The “Birth of a Business”
Up until now you have been hearing from Elise Langsam, our senior partner specializing in personal injury and medical malpractice. We thought it was time for you to hear from the other half of Langsam Law – our other senior partner, Richard Langsam, who specializes in business and commercial transactional law.
Some lawyers analogize the creation of a business with the birth of a person – i.e., the doctor delivers the baby and takes care of her throughout her life. The analogy being that a lawyer helps to form the business and counsels it throughout its “life.” The analogy is good as far as it goes.
However, the reality is that the lawyer is in a position, unlike a physician, to not only decide the color of the businesses’ “eyes,” but can design and formulate most aspects of that business so that once formed, we know precisely what the business will do, legally, and how it will perform. The doctor just waits nine months to see what nature hath wrought.
When a person desires to start a business, he or she can consult with an experienced business attorney who can analyze the specific needs of the business and design an appropriate vehicle for carrying out the “life” of that business.
For instance, if the business will have investors who will not participate in the management of the business (or if they will), the vehicle chosen can take that into account.
A minority owner of a limited liability partnership, for instance, can structure a business so that he or she controls the operation of that business even if he or she does not intend to be the contributor of the majority of the capital for the business.
Of course, the opposite may be achieved as well, with the investors having some or most of the control over the business.
At one time the initial primary motivation for incorporating a business was to limit the potential personal liability of the owner-operator of that business.
And while that motivation is still important, today there are many aspects of business formation that go above and beyond merely protecting the owner-operator from the danger of subjecting his or her personal assets to risk (other than the actual investment in the company).
Limited liability companies, limited liability partnerships and limited partnerships all provide the owner-operators with a shielding of their other personal assets from risk, but each of these vehicles have characteristics which are best suited to certain types of business operations.
If you’re considering starting a business, consult an experienced business attorney before the baby is in the oven!
Note: Prior results do not guarantee similar results.