A Growing Business Needs Legal Advice

A Growing Business Needs Legal Advice

A Growing Business Needs Legal Advice

The owner of a growing business faces new questions because he or she may be hiring employees and may have more customers than when the business began.  A growing business has the advantage of greater prosperity for the owner and the disadvantage of greater possibility for lawsuit from employees, customers, and competitors. Usually an owner begins business as a sole proprietor (also known as sole proprietorship). There comes a time when the sole proprietorship should be converted into an organized business entity like a corporation, limited liability company, or a limited partnership.

How do you know when it is time for you to convert your sole proprietorship into a corporation, limited liability company, or a limited partnership? Only you can decide when the time is right. I recommend considering the following factors to discuss with your business attorney when thinking about whether to convert your sole proprietorship into a business entity:

1. Number of owners, partners, or investors;

2. Amount of gross revenue earned by the business;

3. Likelihood of inviting additional partners or investors;

4. Likelihood of risk in the business for financial loss or personal injury;

5. Intensity of risk when financial loss or personal injury occurs;

6. Sensitivity to federal income taxes;

7. Whether the business owners own real estate other than their homesteads;

8. Whether the business owners have cash assets that exceed $30,000;

9. Whether the business will someday “go public”; and

10. Level of concern that one or more partners in the business might get divorced, disabled, go bankrupt for other reasons, or die.

Answering these ten questions with your business law attorney will help you decide when the best time will be for you to convert your sole proprietorship into a corporation, limited liability company, or a limited partnership.

7 comments on “A Growing Business Needs Legal Advice

  1. Eddie Callender, Jr.
    March 17, 2014 at 1:06 am #

    Mr. Marquardt: You have provided us small business owners with a full buffet for thought. Thank you for your interest in helping us protect our business and our assets.

  2. Dawn Snow, CPP
    March 17, 2014 at 1:16 am #

    Mr. Marquardt,
    Thanks for breaking down this confusing issue into digestible chunks. Some great advice.

  3. Richard Lopez
    March 17, 2014 at 4:16 pm #

    This is necessary counsel for any maturing business hoping to both limit risk and avoid future litigation. Thanks! Mr. Marquardt, for the insight!

  4. Mark Hudson
    March 17, 2014 at 10:12 pm #

    Awesome Guidance! As a small business owner you get caught up in daily operations and forget or put off important tasks like this. This is great information on how to protect yourself as your business grows. Be sure to talk to Todd and find out more.

  5. Gina Hobbs
    March 18, 2014 at 1:33 am #

    Mr. Marquardt,
    I can always count on you and your teams expertise for insightful business advice to help small business owners, like myself, to protect what we have worked hard to build.

  6. Becky
    March 19, 2014 at 3:55 pm #

    Todd, Thnks for your expertise. I really learned so much and how to protect not only my business but Stan’s as well. Such a pleasure to work with you.

  7. Faye Thompson
    May 8, 2014 at 8:37 pm #

    Great advice. Give Mr. Marquardt a call for additional informational.

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