Business Formation

When should you form your business entity?
Do you want to get paid to do what you love?

Are you worried about exposing your personal assets to the risks of owning a business?

Do you want to raise money to start or grow your business?

Are you ready to be taken seriously as a business and not just a "hustler" or hobbyist?

Are you seeking freedom from your current situation that you hate (your job, your boss, your career)?

Then it's time to start your business and pursue your passion!

As early as possible!

Before taking on any significant obligations or exposing yourself to any substantial risks, i.e. signing contracts/leases.
Before hiring various service providers and/or independent contractors.
Before raising money, even from family and friends. Otherwise, you are inadvertently creating a partnership and the question of who owns or owes what is subject to everyone’s memory, misinterpretation, and mood swings.

Common Business Entity Types
There are 4 common types of business entities you can consider when starting your business: sole proprietorship, partnership, limited liability company (LLC), Corporation (C Corp). The LLC is the most common choice for new and existing businesses of all types and sizes.

Sole Proprietorship

A sole proprietorship is a business owned by one person. It is the default option when you start a business without any business partners and without filing anything with the Secretary of State. But as a sole proprietor, you are personally responsible for everything, including all of the debts and obligations of the business. A sole proprietorship is not a separate legal entity, and for that reason alone, it really isn’t an entity anyone should choose. You’ve started a business, but you haven’t limited your personal exposure should anything go wrong.

So if there is a disgruntled customer or client who hasn’t received the promised goods or services, they would have the legal right to sue you. Or if the business owes a supplier or vendor money, that supplier or vendor could sue you for the debt. And if you lose those lawsuits, you stand to lose your personal assets. This is why we always recommend that you establish a business entity (usually an LLC) before you simply start operating your business.

General Partnership

Like a sole proprietorship, a general partnership is the default entity for two or more people who go into business together for a profit. Each partner is still liable for everything that goes on in the business, including anything the other partners do or fail to do, whether the partners knew about it or not. And this liability is what we call “joint and several,” meaning a business creditor can attempt to recover the entire debt from just one business partner. That business partner would then have to sue their other partners to get them to contribute their fair share. So if your business partner takes on more debt than the business can afford, the business’s creditors can come after your personal assets for the entire obligation and likely will if they get the sense that you are the money behind the operation.

Of course, every business partnership should have a partnership agreement, and it should address how the partners want to handle worst-case scenario situations such as this. But like the sole proprietorship, this default choice of entity is really no choice at all.

Limited Liability Companies (LLCs)

Forming a limited liability company or LLC is probably the most common choice of business entity for entrepreneurs and small business owners. The reason is because every member (the legal term for owners of an LLC) enjoys limited liability for the debts and obligations of the business, while still being able to participate in the management of the business (at least to the extent allowed by the LLC’s operating agreement). If an LLC incurs a debt, then the LLC—and not the members who own the LLC—is the only legal “person” responsible for paying back that debt. This is true even where the LLC only has one member.

Corporations

A corporation is the traditional form of business entity, and like the LLC, is a legal entity or “person” separate from its individual owners (called shareholders). Corporations raise money by selling stock in the corporation, even small closely held corporations. Shareholders have the same limited liability as members of an LLC. If a corporation is sued or owes a debt, the shareholders generally can’t lose any more than their investment in the corporation.

There are two reasons why corporations have fallen out of favor with small businesses. First, corporations are required to observe certain corporate formalities. For example, corporations are typically run by a board of directors that must follow corporate bylaws. The corporation must have regular board meetings and shareholder meetings. Someone has to keep meeting minutes and make sure that there was a quorum present for the meeting so that business could be lawfully conducted. Corporate resolutions may need to be drafted and approved. If the corporation fails to observe these formalities, then the corporate veil can be pierced and the shareholders can lose their limited liability protection. LLCs are preferred because they are not required to conduct business in such a formal manner.

Second, corporations have a double taxation problem. Unlike an LLC, a corporation pays taxes on its profits each year. Then, when the corporation distributes profits to the shareholders in the form of dividends, the shareholders have to pay taxes again on their dividends. In an LLC, the limited liability company doesn’t pay taxes on its profits. Instead, the members pay taxes on their share of those profits.

S Corps

It’s very important for entrepreneurs to understand the difference between their legal entity type and their tax status. Contrary to popular belief, an S Corp is not a legal entity; it is only a tax status. You cannot create an S Corp with the Secretary of State. An S Corp, by itself, does not offer any limited liability protection. Instead, an S Corp is a tax election filed with the IRS that allows the business (which might be a general partnership, an LLC, or even a corporation) to pass the profits, losses, deductions, etc. to the owners for federal tax purposes. Typically, small businesses will elect S Corp tax status if it allows the business owners to save money on self-employment taxes. Electing S Corp tax status should only be done in consultation with your accountant.

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Flat Fee Pricing:

All fees and services described on this site are for information purposes only and are subject to change at any time. Until we have both a signed Engagement Agreement and your initial payment, the Firm reserves the right to quote you a new or different fee for services based on the unique legal needs of your business.

Payment Plans
Payment Plans are available for an additional premium of 15%. All payment plans require a credit card authorization and are billed monthly. Payment plans are not available for rush delivery projects. Anticipated expenses are due with your first payment.

Business Formation includes:

Legal advice for selecting the right entity;
Preparing and filing Articles of Organization or Incorporation with the Ohio Secretary of State;
Preparing your business operating agreement or corporate bylaws;
Preparing initial corporate resolutions (as needed) for organizational matters; and
obtaining your tax identification number.

Single Owner or Spouses: $650

Multiple Owners: $1,600

Multiple Ownership Classes / Vesting Restrictions: $3,575

+ $99 Minimum Secretary of State Fee

Operating Agreements / Corporate Bylaws / Close Corporation Agreements
Single Owner or Spouses: $350

Multiple Owners: $1,375

Multiple Ownership Classes / Vesting Restrictions: $3,550

Review and Advice: Get attorney recommendations and counsel to protect your personal interests; editing or re-drafting the agreement or bylaws is not included.
- Multiple Owners: $400
- Multiple Ownership Classes / Vesting Restrictions: $1,050

Other Business Governance Matters:

Advisory Board Member Agreement: $750

Agreement to Dissolve a Business / Partnership: $1,175

Articles of Incorporation / Organization: $200
+ $99 Secretary of State Fee

Amend or Restate Articles + Resolution: $225
+ $50 Secretary of State Fee

Buy-Sell / Membership Interest Transfer / Shareholder Agreements: $1,150

Certificate of Conversion + Articles + Declaration: $200
+ $99 Secretary of State Fee

Corporate Dissolution: $725
+ $50 Secretary of State Fee

LLC Certificate of Dissolution: $225
+$50 Secretary of State Fee

Resolutions / Written Actions: $200

Update / Serve as Statutory Agent: $100
+ $25 Secretary of State Fee

Traditional Hourly Rates

Where flat fees don't make sense, the Firm works on the traditional retainer basis. For general business needs, the Firm requires a replenishing retainer of $2,000/$1,000. The Firm bills at the hourly rate of $275 per hour for all attorney time and $125 per hour for all paralegal/law clerk time. The Firm bills in tenths of an hour increments. The Firm may from time to time require a larger retainer or replenishment in anticipation of significant work that the Firm reasonably believes cannot be covered by the standard retainer amount.

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