business law FAQ's

Why do I need to Register my business with the state?

There are many reasons that you should register your business. The main reason to register your business with the Secretary of State is to give yourself protection from personal liability. If the business is not successful, or if there is a judgment against the business, you do not want that to transfer over to your personal assets such as your home. 

What type of entity should I choose?

As I am sure you are now aware, there are many choices of entities.  Which one is right for your endeavor? There are many questions that need to be answered to decide what business entity is right for your business.  You should always talk to an attorney and an accountant to decide what entity is right for you. 

Does it matter what state I register my business in?

The short answer is both yes and no. There are some states that have different tax advantages/disadvantages. There are also advantages of privacy in some states over other states. For example, if you register your business in California there is a franchise tax that every business has to pay. However, if you register in Utah, there is no such tax. If you register in Wyoming, you do not have to list names of owners and so there is some added privacy. However, unless you are running your business completely online there is typically some form of foreign registration that you must do in your home state to maintain liability protections. 

What if I register my business in one state but have my offices in another state?

If you are a Wyoming LLC but have your main offices in Utah, you will want to do what is called a foreign entity registration. This allows you to get the same protections from your Wyoming LLC in Utah. Bigger companies that have multiple locations will often register as a foreign entity in all locations. This in not registering your business in each state, but is letting the state know that you are a business from out of state doing business in their state. 

What is an operating agreement, and do I need one? How are they different from By-Laws or a Partnership Agreement?

There are decisions that have to be made on how you want to run your specific business based on personal preferences of those who own the business. For example, who needs to be involved in the purchase of certain equipment, when and how will profits be distributed, or how can a partner sell his share of the business, and to whom can they sell it to? These are decisions that are different for each company and is the governing law for that specific company. There are statutes that govern those businesses that do not have By-Laws for other agreements in place but they may not always be what you had envisioned when starting your company. These decisions are made in an Operating or Partnership Agreement.

What is an S election?

An S election is a tax designation you make with the IRS. It gives certain corporations and even LLCs tax advantages if they meet certain criteria. Some of these requirements are that all the stockholders have to be individuals and not other entities. Another requirement is the number of shareholders must be less than 100. Additionally, it must be a domestic entity, meaning registered in the US as a US company. There can be only one class of stock, such as  voting or non-voting stock, for example. This allows a corporation to get certain tax benefits similar to a partnership, which allows all the income and expenses to flow through to the shareholders.  Before deciding on making an S election you should talk to your CPA and an attorney to make sure it is the right fit for your situation. 

What is an EIN, and do I need one?

An EIN is an employer identification number. It is a number given by the IRS to identify your business. All new businesses should have an EIN and most states are starting to require you obtain an EIN at the time you register your business with the state in which you are establishing your business. Almost all banks require an EIN in order to open a business bank account as well. So, the easy answer to this question is yes. You should have an EIN. 

How do my business partners and I protect ourselves from liability and from each other?

This question goes to the foundation of business entity law. The first businesses were created so that owners could limit their personal liability and separate it from their business liability. Therefore, the short answer is that the best way to limit your personal liability in a business is to set up a business entity. What type of entity is a completely different question and depends on your situation. This can also aid you in protecting yourself from the actions of your business partners. There are some other more complex strategies to help limit your liability.  If you are concerned that just simply setting up a business entity is not going to be enough, you should talk to an attorney to find out more information. 

What is the difference between for profit business and a non-profit business?

The difference between a for profit business and a non-profit or not for profit business is right in the name. A for profit business is set up to make as much money as they can to increase their profits and in turn the money will be paid out to their owners. A non-profit is typically set up with a more philanthropic goal in mind. All profit is reinvested in the cause of a non-profit and there are no payments made to any shareholders or owners. Employees, directors and officers of a non-profit are typically paid but there are no profits. Everything is used to benefit the cause in which the company was created. 

Our Mission

Our goal is simple, it is to help your growing business with legal needs you may have while taking the time to educate you along the way. Whether you are starting a small business or you run a large corporation, we will be there to answer your questions.