Business Formation

Being an entrepreneur requires managing multiple elements of business creation, one of the most important being the formation of a legal business structure. Business formation and entity creation are critical steps that you will need to take on the pathway to creating a successful, profitable operation.

Business formation is not only one of the first and most critical steps for new business owners, but also one of the most sensitive and complicated. There are multiple types of business entities that a prospective owner could form, each with numerous benefits and consequences. And business formation doesn’t end with the creation of a legal structure – property and lease agreements, business naming and related rights, employee contracts, tax implications, and contract law are all things that your business will likely encounter early on as well.

The business formation attorneys at the law office of Davis, Bingham, Hudson & Buckner, P.C. are prepared to represent you during each step of the business formation process. We have extensive knowledge of this area of the law, and we understand the complexities involved with business formation, the types of entities available, and the advantages and disadvantages of each. Our firm has over four decades of business law experience, and we put our in-depth experience to work to ensure that your best interests are fully protected.

Legal Business Structures and Entity Types

 Deciding on the type of business entity you want to create is one of the earliest steps that you will need to take. Our lawyers can help you understand the various entity structures, the benefits and drawbacks of each, and which type of business formation is most germane to your business objectives. We can also handle all paperwork and legal documentation required for the formation of the business. The five types of business structures that are legally recognized by the IRS include:

• Limited Liability Companies (LLCs). An LLC is one of the most common business structures, and one of the most desirable. This entity structure offers protection for owners from personal liability in a wide range of circumstances, including protection from liability for the business’ debts in many situations. This is also one of the least complex business structures, and its straightforward nature makes it an attractive option for those starting a business. Advantages of an LLC include pass-through taxes, legal protections, and even enhanced credibility – outside parties tend to look more favorably on businesses that hold the formal ‘LLC’ registration.

• Partnerships. A partnership is a business type that is formed between two or more partners, with each involved party contributing labor, skills, money, or another resource or asset to the business. In exchange, each business partner shares in the profits and losses of the business. The benefits of a partnership include ease in taxation (each partner will report profits and losses as part of their own tax return rather than having to file a separate business tax return), ease in establishing the entity, and shared, rather than sole, liability. The downsides of this type of business formation include more vulnerability in terms of liability and the high potential for business disputes.

• S Corporations. In an S corporation, all of the profits and losses of a business are passed on directly to the shareholders of a company, which means that the business is not required to pay a corporate tax on business profits. In order to qualify as an S corporation, a business must meet certain criteria, including management by shareholders (who must be individuals, trusts, or estates and cannot be partnerships or corporations), having 100 or fewer shareholders, having only one class of stock, and having a domestic location.

• Sole Proprietorships. A sole proprietorship is the most common type of business for those who are just starting out, do not have a board, shareholders, or a partner, and have few or no employees. In a sole proprietorship, the business’ profits and losses are directly tied to the individual owner’s profits and losses. These types of business owners do not have limited liability, and must pay an income tax that accounts for business profits, the self-employment tax, and quarterly estimated taxes.

• Corporations. A corporation is the most complex type of business structure, and the one that requires the most legal counsel and guidance to form. In a corporation, the business is separate and distinct from each of its owners, which means that owners are not liable for the business’ actions, financial or otherwise. In fact, corporations, in the eyes of the law, operate as individuals, and maintain the right or responsibility to buy and sell property, borrow money, pursue and be named in litigation, pay taxes, and more.

Other Elements of Business Formation

Once you have determined the type of business entity and legal structure that is appropriate, our lawyers can assist in the formal process of registering your business. We can also assist you with other elements of the business formation process, including:

• Choosing a business name;
• Creating a financial plan;
• Acquiring real property;
• Entering a lease agreement;
• Obtaining a small business loan;
• Acquiring any relevant licenses and permits; and
• Hiring employees and drafting employee contracts.

Our team is available to serve as general counsel for your business during the formation process and beyond.

Contact Our Alabama Business Formation Attorneys Today

At the offices of Davis, Bingham, Hudson & Buckner, P.C., we cannot stress enough the importance of hiring a skilled business formation attorney when your business is in the embryonic stages. Choosing the appropriate legal business structure is critical for your business’ future success, and a misstep along the way can be costly and set you back both financially and in several other ways as well.

When you need legal counsel to protect your business from legal or financial ramifications that would otherwise be avoidable, you need our experienced Alabama business formation lawyers. Our practice has been in operation for over 40 years, and our lawyers have aided business big and small with entity formation, operation, and related issues.

For your consultation with our business formation team, please call our office at 334-821-1908, email us directly, or fill out the secure and confidential contact form on our website and we will return your inquiry shortly. You can also visit our Auburn law office in person at your convenience.