Business law

If you are starting a business or have been in business for some time, there are always legal issues that come into play.  Many essential components involved in running a business involve legal issues, such as, choosing an available name, selecting the right business form, entering into business contracts, buying or leasing property, doing business online, hiring employees, paying taxes, obtaining the proper insurance, and obtaining the necessary business permits or licenses.  Failing to evaluate or understand these issues can expose your business (and, possibly your personal assets) to lawsuits for trademark infringement, fraud, ownership disputes, unfair business practices, breach of contract, or personal injury, among other legal claims. 
In many instances, business owners start and continue to run businesses without considering the legal implications of their actions.  And, often, they do not realize they have exposed themselves to liability until it’s too late.  That is why it is so important to seek legal assistance from an attorney who can carefully consider the unique needs of your business and help you formulate the right business strategy from the start.
One of the most important business decisions, for example, selecting the right business form, can have severe financial or legal consequences if not chosen carefully.  There are several different business forms to choose from: sole proprietorships, corporations (C corps, S corps, professional corps, personal service corps), general partnerships, limited partnerships, limited liability partnerships, limited liability companies, joint ventures, business trusts, and not-for-profits.  Here is a brief overview of the most common entities:

  1. Sole Proprietorship - This is the most common form of business organization and is easy to form.  It has only one owner who is not separate from the business.  Although this is easy to form and run, a major disadvantage is that the owner has no protection from liability.  He/she is responsible for everything, including having personal liability for all financial obligations.
  2. General Partnership - A partnership involves two or more people who agree to share in the profits or losses of a business. A primary advantage is that the partnership does not bear the tax burden. Taxes are "passed through" to the partners to report on their individual income tax returns. A primary disadvantage is liability-each partner is personally liable for the financial obligations of the business.  However, the creation of a Limited Partnership or Limited Liability Partnership can minimize personal liability. 
  3. Limited Liability Company - This type of business entity allows flexibility.  It can have one owner (called a “member”) or more and it takes advantage of the benefits of both the corporation and partnership forms of business.  The profits and losses can be passed through to the owners without taxation of the business itself and the owners are shielded from personal liability.
  4. C Corporation - This is a separate legal entity from the business owners.  It has a specific structure that has shareholders, directors and officers who have limited personal liability.  It also can continue to exist in perpetuity; it does not rely on keeping the same officers or directors.  And, it has unlimited growth potential through the sale of its stock, as well as offering tax-deductible business expenses (including the salaries of its officers).  Some disadvantages are that it has strict record-keeping requirements and it is subject to “double taxation.” A corporation’s profits are taxed when earned and taxed again when distributed as shareholders' dividends.  Income splitting to lower tax liability is allowed.  And, forming an S corporation avoids the double taxation, by allowing income or losses to be passed through on individual tax returns, similar to a partnership. 
At West L.A. Law, P.C., we examine the advantages and disadvantages of the different entities based on your business and personal needs, such as exposure to personal liability, future needs and goals, number of owners, available capital or credit, tax consequences, and the expense and work involved in forming and maintaining the entity.   Then we advise you as to the best option and can do the legal work necessary to create or modify (if possible) the entity you choose. 

As you can see, there are many considerations involved in just this one legal issue.  And, every business will have to face many more.  Doing business will involve legal issues.  It cannot be avoided.  However, preparing and protecting your business (and yourself) puts you in a better position to manage them and minimize any potential liability. 

West L.A. Law, P.C. can help you whether you’re just starting your business or have encountered a legal dispute in running your business.  So, please contact us for a consultation.