Protecting Your Assets and the Power of the Law: Your Dream
You have a great new business opportunity that will make you a profit of $50,000.00. You have not registered your business, but you are so anxious to lock in the deal, you enter into a contract with the client using the business name you planned on registering. One month in, the other party stops performing and you move to enforce the contract. To your surprise, you receive a response from the other party’s attorney informing you that because you were not a registered entity upon the signing of the contract, the contract is void. You have now lost $5,000.00 on the deal, significantly more than it would have cost you to obtain legal representation to register your company.
Your business is the embodiment of your dream, it is something special and something personal and often is a pivotal part of your professional career. In order to adequately protect that dream, every business owner should invest in the adequate legal structure of their business. Business owners can do this by developing a business plan and registering as a corporate entity.
The Business Plan. The foundation of a successful business is a well thought out business plan. Without a business plan, an action directive to achieve a goal, a business dream will forever remain just a dream. A business plan is a living document, meaning it will always be in a draft format, forever changing and becoming more refined. What that means for business owners is you don’t have to know everything to start creating a business plan. In fact, it is never too soon to begin drafting your business plan. And for those business owners already operating, it is never too late. What a business plan does is force ideas into a cohesive and linear direction, it will expose weaknesses, and require research and specification. Just like you would not attempt to drive to an unfamiliar location without consulting a map, you should not embark on the journey of owning a business without a business plan.
Corporate Formation. There are several common questions business owners ask about corporate formation: Why incorporate? How should I incorporate? Can I do it myself?
You incorporate to separate your personal assets/ liabilities (aka your house and/or car) from your business assets/liabilities (aka work location or services). That way when a business deal goes bad, your house cannot be taken. You also incorporate to create a legally existing entity. You cannot legally operate a business without first registering the business. Registration brings your business into “physical” existence, and creates a real entity with which enforceable contracts can be made.
Deciding which corporate entity is right for a business is complex. There are several corporate entity
types and many more factors that go into determining which formation is right for your business model
(based off your business plan). Each corporate entity has different operational requirements,
governmental requirements, and tax implications. The right corporate entity will vary per business.
The answer to whether a business owner can incorporate themselves is simple: yes. There are a lot of things a business owner can do. The more important question is should a business owner do it themselves? Often, that answer is not so simple. Corporate formation is a fundamental aspect of a business. Although the actual application submission is relatively simple, the organizational documents required to sustain the corporate entity once registered is not simple. In fact it is quite complex and it will need continual refinement as a business grows and/or expands. Conclusively, yes you can incorporate on your own but it would not be legally advisable.
Investing in the proper resources into your business not only protects your business, it protects your dreams. Yes it takes some time and money, but the success of any business depends on it. And often, business owners find that either the initial costs of seeking legal services to properly form their business is much less than anticipated or they find that the cost of not doing so is far more expensive. As such, take the first step in protecting your dreams and consult a corporate attorney.
NOTE: Often business owners come to me and say they are worried that they don’t have the capital to pay for the professional services necessary to begin their business. I explain that starting a business is analogous to building a house. When you buy materials to build a house you could choose to purchase glue, a less costly and temporary adhesive, to connect the structural beams, instead of buying a more expensive and permanent material like nails. And true, you may actually succeed in “building” the house and it may even appear well put together. But once you add the dry wall and the insulation, the weight of what the structure must support can become too much. And when a strong wind blows, the house that appeared so solid, easily collapses. A business is similar in that its long term durability and success is dependent on the strength of the foundational corporate structure. As such, if you cannot afford to buy nails, you would be better off to save until you can. Buying glue initially may appear to be a feasible alternative but it will ultimately just waste time and money. For further information please contact Amber M. Johns, partner and corporate attorney at Jackson Corporate Law Offices, P.C., [email protected].
LEGAL DISLCAIMER: The information provided in this article does not constitute legal advice and is not intended by either the author, Amber M. Johns, or Jackson Corporate Law Offices, P.C. to do so. Persons in need of legal advice related to a subject discussed in this article should contact a lawyer who is qualified to practice in that area of law. The articles are the property of Amber M. Johns and Jackson Corporate Law Offices, P.C. The placement of articles is not meant as an endorsement of Amber M. Johns and/or Jackson Corporate Law Offices, P.C. for legal representation. This is article is presented for current events and public discussion purposes only. In seeking legal counsel in any of the areas discussed in the article, consumers should carefully select the professionals they choose to represent them in such legal matters and are solely responsible for this decision. The information, views and opinions expressed in the articles are those of Amber M. Johns and Jackson Corporate Law Offices, P.C.
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