One of the cringing phrases for small business is open for business. Most don’t understand what that means. In fact, that’s why we prevail from a legal standpoint because their issues are very driven by statutes and regulations both at the state level, federal, and local government.

What we try to do with our clients is look at the business, see how they wish to run it, look at the other individuals that will play some role in that business, and then, proceed to talk to them about the form of the business. It can be sole proprietor, limited liability company, partnerships, corporations, professional services, and if there’s no liability but by the nature of the work that they’re doing we set them up as a sole proprietor if they’re just one individual. If there’s two then it becomes a partnership but the key there is, they don’t have the liability exposure in their business.

When liability becomes an issue then we look at limited liability companies. And it used to be before limited liability companies came into play the only route they could go was corporation. And that was a gotcha, particularly to small business because if it’s a corporation they have to have a board of directors. They have to have quarterly meetings. They have to have the annual meeting. Where with a limited liability companies they don’t have to do any of that. But the key there and what most small business owners don’t understand is they have to create what we call an operating agreement. In that agreement it talks about what they’re trying to do, it talks about how it’s going to be managed, it talks about members that they may have, and so forth.

And so, if they wish to get a loan from a bank that’s what the first thing they’re going to ask for, where’s your operating agreement. Unfortunately, most small businesses don’t have one. And so, when there’s issues that come up, we have to do it in the back end and it oftentimes instead of having a document that they wish to live by they have to go to state statutes and look at the limited liability company statute to determine what the states going to do for them.