As your company grows and becomes more successful, the plans, needs, and goals that you had when you started might change. These changes could affect how well your company’s legal structure works. If your business’ legal structure has become a burden rather than a benefit, what options do you have? Find out more from a business lawyer with Mullen Holland & Cooper.
What Factors Might Affect Your Legal Structure?
When starting a business, you and any business partners you have will need to decide what type of legal structure your business will take. Some of the considerations to think about when choosing a legal structure include:
- Flexibility –Consider your goals for your business to determine which forms of legal structure will allow your company to meet them.
- Complexity – More formal company structures such as partnerships and corporations are more complex to organize and run. Consider what level of complexity you’re comfortable with.
- Liability – If you want to protect your personal assets from the liabilities of the business, it’s a good idea to choose a legal structure that includes limited liability protection.
- Taxes – Certain types of legal structures can only be taxed in certain ways. You might want to avoid choosing a legal structure that imposes a heavy tax burden and restricts your company’s growth.
- Management – Different types of legal business structures have certain requirements for how the company’s management.
- Investment – If your business is seeking outside investment, you might have an easier time with a corporation or another more formal structure.
Types of Business Structures
The most common types of business structures used by companies include:
- Sole proprietorship, in which the business and owner are considered the same for legal purposes
- Partnerships, in which two or more individuals establish a business together as either general partners, who have responsibility for operations, or limited partners, who are typically passive investors
- Limited liability companies, which take on aspects of both partnerships and corporations
- Corporations, the most formal business structure in which the company is regarded as separate from its owners, who hold ownership rights in the company in the form of stocks
Can You Change Your Business Structure?
In most cases, you can change your company’s business structure to meet the company’s changing needs and operations. The ease of changing a business structure can depend on how your company is currently organized. If you’re operating as a sole proprietorship, changing your business structure to another form such as an LLC or corporation can be as easy as filing the appropriate registration paperwork with the state.
But if you’re already organized as a partnership, LLC, or corporation and want to change the structure, it can require a more involved process. While changing corporate structures historically required a merger-and-acquisition process, many states have adopted statutory conversion laws that allow companies to change between a partnership, LLC, or corporation by filing the appropriate paperwork with the state. That said, it’s important to consult with tax counsel about the tax implications of the change.
How a Business Lawyer Could Help
An experienced business lawyer can assist your company as it grows by:
- Conducting regular reviews of your company’s operations to evaluate whether your business’ current legal and tax structures still work for your needs and goals
- Advising you on potential alternative structures that might better serve your business’s operations
- Helping you understand the legal and tax implications of changing your business’s structure
- Assisting you with preparing the necessary paperwork to effect a change in the company’s legal and/or tax structure
If you have questions about whether your company’s current business structure works for your present situation or future goals, get the advice you need. At Mullen Holland & Cooper, we can evaluate the options your company has for changing its current business structure. Call or contact us today to speak with an experienced North Carolina business attorney in an initial consultation.