Business Formation

If you’re starting a business, it’s essential that you organize and register your company in the manner that best fits its ownership structure and size, while taking into consideration both tax and potential civil liabilities. Our knowledgeable attorneys work closely with business owners to learn about their goals and needs, and then guide them through the formation and registration process.  Massachusetts business owners have a variety of entity types to select from when organizing the legal structure of their venture, including: 

• Sole Proprietorship: As suggested by its name, this type of entity may only be used when there are no co-owners. Even though sole proprietorships require little to no legal work to form, many municipalities still require residents who are doing business under a separate trade name to formally register the “d/b/a”. With this entity, the owner is personally liable for the debts and obligations of the business, and the proprietorship is not a separate entity for tax purposes. This can, however, be the most appropriate option in certain circumstances. 
• Limited Liability Partnership (“LLP”): While a general partnership can arise under operation of law, it offers no liability protection for its owners. A limited liability partnership, however, offers the advantage of greater protection for its partners from claims and lawsuits. Only the partnership is generally liable for the debts, obligations, and liabilities of the business (although partners can still be individually liable for their own wrongful acts). An LLP, like any partnership, should have a written partnership agreement governing the operation of the business. Once that is prepared and the entity is registered, the administrative requirements of operating an LLP are minimal.
• Limited Liability Company (“LLC”): This entity, which can be formed with one or more members, provides limited liability for its shareholders, as well as the flow-through tax advantages of a partnership. Like a partnership, an LLC should have a written operating agreement that addresses matters such as capitalization and division of profits and losses.
• Corporation: In a corporation, the business must keep separate financial records and file separate tax returns. Because the corporation is a separate entity, its shareholders are typically not personally liable for the debts and liabilities of the business. There are also different subcategories of corporations, including “C” corporations and “S” corporations. A C Corp. is the more traditional type of corporation which is taxed as an entity, while an S Corp. provides the same flow-through tax benefits of a partnership or LLC. 

Using an attorney to assist with setting up your business is a wise investment that can provide long-term cost savings by preventing unnecessary tax and legal liabilities. If you need help with forming your business, please contact our office to schedule a consultation.