Owning your own business, for many people, remains part of the “American Dream.” If you hope to achieve your dream of becoming a small business owner you will need to create a sound business plan and then implement that plan. You will, undoubtedly, run into a number of questions and obstacles along the way. At German Law Group we understand how difficult – and often exhausting — it can be to try and get a fledgling small business off the ground. With that in mind we have created some frequently asked questions and the answers to those questions in the hope that it will help you, in some small way, to achieve your American dream. If you have additional questions or concerns about starting your own business, please feel free to contact our office.
- What are some important steps I need to take when starting a business?
Although no two business start-ups are exactly the same, there are some basic steps that most small businesses need to take and issues that most fledgling businesses need to consider before opening the doors (or website) for business, including:
- Choosing a name and determining if it is available through the Secretary of State
- Deciding what type of legal entity, or business structure, to use for your company.
- Deciding on a location for your business if it is a “brick and mortar” business (as opposed to an online business)
- Registering with state and federal tax authorities and requesting an Employer Identification Number (EIN)
- Determining what local and state permits and licenses you will need to operate your business and obtaining them.
- Setting up your workers’ compensation and unemployment insurance accounts.
- Filing for copyrights, patents or trademarks if applicable.
- What are the basic business structure types?
There are three basic business structures, and several sub-categories and hybrids, from which you can choose for your business – sole proprietorship, partnership, or corporation. A sole proprietorship is simply one person operating a business. No legal documents are required to form a sole proprietorship. A partnership exists when two or more people operate a business and share in the profits. You are not required to execute any legal documents to form a partnership; however, many partners do execute a partnership agreement to make running the business easier. A corporation is a separate legal entity that is owned by shareholders and run by officers and managed by a Board of Directors. Creating a corporation requires you to create Articles of Incorporation and Bylaws for the business, at a bare minimum.
- What are the benefits of incorporating?
Incorporating your business offers benefits that the other two types of legal entities do not. One of the main benefits to incorporation is that it removes the risk to you and your assets for debts or liabilities of the company. In addition, a corporation is also generally viewed as more attractive to potential investors, in part because of the ease by which the company can grow by selling additional stock in the company. Finally, some business owners are attracted to the structure of a corporation and the organized nature of the management structure.
- What documents are required to incorporate my business?
The primary documents you will need to create and execute in order to incorporate your business are Articles of Incorporation and Bylaws. These documents set forth the legal structure of the business and the general management of the business. You may also need resolutions for the Director and shareholders as well as purchase agreements for the stock you plan to sell.
- What is “business succession planning” and do I need to include it in my overall estate plan?
Business succession planning refers to a plan established by the owner(s) of a company to handle situations such as the death, incapacity, or retirement of an owner. If you plan to pass down your business to the next generation, for example, you need to include business succession planning in your overall estate plan to ensure that the business will successfully make the transition to the next generation. Even if you plan to sell your interest in the business, business succession planning remains necessary to ensure that you (or your loved ones) receive the fair market value of your interest in the business and in a timely manner.
- What is a “buy-sell agreement?”
A buy-sell agreement is a legal agreement, usually between partners of a business, that set forth the terms of one owner’s sale of his/her interest in the business. The purpose of a buy-sell agreement is for an owner to know in advance the terms of the sale of his/her interest in the event certain things occur, such as incapacity, retirement or death. Typically, partners execute mutual buy-sell agreements that require each partner to purchase the other partner’s interest in the business. A separate life insurance policy is often purchased just to fund the agreement.
- Is business planning different for farmers and ranchers?
In many ways, yes. One of the big issues family farmers and ranchers have upon the death of the patriarch/matriarch of the family is a lack of liquid assets with which to pay any federal and/or state gift and estate taxes due. This happens because farms and ranches are often cash poor, with all their assets tied up in land, livestock, crops, and equipment. Careful planning, however, can alleviate many of these concerns that family farmers and ranchers often have to worry about in their estate plans.
If you have questions or concerns regarding business planning in Grand Forks, North Dakota, contact the experienced North Dakota estate planning attorneys at The German Law Group by calling 701-738-0060 to schedule your appointment.