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Business Counsel

Success in business is rarely an accident. Making intentional selections about your business, including a carefully chosen business entity, is the first step toward establishing yourself in the marketplace as a serious player. We can help start-up businesses avoid many of the common pitfalls that account for the high percentage of business failures. Whether yours is a new start-up business, a business ready to expand, or a business facing a legal problem, we are waiting for the opportunity to serve you. Think of DeWitt Law as your off-site "in-house counsel" without the in-house price. We can help you and your business navigate legal issues, including:


Choice of Entity- Are your personal assets exposed?

Choosing your entity means choosing the organizational structure of your business. For example, you might choose sole proprietorship over incorporation. Choosing the right entity for your business can be like putting on your business pants. You don't leave home without your pants because you don't want to expose your personal assets, right? Choosing the right pants for your business can keep your personal assets from being exposed as well.

You can do business in North Carolina as a sole proprietor, a partnership, a Limited Liability Company or a Corporation. Your choice of entity for your business depends upon the nature of your business, your exposure to risk, the anticipated growth of your business, the number of employees you have, and your desired tax treatment. Selecting the best entity for your business venture must follow a careful review of these factors. The advice of an attorney and accountant with expertise in business formation and tax is fundamental for choosing your entity.

Sole proprietorship

Sole proprietorship is the simplest form of doing business. A sole proprietorship is not an independent entity, but rather an individual doing business on his/her own behalf. The primary downside to operating as a sole proprietor is the lack of limited liability. If the business is unable to pay its debts or gets sued and becomes liable for a judgment in excess of insurance coverage, the owner is individually responsible for that debt and the owner's personal assets are exposed to the collection efforts of the judgment holder.

General Partnership

A partnership is created when two or more people or entities join in a business for profit. Partnerships are easily formed, sometimes even by accident. LLCs and corporations can enter into partnerships. Partnerships are often attractive because of the pass-through tax treatment they receive- that is, the profits and losses of the partnership pass through the business and are reported on the partners' individual tax returns, to be assessed at individual tax rates. Like sole proprietorships, partnerships do not limit the partners' personal liability, so if the partnership owes a debt, the partners are personally liable for the debt. Also, there is unlimited liability between partners, so all partners are individually liable for the acts of another. For these reasons, partnerships are often best suited for joint ventures between entities that already enjoy limited liability, like LLCs or corporations. General partnerships may also be attractive where there is low risk for exposure to liability. Businesses exposed to significant liability such as risk of injury to others should choose a limited liability entity- an LLC or corporation.

Corporations

The corporation is the classic business entity that protects the owners from personal liability. Corporations are creatures of statute specifically designed to encourage business owners to enter the marketplace by limiting the risk to the owner's investment if the business fails, absent proof of fraud or corporate impropriety. Corporations also provide an efficient vehicle for ownership by many individuals, generally called stockholders. Selling partial interest ("shares") of the corporation to individuals allows the corporation to raise capital without involving the stockholders in management or other business functions.

Tax treatment is an important issue for corporations. For small businesses that meet certain criteria and have 75 or fewer stockholders, an S-corp may be attractive because it receives pass-through tax treatment of profits and losses similar to a partnership. For large business ventures, a C-corp is preferred due to its ability to issue unlimited shares. However, a C-corp files its own tax return, paying tax based on the corporation's profits and losses. The stockholders also report profits and losses they realize from dividends paid by the corporation, resulting in double-taxation.

Limited Liability Company

Limited Liability Companies, or LLCs, combine some of the characteristics of both partnerships and corporations, making them very attractive business vehicles for many ventures. LLCs provide the owners with limited liability, but allow pass-through taxation. The IRS permits some LLCs to elect tax treatment as an S-corp. If doing so will generate tax benefits for your business, you will need the skilled assistance of an accountant and attorney to make this election.

LLCs are owned by "members." The members may or may not be involved in management or other business functions. LLCs generally require fewer formalities than corporations, making them ideal for small or closely held business ventures. LLCs can be formed for professionals like lawyers and accountants, and these are generally indicated by the designation "PLLC."

Entity Formation- Get started in the right direction

Whether any formal steps need to be taken to set up your business entity depends upon the nature of the entity you choose. A sole proprietorship requires no formal filing with any government agency. Formation of a partnership does not require registration, but the partnership terms are generally reduced to writing in a partnership agreement. LLCs and corporations require registration with the Secretary of State.

