Create your business with purpose, before you start selling.
A business is like a marriage. The happy ones tend to be the ones where level-headed people did a little simple planning before taking the plunge. Business divorce, like family divorce, can be just as emotional and messy. The good news is that the law favors business planning — they will enforce whatever contracts or agreements you make with your partner. A sound operating agreement or partnership agreement can save a great deal of angst and expense if you and your partner decide to go separate ways.
This is not a do-it-yourself project.
You’re familiar with the websites that allow you to create “custom” legal documents online after filling out a questionnaire. In a few minutes, the website will produce an official-looking document that appears to meet your needs.
Question: What’s the difference between the legal document websites and a business planning attorney?
Answer: The websites sell a product. I sell a service.
If you are building a new house, are you going to hire an electrician to wire up the house, or are you going to look up videos on the internet to try to figure out how to wire the house yourself? Most people recognize that there is a risk of fire, loss, or death from improper wiring. Common sense dictates that even though you might be able to do the job yourself, you hire the electrician to ensure that everything is done properly.
For the same reason, you should trust your business planning and entity formation to a licensed and experienced professional who can recognize all the risk points and craft the arrangements that you need to ensure that your house doesn’t burn down.
Here’s an example of how things can go wrong.
It’s a little-known fact that both the IRS and civil courts may very well find that if you work closely enough in association with another person in a similar business, they’ll deem you a partnership without you ever intending to be. That means that that other “partner” — who you never intended to be part of the business — might be able to walk away with 50% of your business!
The only sure way to prevent this kind of misinterpretation of your activities is to create a robust plan and contract–even if it’s just between you and your business, and no one else. Courts make these kinds of “mistakes” all the time when busy business people fail to reduce their business relations to a written contract.
Do things the right way, and come see Carson Law Firm before you set off to conquer the world with your business. An ounce of prevention is worth a pound of cure.