State
- Obtain an EIN from the IRS
- Comply with state tax and licensing laws
The Secretary of State has a detailed guide to starting a business that breaks down how to create your business entity, including necessary forms and filing fees.
One of the most important business formation steps involves choosing a name. Choose wisely, as you need something that will differentiate you from other business entities.
An experienced attorney can assist you every step of the way. They can help you weigh the pros and cons of limited liability companies, sole proprietorships, and other structures.
What You Need to Know About Registering Your Business With the State
Missouri requires most businesses to register through the Secretary of State’s office. This means you’ll need to file articles of organization for limited liability companies or articles of incorporation for corporations. A business formation lawyer will ensure that your paperwork is prepared correctly and submitted on time.
More importantly, a lawyer can help you anticipate potential issues your company may encounter in the future, such as:
- Employment issues
- Disagreements with partners or investors (in joint ventures)
- Liability or lawsuits
An experienced attorney can create documents that proactively address these issues, such as including arbitration clauses to resolve disputes within limited liability partnerships. They will also help you meet the basic registration requirements, such as choosing a name that is available and appointing a registered agent. If you are required to file annual reports, your attorney can assist with that as well.
Drafting Operating Agreements and Corporate Bylaws
One of the most important legal steps to start a business in Missouri involves drafting the appropriate bylaws and/or operating agreements. These documents outline how your business functions and provide mechanisms for resolving disputes and making decisions.
While Missouri doesn’t legally require operating agreements for all types of organizations, having one is strongly recommended. A business formation lawyer in Missouri can create customized documents that reflect the specific goals and needs of your venture. Without formal agreements, you may be more likely to encounter issues like:
- Disputes over ownership
- Profit-sharing issues
- Management conflicts
While strong operating agreements don’t prevent these issues from arising, they do provide a clear path forward.
Important Tax Implications of the Business Entity You Choose
Choosing the right business structure will help you reduce your tax liability and keep more of what you earn. Limited liability companies are taxed differently from professional corporations and nonprofit corporations.
Many entrepreneurs prefer a limited liability company (LLC) structure because it allows for more flexibility regarding taxation. You can opt for pass-through taxation, meaning profits and losses are passed through to your personal tax returns. You won’t be taxed at the entity level, but can instead pay taxes at individual income rates.
Alternatively, you could choose to be taxed as an S-corp, which has specific advantages as well. You’ll need to talk to your attorney and an experienced accountant to identify which taxation option offers the most benefits for you.
Asset Protection Through Strategic Entity Formation
One of the biggest reasons you should seek legal counsel is to protect your assets. Forming an LLC or corporation separates your personal assets from business liabilities.
An attorney can identify risks unique to your industry and recommend structures or provisions to shield your assets. For example, if you are a real estate investor, you may use one or more LLCs to protect your assets under Missouri law.
There aren’t any one-size-fits-all solutions. While an LLC is one of the most popular structures for entrepreneurs, other business entities provide unique protections as well. An experienced attorney can use Missouri law to your advantage and identify the ideal structure for your organization.
Why Sole Proprietorships Aren’t Always the Best Option
If you are striking out on your own, you may be tempted to form a sole proprietorship. After all, it’s simple and inexpensive. However, it also exposes you to unlimited personal liability. If your business is sued or falls into debt, creditors may have access to your personal savings, home, or other assets during litigation.
The key component of an LLC or limited liability partnership is the concept of “limited.” Your liability will be limited, meaning that many of your personal assets will be separated from liabilities incurred by the organization. This results in tax benefits and a reduced risk of losing your personal assets in the event of a lawsuit or failed venture.
Other Factors to Consider
After forming a business, you’ll need to comply with a range of industry-specific regulations. Some examples are:
- Sales tax permits
- Professional licenses
- Zoning approvals/requests
- Inspections (i.e., health department, OSHA)
Don’t wait until you are flooded with regulatory headaches. Contact an attorney and let them help you choose the right type of business structure to protect your assets. Being proactive can set you up for success while ensuring compliance with state and federal laws.
What Else Can a Business Attorney Help With?
An experienced lawyer can help you draft enforceable contracts and vendor agreements that protect your interests. They can also review contracts that you receive from vendors or partners. Your attorney will likely recommend including key clauses in your contracts, such as:
- Indemnity to reduce your liability
- Termination rights
- Dispute resolution mechanisms
While no business wants to encounter disputes or other legal issues, you must plan for worst-case scenarios. Don’t assume that you and your partners will get along indefinitely or that every vendor will honor their part of a contract. Disputes are inevitable, but a skilled attorney can minimize the impact on your business.
Guidance From Missouri Business Formation Lawyers
The Law Office of David S. Schleiffarth, LLC, provides a wide range of services, including liability protection for small business owners in Missouri. Our legal team has the knowledge and resources to assist with entity formation, drafting documents, and promoting compliance.
The Law Office of David S. Schleiffarth, LLC, is here to help protect your personal assets and set your new business entity up for success by choosing the ideal structure. Contact us to set up a consultation with our business formation lawyer in Missouri.