Merlyn law firm - Blog 1

1. Merlyn law firm Blog

2. Business Formations, Contracts Entity Formation and Contracts Lawyer in Chennai, India With an emphasis on new entity formation and drafting the inter-organizational documents and applicable business contracts, we also advise our business clients in establishing and emphasizing organizational structure and protocols. To avoid contracting in your individual capacity, you want to limit your liability to your other businesses. The best way to obtain this form of protection is to create separate entities and maintain the separation between yourself, and amongst the separate entities. Our expertise and counsel in corporate law aids our clients in designing and implementing various management tools to create and sustain a growing business, all within a legal framework. We help you determine the best entity form for your business, whether it’s a corporation, limited liability company, partnership, or sole proprietorship. Further, we help you set up your legal entity by drafting and filing the necessary paperwork with the Secretary of State. We also provide general counsel services to small businesses who require ongoing legal advice and/or services and would like the comfort and security of knowing that their business is always legally protected.

3. WHY IS IT IMPORTANT TO FORM A BUSINESS ENTITY? While it is possible to conduct business in your personal capacity, in most cases, it is strongly advised to create an entity, separate from yourself, when conducting business. One of the most important reasons to create a separate business entity is to protect yourself from personal liability for the acts of the business. For example, if your company becomes the subject of a personal injury claim and you did not create a separate entity for your business, the plaintiff can come after your personal assets as well as the assets of your business. However, if you created a business entity and properly maintained the distinction between yourself and your business entity, the plaintiff can be restricted to only the assets of the business.

4. Creating a business entity is to simplify management and governance of the business organization. A business that involves more than one owner means there will be ownership shares and rights particular to each person. It is much easier to have an organizational document that stipulates the rights and responsibilities of owners as opposed to having separate and complicated contracts to define the relationships between the parties. Entity formation is typically a requirement if your business intends to raise outside capital. The business entity facilitates this by pooling all the business assets and liabilities into the organization instead of dealing with the finances and claims of everyone involved. Business formation greatly increases your level of professionalism in dealing with the public; it bolsters confidence in your business so that your clients and customers can rely on the stability of your business.

5. WHAT ARE THE DIFFERENT TYPES OF BUSINESS ENTITIES? Sole Proprietorship: ● This type of business form is the simplest form of business entity. It is run by a single individual for that individual’s sole benefit. Sole proprietorship’s are not separate legal entities and do not exist apart from the owner. ● The owner is personally liable for all debts and claims of the business. Sole proprietorship’s are however considered separate entities for accounting purposes so that financial activities of the business must be separately maintained from the proprietor’s personal finances unrelated to the business. Sole proprietorship’s are terminated upon the owner’s death.

6. Partnership: ● A partnership is formed when two or more people associate for the purpose of carrying on a business for a profit. Partnerships can be based on express, implied or oral agreements between the parties. ● Each partner contributes property, money, labor or skill to the partnership and shares equally in the profits and losses of the business, unless stipulated by agreement. Each partner is also personally liable, individually and severally, for the debts and liabilities of the business. ● Partners are also taxed on their share of the business and profits are filed on their individual tax returns.

7. Limited Liability Company (LLC): ● Limited Liability Companies are a favoured business form for small businesses. They contain qualities of a corporation and a partnership The management and governance of LLC’s has the same flexibility as a partnership, while maintaining the same limited personal liability as a corporation. ● It is important to note that there are advantages and disadvantages to every business organization. The choice of business entity is formed and structured according to how our clients would intend to finance the business, likelihood of major profits and the number of individuals involved in the business. Other factors to consider are the flexibility of maintaining the business entity and taxation. Consulting with an account or a tax professional is strongly advised.

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