Should you organize your business as an LLC, a corporation, a partnership, or a sole proprietorship? What are the differences between each corporation type? Under the laws of which state should you form your business? Making the wrong decision about these fundamental questions could sink your business before you even get started. Having competent guidance will ensure that your decisions match your long-term goals.
Starting Your Business
Starting a business is an exciting and intimidating endeavor, but not one to be completed alone. At MKP Law, clients benefit from counsel that is informed by decades of firsthand experience in business. Our expertise in business formation and operation coupled with the obvious advantages of legal counsel is here to help you in each step along the way.
Our goal is to ensure that your business is set up for long-term success while minimizing legal risks and liabilities. Business law is complicated, and having counsel versed in the world of business could be the difference between success and failure. At MKP Law, clients are granted access to the knowledge and experience of world-class business leaders who are here to serve you and your business needs.
Practice Strengths
A key attribute that sets us apart is our reputation for smart and relevant business advice across a wide variety of business issues, such as:
- Review of contracts, bank loan documents, and other business agreements
- Considering someone for a joint venture or another type of business relationship
- Expanding the business, with people or locations or both
- Terminating a contract
- A personal dispute or divorce referral
Limited Liability Companies (LLCs)
A limited liability company, commonly called an LLC, is the most flexible way to operate a business. At MKP Law, our experience allows us to find the best business solution to turn your dreams into a thriving reality. A well-organized LLC may offer you the flexibility and protection you need.
How does an LLC work?
Each state has its own statute that governs the creation and operation of LLCs, but there are many commonalities. The owners of an LLC are typically called ‘members’ instead of ‘shareholders’. An LLC can either be managed by a member or group of members, or by an appointed manager. This is specified in the operating agreement of any LLC, which is the equivalent of the bylaws of a corporation. Some important decisions should be made in advance, and can be included in this agreement. LLCs are typically taxed as partnerships, which means that the entity itself does not pay income taxes – all income taxes are paid by the members of the LLC. The LLC may need to pay other types of taxes, including property taxes, sales taxes, use taxes, etc.
There are fewer corporate formalities associated with running an LLC, however, the members must still exercise due care to ensure that the limited-liability shield given by the state protects their personal assets. In some circumstances, it makes sense to file an election to have your LLC taxed as an S corporation, but this comes at the cost of flexibility.
Corporations (S, C, & B)
Deciding which type of entity is right for your business goals is a difficult decision, and the insights offered at MKP Law will provide you with the confidence you need to move forward with your vision. Our clients are served by the experience of successful business operators and founders throughout the entity selection process. Corporations are divided into several categories, each governed respectively by individual states. Corporation types differ primarily in tax and ownership regulations.
C Corporations:
The defining attribute of a C corporation is the requirement to pay both entity-level taxes (determined based on the corporation’s earnings) as well as taxes upon dividends. This means that when shareholders are paid out, that money is taxed. While two tax rates may seem suboptimal, a C corporation offers flexibility and access to capital that other corporation types cannot. Versatile stock trading makes this the standard corporation type for publicly traded businesses.
S Corporations:
Entity-level taxes can be avoided through the use of an S corporation, with all taxes being applied directly to owners’ income. This corporation type does not come without disadvantages either, however. The IRS imposes limitations upon the number and types of owners, and the treatment thereof. An LLC offers similar benefits while sustaining flexibility, though LLCs are impermanent, meaning that they dissolve upon the death of the owner(s).
B Corporations:
A B corporation is uniquely defined not by tax processes or ownership, but by its ability to pursue social goals set forth in the company’s organization. Liability is decreased as a B corporation fulfills its purpose.
Corporate law is intentionally complicated. Businesses founded under the counsel of MKP Law are marked by synergy in the real world, designed with full attention to each intricacy of the law.
Partnerships
When it comes to establishing partnerships, navigating the legal complexities is crucial for a successful and harmonious business venture. At MKP Law, we offer expert counsel and guidance for those starting businesses. Our combined experience will assure you in understanding the nuances of various partnership structures and help you choose the one that best suits your needs and goals.
General Partnership:
A general partnership is any two or more people who have decided to form a business together, even before filing with the government. Each partner shares equal responsibility for the partnership's debts, liabilities, and decision-making. This type of partnership does not provide personal liability protection.
Limited Partnership:
Limited partnerships involve two types of partners: general partners and limited partners. General partners enjoy managerial control. However, they are unprotected from liability, while the liability of limited partners is restricted to their investment in the partnership. Limited partners also hold less power in the corporation.
Limited Liability Partnership (LLP):
This type of partnership offers equal liability protection to all partners. An LLP allows partners to be shielded from personal liability for the actions and debts of other partners, as well as from the creditors and lawsuits of the business.
Limited Liability Limited Partnership (LLLP):
This partnership type is similar to a limited partnership (NOT to an LLP), except both general and limited partners are exempt from liability, dependent upon the correct filings being made.
