Business Lawyer Memphis TN
Forming a New Business
A business lawyer Memphis, TN clients recommend knows that making the decision to start your own company or small business will require you to come up with a clear course of action. You will want to be sure that you have all of your bases covered when it comes to developing a clear business plan. Starting a new business without consulting with the right people could land you in trouble down the road.
When forming a new business, consulting with a Memphis business lawyer will be important in making sure that you are putting the proper legal protections in place. Here are some common decisions people forming new businesses will need to take prior to opening up shop:
Put Together a Business Plan
You will want to have a clear plan in place before you start your business. The plan will outline the details of your business and should capture the initial starting phases and how you see it progressing or growing over time. Having a business plan is required if you are looking for financial backing from investors.
Choose a Business Type
There are primarily four types of businesses that a small business owner may choose from:
1. Partnership
2. Limited Liability Company (LLC)
3. Sole Proprietor
4. Corporation
This is where it may be beneficial to speak with a business lawyer Memphis, TN residents recommend. They will be able to help you by looking at your business and determining which business structure will fit best. They can also take into consideration the tax obligations, which can play a huge role depending on the one you choose.
Registering Your Business
You will want to take time in choosing the name of your business. This can be another area in which attorneys are helpful. You will want to make sure that the business name is not registered or trademarked by another person. This is a step people often miss when starting a small business. By failing to do so, you put yourself at risk of creating huge expenses down the road. This is especially true if you have gone through the process of purchasing items with your company logo.
If the name of your business is already in use, you risk the other business taking legal action. A business lawyer in Memphis, Tennessee can search trademarks to make sure that your logo and company name are not in use by another business. It will also be vital to make sure it is not similar to another person’s business as this could also land you in hot water. Once you are trademarked, an attorney can register your business.
Consider Hiring a Business Lawyer Memphis, TN CEOs Recommend
A number of business owners may circumvent using a business lawyer in Memphis, TN as a way to save money. Although avoiding the cost of attorney’s fees may seem attractive, by not hiring an attorney to advise you, you put yourself at risk for paying more money down the road.
The repercussions could be incredibly damaging for your business. Although there are a number of things you can do without an attorney, when starting a business, there are several key factors you should have them weigh in on:
- An attorney can reduce your risk of being held liable in the event of an accident.
- They can look at the business you have and make recommendations surrounding the type of business you should file your taxes under.
- Making sure that your intellectual property, such as patents, inventions, trademarks, and licensing, are protected.
An attorney can make sure that the appropriate contracts and agreements are drawn up correctly and in place prior to starting your business.
Understanding the initial phases for getting your small business up and running will prove to be helpful. Contacting a business lawyer Memphis, TN offers with experience in business law will play a vital role in making sure that you have legally protected yourself along the way.
As a Business lawyer in Memphis, TN at Patterson Bray has said before, no one should ever enter into a business partnership lightly. Before you and another person make this commitment, you should be certain that your business practices and ideologies are compatible. Unfortunately, it can be very difficult if you discover that your partner is doing things that you consider harmful to your business, it can lead to serious conflict. While it can be an appealing thought to resolve the conflict and return things to how they were before, your top priority should always be to protect yourself legally. If your partner is doing something illegal, distance yourself immediately. If the conflict is not quite that serious, here are some of your best options.
Your Options
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- Resolve the Conflict – The first step you should take is to try and resolve the conflict amicably. You are partners, after all, so take the time to talk with each other and try to come to a compromise. You might be surprised at what conflicts can be resolved if you simply give cooperation a try.
- Go to Arbitration – If talking with your partner does not work, a great option is arbitration. You can think of arbitration as a less intense lawsuit. Both you and your partner go before an arbitrator and each explain your side of things. The arbitrator is a professional who is trained to be unbiased and just. He or she will come to a decision about who is right. You and your partner can agree in advance to hold the arbitrator’s decision to be legally binding. This is an incredibly powerful tool for saving the relationship.
- Buy-Out Your Partner – If you think continuing the partnership is simply not an option, or if you have exhausted all the previous options, you might want to consider buying your partner out. If you follow this path, you will pay your partner for the amount of the business that he or she owns, and the business will be fully yours. Alternatively, you can request to be bought out.
