Solana Beach Lawyer: Corporate Structure Should You Use For Maximum Protection?

There are many possible business structures for a company - how do you know which one to use? A lawyer can help you protect yourself from liability through using the right structure, based on your individual needs. In planning ahead with your business, you can avoid legal actions and prevent your company from valuable lawsuits.

Article:
If you’re a business owner, you have several options on how to structure your business. You can have a corporation, a limited liability company, you can have a partnership, you can have a general partnership, or a limited partnership, or you can have a joint venture. There are a lot of kinds of corporate structures or business entity formations that you can use to help you run your business.

The key is to plan ahead and to protect yourself against litigation if the problem is within your business, which it usually is. Most of the cases we would study when I was in law school were between friends and family members. So, a business would start with, lets say, two brothers, and because they were brothers they thought, ah what do we have to do, we don’t have to write it down we can just start doing the business. Well, believe me the cases that we study that became California law were about not planning ahead because thy were so informal about it. The key really would be know that there’s going to be a potential for a problem and plan ahead. Know what you’re respective duties and responsibilities are going to be. Is there going to be a manager, is someone going to be responsible for the accounting, is there someone who is going to be responsible for the marketing, define it.

What we do in terms of the formation is to, if it’s a partnership, draw up a partnership agreement. If it’s a limited liability, it will be an operating agreement. If it’s a corporation, it can have by laws. Whatever it may be, it’s really all the same thing. It’s a written memorialization of the rights and obligations and the duties and responsibilities are of the respective people in that organization. And if you define it as clearly as you can, in advance then you’re typically going to protect yourselves from problems down the road. The other reason it’s important is because it’s a form of insurance. You obviously want an insurance policy but if you have a business structure, not a business partnership, but a corporation or a limited liability company for instance, it becomes an entity of itself. You can insulate yourself against any personal liability and responsibilities in the event of something going wrong, such as a third-party wants to sue your business, they can’t get you individually or any of your assets and so that's a really inexpensive way of protecting yourself.