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Business Entities...

Whether you are considering starting a small business, or a large enterpise, it is very important to protect yourself, your family and your company by creating a "corporate shield," and forming a corporation, a limited liability company, or a limited partnership. The right incorporation foundation, including a suitable stockholder buy-sell agreement, is the most basic building block of sound legal advice for corporate clients.

Corporations:
What kind of incorporation will suit you? Maryland recognizes regular corporations, and close corporations, which do not have boards of directors and are more suitable for a small business and a one or two-person enterprise. Both regular and close corporations can be a "C" corporation or a subchapter "S" corporation, which are designated for tax purposes. I do not practice tax law and do not give tax advice; you should work with your accountant to decide the details appropriate to your small business or large enterprise. If you do not have an accountant, I can help you find a good CPA. When an incorporation involves multiple shareholders or owners, a shareholders agreement should be an integral part of the initial legal project. The basic purpose of a shareholders agreement is to provide a simple, efficient mechanism to resolve ownership conflicts, and thereby avoid costly, bitter lawsuits with huge attorneys fees.

Limited Liability Companies (LLC's):
Accountants often advise that an incorporation with the limited liability company form is best suited to a small business. An LLC is similar to a corporation; if more than one person is involved, it will require a detailed LLC operating agreement designed to prevent deadlocks and conflicts if problems arise between the owners of the limited liability company in the future.

Limited Partnerships:
In some circumstances the limited partnership entity is preferred over a standard incorporation or limited liability company. Usually the general partner of a limited partnership should be a corporation, not an individual. Your accounting and tax adviser can tell you if a limited partnership is right for your small business or large enterprise.

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