- File a Lawsuit – If all else fails, you can also file a lawsuit against your partner. This is the most reasonable option if your partner has breached your contract or done something illegal. If you decide that filing a lawsuit is the best answer, your partnership will almost certainly be permanently ended. The very first thing you should do once you decide to file a lawsuit is to speak with a Business lawyer in Memphis, Tennessee.
- Resolve the Conflict – The first step you should take is to try and resolve the conflict amicably. You are partners, after all, so take the time to talk with each other and try to come to a compromise. You might be surprised at what conflicts can be resolved if you simply give cooperation a try.
We are experienced in consulting with clients to answer these questions, sometimes in partnership with a client’s other valuable and trusted partners (e.g. brokers, accountants, advisors).
Business Entity Formation
We counsel many clients in making the strategic decision of which form of business entity to use when starting or expanding a business. The selection of the most advantageous form of legal business entity involves counseling on many practical and legal considerations.
The most important issues to consider in selecting a form of business entity include, but are not limited to, the cost to establish and maintain the entity, taxation of the entity, continuity of existence, ability to transfer ownership interests, management, control and vulnerability to personal liability.
In general, the available forms for a business entity include the sole proprietorship, the general partnership, the limited partnership, the limited liability company, and the corporation. We highlight below some of the key features of each entity choice; however, the choice of entity and the best ownership structure within the entity often involves a variety of factors specific to a particular business. Our clients rely on our knowledge and experience with the nuances of each type of business structure and the application of the best structure to meet their business needs.
Let us help you form the business entity that will most closely meet the needs of your business.
Sole Proprietorship
The sole proprietorship is the simplest form of business entity. It is owned and managed by one person. The individual owner has the ultimate responsibility and authority for all decisions affecting the business and is personally liable for the debts and liabilities of the sole proprietorship. No legal formalities are necessary to create a sole proprietorship.
A sole proprietorship will terminate at the death of the individual owner. Estate planning documents for the sole proprietor may grant the heirs of the individual owner the right to continue the business.
Since a sole proprietor owns the business directly, the ownership interest may be transferred at any time, and all business income or loss is treated as the individual owner’s income or loss and taxed on his individual income tax return.
General Partnership
A general partnership is created by an oral or written agreement to share in the profits, losses, and assets of the partnership. The relations of the partners are governed by that agreement. In addition, a fiduciary relationship also exists between the partners. Each partner is personally liable for the debts, obligations and other liabilities of the partnership, which is a characteristic that makes this form of business entity undesirable to many clients.
The death or withdrawal of a partner, or the expiration of the term of the general partnership, will dissolve the partnership. However, the continuation of the partnership can be determined in accordance with the partnership agreement.
Although a general partnership is required to file an income tax return, a general partnership pays no federal income tax. Each partner is required to declare his share of partnership income or loss on his individual income tax return as reported on a Schedule K-1 from the income tax return filed by the general partnership.
Limited Partnership
A limited partnership is similar to a general partnership in certain aspects and similar to a corporation in others. A limited partnership is a form of business entity in which, by complying with certain statutory requirements, the limited partners have only limited liability for partnership debts, obligations and other liabilities. However, the limited partners cannot participate in management. The general partner manages the limited partnership but also can have liability for partnership debts, obligations and other liabilities.
The relationship between the general partner and limited partner in a limited partnership is different than that of the partners of a general partnership. If there is at least one general partner, the death or withdrawal of another general partner in a limited partnership will not result in a termination of the partnership. Moreover, a limited partner is more like a shareholder of a corporation in that his withdrawal or death will not affect the continuity of the partnership.
Usually, the ownership interest in a limited partnership held by a limited partner cannot be freely transferred because of restrictions in the partnership agreement of the limited partnership.
Limited partnerships are taxed similarly to general partnerships for income tax purposes. Each partner is required to declare his share of partnership income or loss on his individual income tax return, which share is reported on a Schedule K-1 from the income tax return filed by the limited partnership.
Corporation
A corporation is a form of business entity created under a particular state statute. The corporation may be owned by one or more shareholders, who may be natural persons or other legal entities. A corporation is treated as a separate entity from its shareholders. Therefore, the shareholders of a corporation are generally not liable for corporate debts, obligations and other liabilities. In order to maintain the corporate protections, certain statutory formalities related to the formation and operation of a corporation must be strictly followed. Failure to properly follow the statutory corporate formalities may cause the shareholders to become personally liable for the debts, obligations and other liabilities of the corporation.