It is important to note that partnerships are not taxpaying entities; all income and attached taxes are directed to each partner.
Our clients feel supported through the entire partnership formation process. At MKP Law, ensuring compliance with legal requirements, drafting partnership agreements, and addressing key issues such as profit sharing, decision-making authority, and dispute resolution mechanisms is made straightforward and stress-free. By seeking our counsel, you can establish a partnership structure that aligns with your goals while safeguarding your interests and minimizing legal risks.
Contracts & Agreements
Good Business
At MKP Law, we believe in community. Which is why we believe in good business. Our intention is to equip each of our clients with the tools and strategies necessary to make their dreams real in a way that benefits not only them, their employees and clients, but also to the public. As the saying goes, good fences make good neighbors, and the right legal agreements will sustain congruousness so that you can focus on your business.
Negotiating
Negotiating contracts can be inordinately complicated and confrontational without first understanding how your interests translate into practice. Our counsel will prepare you to negotiate with grace, build and maintain a healthy presence in your community and workplace, and define your interests and priorities.
Mergers & Acquisitions
From its inception to its dissolution, owners invest their blood, sweat, and tears into their business. The decision to sell a business, or to merge with another business, can be emotional and complicated. Once that decision is made, however, it is important to make it happen the right way. The same applies to buying a business.
Even apparently simple decisions in a merger or acquisition can hold significant tax implications that may affect your financial bottom line. Our clients enjoy counsel on these crucial decisions that is enlightened by decades of real-life experience in the corporate realm.
Determining whether to sell the assets or stock of a business, setting aside funds for future liabilities, and even choosing the payment method for the purchase (cash, future earnings, or stock) are complex considerations that require the expertise of experienced professionals. Relying solely on yourself or your accountant to navigate these decisions can expose you to unnecessary risks.
General Business Advice
Business owners want a law firm that will work with them to solve their legal problems, advise them on business strategy and growth, and make their lives easier. Our clients know they can call us for whatever they need. We will help them with most of their business needs, but if more technical expertise is required, we will provide guidance and help in locating and working with the appropriate professional experts. Many conversations from our clients begin with, "I'm thinking about doing something and want to run it by you."
Clients look to us for legal advice that is practical and takes into account their specific situation and needs. Often the client isn’t even aware of the legal and other pitfalls they may encounter. The client may be:
- Entering into a new contract and wanting us to prepare it, or reviewing someone else’s draft, keeping in mind that the parties will want and need a good working relationship after they sign the documents. It may be a contract with a vendor, customer, subcontractor, or even their bank.
- Thinking about a new business venture and wanting to know what to watch out for before they get too far down the road.
- Opening a new location, buying a franchise, evaluating a joint venture, or otherwise expanding an existing business.
- Hiring someone to help with a company’s finances or some other aspect of its operations.
- Applying for a bank loan.
- Looking for a referral to another subject matter expert or professional.
Our clients know that we are entrepreneurial lawyers who take a holistic view, considering not only the needs of the business but also the personal goals of each business owner. We pride ourselves on our reputation for practical application of our technical legal skills, business acumen, and experience. We add value in each encounter with them, providing trusted business advice and guidance -- whether it involves technical legal application or not. Thanks to our collegial culture, efficient size, focus on Colorado and our region, and ability to simply walk down the hall or pick up the phone to get immediate answers for a client, MKP Law is prepared – no matter what the question or issue.
MKP Law in Action
Featured Client Case Studies
Case Study: Investing in a New Business is not for the Faint of Heart
Our Client's Objective: A business owner has been offered the opportunity to invest in a strip mall with a friend, and wants to know what questions to ask.
MKP Law's Approach: We quickly reviewed the materials provided by the friend and then came up with a list of things to watch out for. It started with “How well do you know this friend,” went on to address how much business acumen and specific applicable experience that a friend has to run this type of business, and then looked at other more technical practical and legal questions, such as, “How do you get your money back,” "What if you and your friend have different plans for the property;” and “What if all of the leases come up for renewal at the same time,” and “Do you have personal beliefs about the types of businesses operated on the property?”
What's Next? The client is off and running, talking to the friend (and yes, they are still friends) and looking at the investment opportunity with a much better understanding and knowledge of the framework of their business relationship and the questions to be asked.
Case Study: When an Agreement is really a “Hidden Franchise”
Our Client's Objective: Our client wanted to allow another business to operate under its name and use its logo, and just wanted a simple license agreement.
MKP Law's Approach: Licenses for names and logos are tricky because sometimes they really are franchises under federal and state law. If so, then that “simple license” just opened up a massive liability for the client. We talked about what the client really wanted, what type of controls they wanted over the business licensee, and then reviewed the law to see how far the client could go without stepping over that franchise line.
What's Next? We talked with the client to ensure that they were still willing to do the deal, with the limitations and requirements that we needed to include. It was a “GO,” so we drafted the agreement, and the parties are happily working together.
