Cambridge Entity Formation Lawyer | Entity Formation and Incorporation
Creating the Entity
Our Cambridge entity formation Lawyers know that to cut costs, many entrepreneurs use template forms or do-it-yourself kits to create their entities, which could lead to disastrous results, as one size doesn’t fit all. We will customize documents to fit your unique business, draft and/or file the appropriate paperwork, while taking care to ensure that rights of the parties are clearly and properly addressed. To get your entity off to the right start, our Cambridge entity formation lawyers will explain the particulars and operating principles of the chosen entity, taking care that all formation formalities are observed, and will properly file the necessary paperwork to ensure the legal protections and tax treatment of your chosen entity.
Financing the Entity
Once an entity has been formed, the next area that requires attention is how the entity should be capitalized. While this area was addressed during the entity selection process and many of the financing documents should be prepared during the formation process, it still deserves special attention.
Without proper financing the business might be short-lived or could lead to inequitable results, such as loss of limited liability. Many entrepreneurs will choose to invest some of their own money, while others will obtain loans from banks or friends, and yet others will seek capital investment for ownership in the enterprise. Each of these choices, or a combination thereof, must be carefully considered to ensure that that entity is properly capitalized and that the rights and expectations of any creditors and/or investors are properly memorialized in writing.
Our Cambridge entity formation attorneys will work with your accountant, lenders and/or investors to ensure that the necessary documentation is prepared. We also will ensure that the financing process is in compliance with regulatory requirements.
Choice of Entity
All businesses are established and operate in some form of entity, each with its own advantages and disadvantages from a variety of standpoints, including limited liability and tax consequences. At the beginning of a business venture, it is important to ensure that the right entity is selected in light of your goals, in both the long and short terms. In some instances it could even be prudent to utilize a combination of entities to achieve your goals.
Our Cambridge entity formation lawyers know it is our job to learn about your business, explain your options, and help you determine the entity in which your business should operate. Following are some commonly used entities for business purposes:
Sole Proprietorship—Specific to a single business owner who is looking for simplicity. The owner is, however, personally responsible for the liabilities of the company.
Corporation—Separate and distinct legal entity, owned by shareholders who have the ability to elect directors to guide the management and directors of the company through the corporate officers. The shareholders are generally not liable for the debts and obligations of the corporation.
Subchapter S Corporation—Similar to a corporation but, assuming that the shareholders and entity meet certain conditions, shareholders can elect to have the company taxed under subchapter S of the Internal Revenue Code, which allows the company’s income/loss to pass through to the shareholders.
Limited Liability Company—Relatively new and flexible entities that can be crafted to a variety of business purposes and generally provide limited liability to its owners.
Partnership—Formed when two or more individuals choose to work toward a common business purpose. Partners are responsible for the debts and obligations of the partnership as a whole and, as such, can be liable for transactions and debts incurred by other partners.
Limited Liability Partnership—Special form of partnership, in which certain partners can enjoy limited liability.
Joint Ventures—While a joint venture is not a separate entity structure, it is a special relationship involving existing businesses that combine skills for financial gain, without fully transferring ownership of any assets. An agreement is required to establish operating guidelines and to protect each business’s rights. In many instances a joint venture will lead to the formation of a new entity.
- Limited liability companies vs. S corporations
- Steps in forming a Massachusetts corporation
- Operating a business as a Massachusetts corporation
- Operating a business as a Massachusetts limited liability company (LLC)
- Operating a business as a Massachusetts partnership
- Operating a business as a Massachusetts sole proprietorship
- What is an S corporation?