The statutory filing documents of a corporation can provide for perpetual existence so that the corporation will not be dissolved but will continue upon the death or withdrawal of any of its shareholders, officers, or directors.
Shareholders’ interests in a corporation are evidenced by stock certificates, which are generally freely transferable. The corporation permits the greatest flexibility in the transfer of ownership interests. However, a shareholders’ agreement can be used to restrict the transfer of the shares.
A corporation must file its own income tax return. A disadvantage to the corporate form is that “double taxation” may occur since income received by the corporation will be taxed at the corporate level and, if distributed to its shareholders as dividends, will be taxed again on the shareholders’ individual income tax returns. There are several strategies that can be used to minimize the impact of this double taxation such as salaries to officers, loans from shareholders, and a Subchapter S election. A corporation taxed as an S-Corporation is taxed like a partnership for income tax purposes.
Limited Liability Company
A limited liability company (LLC) is a hybrid form of entity that shares characteristics with a limited partnership in certain aspects and a corporation in others. The LLC is a form of business entity in which, by complying with certain statutory requirements, all the members of the LLC, like limited partners of a limited partnership, have only limited liability for partnership debts, obligations and other liabilities. The LLC is managed by either its members or a board of directors, but it does not have a general partner like a limited partnership. The members of the LLC can participate in management but still have limited liability.
The ownership interest of an LLC cannot be freely transferred because of restrictions in the operating agreement of the LLC.
Like limited partnerships, LLCs are required to file a tax return but will not have to pay income tax if the LLC elects to be taxed as a partnership. If the LLC elects to be taxed like a partnership, each partner is required to declare his share of LLC income or loss on his individual income tax return, which is reported on a Schedule K-1 from the income tax return filed by the LLC.
In other words, the members of a LLC enjoy the limited liability of shareholders of a corporation but can avoid the “double taxation” of a corporation if the LLC is taxed as a partnership.
Do You Really Need a Business Lawyer to Start Your Business?
A Business lawyer in Memphis knows that starting a business isn’t an easy venture. Money is probably tight. You have to decide where to best spend your dollars. You might want to save money by not hiring an attorney, which you have the right to do. Many small businesses start out without an attorney. The simpler your business is, the less likely you really need an attorney. What are some situations in which you might save more money by hiring a lawyer to help you start your business?
How Many People Are Involved?
If you are the only owner of your business, you might be able to get away without an attorney. As you add partners, even one, it can be a good idea to create a contract that outlines some basic principles. You want to know what will happen if one of you wants out of the business or dies. How will you distribute proceeds? What are each of you responsible for? Boilerplate legal documents can be a starting place, but don’t always work for every situation.
How Much Paperwork Is Involved?
If you are registering your business as an LLC, partnership or corporation, we can help you with the paperwork and legal documents. Your lawyer can discuss the pros and cons of different legal structures and make sure that your interests are represented. Having an attorney set up articles of incorporation will save you time later when your business takes off.
Taxes, Legal Issues, and More
Small businesses often get themselves into trouble by not laying a good foundation from the start. If you don’t pay taxes on time, it can cost you a lot in penalties and fees from the state or IRS. Having a TN Business lawyer from the start helps you get off the ground without missing details that could come back to bite you. Your attorney may know of legal issues that pertain to your state or industry that require certain requirements in place to open a business.
Technically, you don’t need a lawyer to start a business. But paying one to go over your information before you get into a business can help you save time and money down the road. Just as you wouldn’t try to rebuild your kitchen without professional expertise, you shouldn’t try to build a business without legal advice. Your lawyer might cost a little up front, but if you save money by not having to learn the legal aspects of business, it is worth the investment. Don’t discount the value of an attorney.
Estate Planning For Businesses
Tips for Ending a Business Partnership
Having the ability to share in the responsibilities of a partnership can provide business partners with someone to rely on during the trials and tribulations of owning a business. Sharing in the risk of business ownership with a partner can have a series of advantages. However, in some cases, business partnerships don’t always go as expected. When partners are unable to stay in business with one another, they may choose to end their partnership.
