Whether you operate your business as a sole proprietorship, corporation, limited liability company, partnership or some variation thereof, the form of organization is one of the first decisions to be made when launching a new business or even growing an existing one.
Business structuring is like pieces of a puzzle, except that in this puzzle the pieces can fit together in a variety of ways, not just one.
Many people confuse the different forms. For example, many times I have been asked to draft a partnership agreement for a corporation, or a shareholder agreement for an LLC. This is entirely understandable as these can be confusing.
Add to the choice of entities various considerations of control, taxation, succession, employee ownership and others, and the process can be overwhelming. Often, my goal is to simplify a situation. Other times, especially when dealing with businesses that operate partially or entirely outside the US, something a bit more complex can have substantial benefits for the owners by taking advantage of different tax rules and treaties of various countries.
One non-US client was told he should incorporate in California and asked if I could help him accomplish that. I asked a few questions about their cash flow projections and goals, and learned that they really want a pass-through entity, such as a Sub-Chapter S corporation. The problem is that a non-resident alien cannot be an owner of a Sub-chapter S corporation; but the other attorney never considered the pas-through factor and never told the client that it wouldn’t work. I proposed a solution that worked.