Starting a business in Michigan is an exciting venture, but entrepreneurs looking for long-term success must keep the less exciting things in mind. Things like the legal structure of the business, contract review, and legal compliance may not seem as exciting as marketing product lines and service options but they are an important part of a successful business. Developing a plan to handle these details early on can help to set a solid foundation for your business.
Legal question #1: How do I choose the right business entity?
One of the first and most important decisions you will make as a new business owner is selecting the appropriate legal structure for your company. Each type of business entity offers different benefits and legal protections:
- Sole Proprietorship: Simple to establish and gives you complete control.
- Limited Liability Company (LLC): Offers flexibility and protects your personal assets from business debts.
- Corporation (S or C type): Suitable for businesses that plan to raise investment money and scale while also providing liability protection. S corporations pass profits and losses through to shareholders’ personal tax returns, potentially avoiding double taxation.
This choice is important and will vary depending on the business’ specific needs because it will affect liability, tax obligations, and potential growth.
It is also important to note that different structures have varied requirements for paperwork, record-keeping, and compliance. Choosing the right entity requires a careful analysis of these factors relative to your business goals and resources.
Legal question #2: What should I know when it comes to putting together contracts?
Contracts are the backbone of a secure business. They define the relationships and terms with partners, employees, and customers. A well-drafted contract can provide clarity in business relationships with clearly stated terms to help prevent misunderstandings and disputes. It can also provide a legal basis for enforcing terms if disputes occur.
Having solid contracts in place can save you from future legal headaches and ensure all parties are on the same page.
Is there anything else I should know?
You do not have to go through this alone. As any savvy business leader knows, sometimes the key to success is knowing when to delegate. When it comes to starting a business, the legalities are often best dealt with by a business law attorney. This professional can deal with a variety of issues on your behalf, including:
- Entity formation: A business attorney can help you choose the best structure for your business and handle the legalities of setting it up.
- Contract drafting and review: An attorney will help to better ensure that your contracts are comprehensive, clear, and legally binding, tailored to your specific business needs.
- Compliance and regulations: They can guide you through the maze of state and federal regulations to better ensure your business complies with all legal requirements, which helps avoid costly penalties and legal issues.
- Protection from liabilities: By setting up the right business structure and proactive legal planning, an attorney can help minimize the risks associated with business liabilities.
Starting a business in Michigan involves several critical legal steps that can significantly impact its success and sustainability. By working with the right team of professionals, you can better ensure a firm foundation and a fruitful future for your business.