In some cases, this can be resolved amicably. However, in most cases a business lawyer in TN like one from Patterson Bray may play a key role in the dissolution of a business partnership. Here are some tips to consider should you and your business partners decide to part ways:
Tip #1 Review Your Partnership Agreement
In the event you created a partnership agreement, taking the time to review it can help to provide both you and your partner with insight. A partnership agreement can act as a guide to business owners, especially when faced with conflict or disagreement over the business. Once you have made the decision to end your partnership, the agreements you have in place may shed some light into how you and your lawyer should go about dissolving your partnership.
Tip #2 Be Honest with Your Business Partner
Have you tried to communicate with each other regarding the problems? Chances are, if you are ending a business partnership, the likelihood that you and your partner have been struggling to run the business together is high. If you have decided to end the partnership, we stress the importance of at least making attempts to communicate how you are feeling and the decision you have reached.
Tip #3 Attempt to Negotiate with Each Other
Avoiding litigation is usually an attractive option for many business partners. In some cases, partners looking to dissolve their partnership without litigation may be possible. However, it’s important to bear in mind that there can be many complexities to dissolving a partnership. Many of which, you may have not even considered. Accessing a Memphis, TN Business lawyer to provide counsel and assistance with this process can ensure that you cover key details to the dissolution process.
When A Memphis, Tennessee Business Lawyer Becomes a Necessity
Even before negotiations to end a business partnership go south, obtaining counsel may be necessary. Partnership dissolutions are often a complex matter. It’s likely this process may result in hard feelings between partners. Counsel from a Patterson Bray can be especially key to remain focused on the task at hand. A business lawyer can help by putting together a dissolution plan that includes:
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- A plan of action regarding how the dissolution will be managed from start to finish
- An appraisal or valuation of the business
- List of tasks to be completed
- Outline of documentation necessary to dissolve the partnership
In some cases business partners can endure this process together. In other situations, partners may be unable to reach an agreement, making the ability to negotiate terms nearly impossible. Through litigation, the court may make decisions regarding payments and the division of assets. The process of ending a partnership that requires litigation, in some cases may be the only viable option. We can help assist in the complexities surrounding this significant change to your business.
Dissolution of a partnership can be a pivotal decision for a business owner. Regardless of the reasoning behind moving forward, managing the fear of the unknown can be challenging to manage alone. At Patterson Bray, we can work closely with you to protect your interests and manage the legal issues you may be facing.
Business Succession, Planning for the Future
If you are the owner of a business, or have interests in one, we recommend that you not delay in developing a succession plan in the event of the unexpected. Your business succession plan should be an integral part of your business plan regardless of how involved you might be in the day-to-day operations.
A TN Business lawyer in Memphis can help you to consider all possibilities to ensure you’ve covered all of the details. If you would like to speak with a Memphis, Tennessee business lawyer, call Patterson Bray to access the wealth of knowledge they may provide.
Most U.S. businesses are family owned, and up to half of all wage earners in the country are employed by them. Walmart, for example, is the largest family-owned private employer in the U.S. Although very few businesses will ever approach this kind of magnitude, all businesses will be subjected to taxes and other rules – especially when a business is transferred. When you die, retire, or become incapacitated, business succession will likely take place. However, without a plan in place that has been carefully developed by a lawyer, you and your heirs may run into problems.
The Importance of Having A Business Succession Plan
As we may explain to you, a business succession plan enables you to transfer your business to a family member, partner, third party, or to the business itself in an easy and effective way. Your business lawyer will first consider the type of business structure in place; afterwhich, the following aims may be sought:
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- Reduce or eliminate estate taxes
- Avoid the probate process
- Establish a fair value for the business
- Determine who will have the responsibility for taking over the business
- Provide financial interests for anyone who might not be involved
- Structure the business in a way that protects your interests and assets
- Organize to transfer interests to anyone who may be involved in the business
- Stop a potential sale to anyone who is not interested in the business
- Provide funding for the business
- Arrange for taxes and transfer costs
- Restructure the business in the event that a partner or other interested party becomes incapacitated, retires, or dies
It is estimated that only 30 percent of family-owned businesses in the U.S. will survive into the second generation. We will tell you that the disharmony of family members, taxes, and other hurdles, can make it difficult to transition a business properly. With a business succession plan in place, it may be possible to mitigate obstacles; giving the business the opportunity to thrive.
The future of your business, your family, and your employees will depend upon your business succession plan. Through meticulous planning with a lawyer, you can ensure a smooth, and successful transition between you and the future of your business.
If you would like to learn more about planning for the future of your business,