We were recently contacted by a client to set up an entity for his new business. After our meeting, he said, “Wow that seems easy. I saw these forms online, too! I can do it myself.”
Fast forward six months and the same client came back wanting to transfer his shares to the Corporation he set up with an online form and move on. His Corporation had no Shareholders Agreement and he had failed to properly advertise the Corporation. There was nothing in writing that determined his rights or the rights of the other shareholders in the Corporation. This led to lawyers on both sides of the dispute and a lot of money spent needlessly.
This is just one example illustrating why it is crucial to have an attorney and an accountant involved in your business formation. An accountant should be involved to best advise you regarding the tax consequences of the different types of business entities and to work with your attorney to create the right entity for your needs.
If you create a Limited Liability Company (“LLC”) or a Corporation, you should have an Operating Agreement or a Shareholder’s Agreement that is compliant with Pennsylvania law. Oftentimes, online forms are generic and don’t speak to the specific current and future needs of your business. You should think ahead in terms of what to do if a member or a shareholder wants to leave the business or if a dispute arises. You also want to accommodate the transfer of a member’s or shareholder’s interest in the LLC or Corporation. What will you do if a member or shareholder dies?
No two businesses are the same. Your business should not operate under a cookie cutter online form. Contact experienced business lawyers to ensure the business entity and agreements address your needs and protect your rights and your business.