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Why You Should Consult an Attorney for Business Formation

5 days ago

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Why You Should Consult an Attorney for Business Formation

Starting a business is an exciting venture, but it comes with a host of legal and financial considerations. One of the most critical steps in this process is business formation—deciding how to structure your business to achieve asset protection and tax efficiency. While many online services offer to help with this step, they often fall short of addressing the complexities involved. Here’s why working with an attorney is essential.


The Role of an Attorney in Business Formation

Forming a business involves more than just filing paperwork with the state. While online services can handle the basic filing, they don’t offer the tailored guidance or long-term support you need to protect your assets and ensure compliance. Here’s what an attorney can do for you:


  1. Asset Protection: The primary reason for forming a business entity, such as an LLC or corporation, is to shield your personal assets from liabilities. An attorney ensures that your business is set up correctly to provide this protection.

  2. Tax Structuring: While forming a business is a state function, tax designation is handled separately by the IRS. An attorney can guide you through this process and work with a CPA to optimize your tax strategy.

  3. Compliance: Once your business is formed, there are annual requirements to maintain compliance. An attorney helps you stay on top of these obligations, such as filing annual reports or maintaining corporate formalities, to preserve your liability protection.



The Risks of DIY Business Formation

Filing your business with the state can seem straightforward, but there’s much more to it than meets the eye. Some common pitfalls of DIY or online service-based business formation include:


  • Improper Structuring: Without professional guidance, you may choose a business structure that doesn’t meet your needs for asset protection or tax benefits.

  • Missed Annual Requirements: Neglecting yearly filings or formalities can result in losing your liability protection, leaving your personal assets vulnerable.

  • Tax Issues: Online services don’t address the IRS’s requirements for business tax designations, which can lead to costly mistakes.


As one experienced attorney puts it, "The organization most likely to take your business down isn’t someone suing you—it’s the IRS."



Why You Should Work with an Attorney and CPA

When forming a business, it’s important to recognize that an attorney and a CPA each play a unique role:


  • The Attorney: Focuses on the legal aspects, such as structuring the business, drafting documents, and ensuring compliance with state laws.

  • The CPA: Specializes in the financial side, helping you navigate tax planning, reporting, and strategies to reduce your tax burden.


While an attorney can guide you on structuring your business to align with tax considerations, a CPA is essential for ongoing financial management and compliance. In fact, many attorneys recommend allocating a significant portion of your budget for a CPA, as the IRS poses the most significant risk to your business.



What to Expect from a Business Formation Attorney

When you consult an estate planning attorney who specializes in business formation, you can expect:


  1. Personalized Guidance: Attorneys understand that every business is unique. They’ll work with you to choose the right entity type (LLC, corporation, etc.) based on your goals.

  2. Ongoing Support: Beyond the initial filing, an attorney can help you manage annual requirements, address changes to your business, and plan for long-term growth.

  3. Practical Insights: Many attorneys are business owners themselves, so they understand the challenges you face and can provide practical advice for success.



Final Thoughts

Starting a business is a significant milestone, and getting it right from the beginning can save you time, money, and stress down the road. While online services may seem like a convenient option, they can’t provide the comprehensive support and protection you need.


Consulting an experienced estate planning attorney who specializes in business formation ensures your business is legally sound and set up for success. And don’t forget to involve a CPA to safeguard your financial future—because in the world of business, the IRS is your most formidable opponent.


If you’re ready to take the first step, reach out to an attorney today to discuss your business formation needs. Proper planning now can make all the difference later.

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