Factors to consider when choosing a business form – Part 2

Forming a corporation is no small undertaking. Yet there may be reasons for a family business or other form of equity ownership among individuals to make this choice.

Limited liability and corporate forms are generally more conducive to raising capital because investors are shielded form individual liability. A corporation, with its accompanying organizational and formation documents, may be better suited to handle a business’s rapid development and growth. Perhaps a company is launching a potentially risky project and the original owners want to be shielded from personal liability from operational debts and taxes.

Our firm’s corporate attorneys can help partnerships, proprietorships, and even small corporations navigate the requirements of state corporate law. We place a strong emphasis on detailed organizational and formation documents. Our philosophy is that a proactive approach to potential problems may help to minimize or even avoid problems.

Our checklist of organizational issues is tailed to each client’s unique needs. Nevertheless, formation procedures are common to most of our corporate clientele checklists.

For example, the articles of incorporation must state basic information about the legal business name, state of incorporation, corporate purpose, registered agent, stock information and other details. That document must be filed with the Massachusetts Secretary of State’s office.

The corporate bylaws are much more detailed. They function as rules, describing the duties of the officers and board members, as well as the corporation’s operating standards and procedures. Although the bylaws are not filed with the state, they could nevertheless give rise to a lawsuit. Indeed, members might sue a corporate board for an alleged violation of a provision of the bylaws. This is yet another reason why we advise corporations to consult with an attorney over their formation documents.

Source: FindLaw, “Checklist: Starting a Corporation,” copyright 2016, Thomson Reuters