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Structure Your Business for Success

According to the U.S. Small Business Administration, hundreds of thousands of small businesses launch in the United States each year. Although many factors influence the success or failure of a business, appropriate structuring and organization is essential for the long-term health of your venture. From choosing the right form of incorporation to drafting critical documents like bylaws and operating agreements, getting the basics right the first time will put you on the path toward growth and prepare you for challenges ahead. Here, we’ll outline some of the main areas where legal counsel can help you build a solid foundation for your business.

SELECTING A CORPORATE TYPE

Choosing the right business structure is one of the first decisions you’ll need to make when launching your company, and it’s a highly important one. Corporations, general and limited partnerships, LLCs—each offer different advantages and potential drawbacks for taxation, fundraising, and liability (whether or not you’re personally liable for debts incurred by your business). For example, a limited partnership offers liability protection for the limited partners, usually in return for less control over the company, while a sole proprietorship (the default structure for doing business) offers no liability protection. A legal team can help you assess the key differences between the many available business form options, and how they can further the needs and goals of your business.

DRAFTING BYLAWS, OPERATING AGREEMENTS AND MORE

Every business needs to set out guidelines for how it will operate. for example Corporations use bylaws, LLCs use operating agreements, and partnerships use partnership agreements. These documents form the foundation of your business. They govern everything about your business, from stock issuances to how profits and losses will be shared among partners, as well as how your business will interact with other players and companies.

Bylaws and operating agreements establish your business and serve as a critical basis for other key functions, including protecting intellectual property. States have varying requirements for these documents, and an attorney can offer guidance to make sure that you are in full compliance. Moreover, if you will be seeking to raise or borrow funds, these foundational documents will be one of the first things an investor or lender will want to review.

CREATING FOUNDERS’ AND JOINT VENTURE AGREEMENTS

If you are starting a business with someone else, or planning on doing business with another company, it is important to clearly spell out responsibilities, rights, and privileges up front. Moving forward without robust agreements in place is a recipe for discord, arguments, and even lawsuits.

Founders’ documents cover all aspects of your relationship with co-founders and lay out a plan for the company you intend to start. With the assistance of legal counsel, you can create comprehensive founders’ documents—addressing capital contributions, ownership, management structures, contingencies for buyouts, along with other important matters—and ensure the highest level of institutional competency for fundraising and future growth.

Joint ventures allow you to cooperate with one or more other businesses to achieve a specific goal. They often involve the creation of a separate business entity with its own structure (corporation, partnership, LP, etc.) that all parties own. When entering into a joint venture, it’s essential to have a contract that outlines how each business will contribute to, manage, and share in ownership of the venture. Legal assistance can help you effectively delegate operational and financial responsibilities to minimize misunderstandings and maximize the potential for success.

SETH KAPLOWITZ
Seth has over 20 years of experience, as an attorney practicing at international law firms and as in-house counsel to an international private equity firm. Seth has advised on, structured and executed commercial transactions throughout North America, Europe, Asia, Africa and South America, both as a legal practitioner as well as an equity and debt holder.
CONTACT
seth@kaplowitzfirm.com
Direct - 1-212-547-8846