I’m sure that if you Google this topic you’ll get about 7,000 blogs and websites. It is not an easy question to answer directly. The point of this essay is to encourage you to at least undertake the effort to educate yourself on the options before making a decision, for that is the hallmark of a sophisticated businessperson. As you read on, bear the adage in mind, “Those who fail to plan, plan to fail.”
By way of background, historically people entered into business ventures through partnerships. Larger ventures, however, required a more efficient vehicle and the corporation was born, starting with the English East India Company on December 31, 1600. More recently and again in response to ever-changing economic and business conditions, the Florida Legislature created the Limited Liability Company. The LLC is something of a hybrid in that is looks more like a corporation, but acts like a partnership in some circumstances. The one piece missing from the proverbial puzzle are default provisions in the LLC Statutes that have long existed in the corporate and partnership laws. They are in the works, but will likely take several more legislative sessions to enact them. In the interim, it falls to the incorporators to fill in the blanks and that is where an operating agreement and competent legal counsel come in.
If you are contemplating entering into a business venture either on your own or with “partners”, after you define your business plan, one of your first steps should be to seek qualified and competent legal counsel. Cutting corners to save a few dollars will not only come back to haunt you later, but is akin to buying a Ferrari without seats and just using folding chairs. You wouldn’t do that with a Ferrari, so why would you do it with your fledgling business that you plan to grow into a profitable venture ?! Again, failing to plan, is planning to fail.
But Dave, why can’t I just go out on the Internet and download some forms or use other people’s documents. To that I say, why go to a doctor; why not just take other people’s prescription medicine ?! The structure of a legal entity must be tailored to your requirements and goals. Maybe a corporation is better for your business plan as opposed to an LLC or a partnership or even a limited liability limited partnership. Only qualified and experienced legal counsel can help you to determine what entity is best for your business. Equally so, a one-size-fits-all document, such as an LLC operating agreement downloaded from the Internet, will most likely not accommodate the unique and specific circumstances of your business plan. Trying to save money by stretching a generic document over your unique business may come back to haunt you later and will very likely cost you much more money in legal fees to fix a problem that you inadvertently created.
Businesses are fluid and dynamic; they adapt to a changing business climate. Likewise, the structure of a business entity can be changed to adapt as necessary as can the agreements that support that entity, like shareholder agreements or operating agreements. However, failing to plan is planning to fail. Not properly documenting your business deprives your business of a foundation from which to react and change.
In the initial stages of creating your business enterprise, even before you incorporate, I encourage you to discuss your business plan with qualified legal counsel. The Florida Bar identifies the expertise and experience of attorneys in specific fields by recognizing them with Board Certification. As with everything, you get what you pay for. If you want the best advice, go to a Board Certified attorney.
For more information please visit http://www.davidsteinfeld.com