Partnership agreements are frequently long, complicated contracts designed to address as many possible contingencies as possible. As contracts, they permit the parties to adopt any terms they choose unless the terms are illegal or violate public policy. In the absence of a partnership agreement, partnerships are governed by the Uniform Partnership Act, G.S. 59-31 et seq. At DeWitt Law, we strongly encourage customized partnership agreements tailor-made to meet the needs of your venture.

Formation of an LLC requires the creator to file Articles of Organization with the Secretary of State and pay a filing fee. This document must show the name of the LLC, the name and address of the registered agent, the name and address of the organizer and a statement regarding how the LLC will be managed. LLCs also adopt an Operating Agreement that sets out the management responsibilities for the company, membership interests, transfer of interests, etc. If no operating agreement is created, the duties and obligations of members and managers, including dissolution, will be governed by statute. At DeWitt Law, we offer operating agreements from economical "one size fits most" models to highly customized, one-of-a-kind agreements designed to meet the specific requirements and challenges of your business.

All of these requirements as well as other steps, like the procurement of a tax identification number for the LLC, maintenance of the company minute book, obtaining permits or licenses, procurement of a company seal and the annual report filing requirement can be handled by our office, permitting you to focus your efforts on making your business a success.

Like LLCs, creating a corporation requires registration of the corporation with the Secretary of State. Articles of Incorporation are created that show the name of the company, the name and address of the registered agent, the name and address of the incorporator, and the number of shares and class of stock the company can issue.

The day-to-day functioning of the corporation will be governed by a set of rules called "by-laws." Like operating agreements, by-laws are available in "one-size-fits-most" models or highly customized rules drafted around your business's particular needs. Proper management of a corporation requires the careful observance of more formalities than an LLC. The company must manage organizational meetings, obtain a tax identification number, develop a proper record-keeping system, file the appropriate notices with the IRS and more. DeWitt Law is available to manage these and all other requirements to ensure your company complies with state and federal regulations.

Contracts creation, negotiation and enforcement- An ounce of prevention…

Businesses constantly enter into and out of contractual obligations. DeWitt Law stands ready to advise our business clients regarding all aspects of their contracts with others, from customers to lenders and everything in between. We are better able to protect our clients if we have an opportunity to review agreements before the agreement is effective. We are also ready and willing to prosecute or defend or clients in litigation over contractual disputes. DeWitt Law is also available to prepare written contracts of any kind needed by your business. All contracts, regardless how seemingly insignificant or benign, are worth putting into writing. Many agreements cannot be enforced unless they are in writing. Having a clear understanding with the other contracting party, spelled out in writing with the advice of counsel, is the most effective method of ensuring you never have a disagreement that could result in costly litigation. Truly, an ounce of prevention is worth a pound of cure.

Leases- Look before you lease

Leases are such an important contract for most businesses that they warrant discussion separate from other contracts. Commercial lease agreements (unlike residential lease agreements) permit the parties to agree to any terms they want unless the terms are illegal or violate public policy. As a result, commercial lease agreements can be complex and creative. Properly drafted one-of-a-kind leases are crucial to avoid unforeseen problems, and to ensure that the intent and obligations of the parties can be clearly ascertained. The liability taken on by entering into a commercial lease that goes bad is often sufficient to swamp a start-up business, so at DeWitt Law these agreements are carefully drafted or scrutinized to ensure our client has a complete and accurate understanding of his/her position.

Administrative and Regulatory Compliance- The bureaucratic quagmire

We've never heard a businessperson say, "I just don't have enough rules to follow." The level of regulation placed on businesses is intense. Taxes, licensing, insurance, signage, materials storage, zoning- the list goes on and on. At DeWitt Law you can depend on us not only to identify the requirements that apply to your business, but to also ensure you are in compliance.

Representing out-of-state entities- Foreign isn't foreign to us

The "business community" no longer refers to those companies in your town. Nationalization and globalization of the business community is a reality. Whether your situation calls for legal advice in dealing with foreign entities, or registering your foreign entity locally so you can do business, DeWitt Law stands ready to assist. In the event of an interstate or international legal problem, we are prepared to prosecute or defend our clients' interests.

Miscellaneous business related legal issues- Your off-site "in-house" counsel

At DeWitt Law our availability to your business does not stop until your needs are met. If one of your employees has an accident in a company vehicle, we're here for you. If a storm levels your facility and you require legal action to recover, we'll be right beside you. If a customer, vendor, employee, or anyone else files a lawsuit against your company, you can count on us. We are your off-site "in-house" counsel.



To see if we can help you with your business, contact our office via our contact page or call us at 919.338.8200.