One of the most enjoyable aspects of my law practice is being able to speak to newly minted entrepreneurs at events sponsored by our local U.S. Small Business Administration (SBA). At these events, I witness first-hand the strong commitment of business owners who put in the time and effort to attend classes on a multitude of business-related topics including my favorite, Business Law Essentials. The bottom line – these are business owners who understand that they don’t know everything they need to know. And, rather than taking shortcuts and simply resorting to a Google search, they’ve chosen a more thoughtful and thorough approach to obtaining needed information.
These business owners tend to be quite concerned about how their business will be set up, and ask many questions in this regard. Their concerns are well founded. The business structure they chose is, in essence, the house that their business lives in. Many business owners tend to say, “I want an LLC.” But, if you ask them to tell you three ways in which an LLC differs from a corporation, they couldn’t answer that question. It’s the equivalent to a potential homeowner saying, “I want to buy a condominium,” when that person has no idea that this type of home ownership involves adhering to many rules and regulations, including the payment of ongoing homeowners’ dues. And, similarly, once making the decision about what type of business entity is desired, some business owners simply go online to form that entity. Again using home ownership as an analogy, forming a business online is the equivalent of buying a plot of land and then asking your 17-year old daughter to design, obtain necessary permitting, and then construct a house for you from scratch during her summer vacation. Most 17-year olds would not have the wherewithal, much less the background and knowledge, to successfully complete this task; just like most business owners lack the background and knowledge to achieve success in constructing their business entity on their own.
I don’t know about you, but my house is a work in progress. I recently got through tearing out aging carpet in a spare bedroom and replacing it with (hopefully!) indestructible laminate flooring. And, I have another big home improvement project in the works for 2018. However, oddly, many business owners seem to believe that they can form their business – and that’s it! Magically, there’s nothing else, forever, that will need be done. Not so fast. Just like the ongoing duties of home ownership involve various projects big and small, business ownership is much the same. Once you select and have your attorney create your business entity, that business entity needs to be maintained over time. The maintenance can come in the form of small upkeep projects, such as conducting your corporate annual meetings, as required by Washington law, and can also occasionally involve larger projects such as adding additional business owners or negotiating the exit of a business owner.
Do you have questions about setting up or maintaining your business entity? We’d be happy to help.
Photo credit: Maryland GovPics on Flickr