If you have been working for yourself and earning money by doing so, you need to form a business entity according to North Carolina law to protect yourself from the claims of others.
The formation of a legally recognized business entity under North Carolina law will protect you, your family and your assets from the claims of third parties, as well as provide you other benefits as a small business owner. Many folks do not realize the exposure they have personally to the claims of third parties when they have failed to form a legally recognized business entity until it is too late. There is no way to go back and retrospectively change the ownership status of your business from a sole proprietorship to avoid liability after a third party makes a claim against you. Insurance can help give you some protection, however, there are so many different types of claims that can be made against you, it becomes a nightmare trying to keep up with what is covered by insurance and what it not. Plus, many of my clients have expressed their frustration about all the work they had to do to gather the evidence necessary for the insurance company to give them the financial assistance they believed they had.
If you properly establish and maintain a legal business under the laws of North Carolina, and a third party is damaged by you or your employees while performing duties in the scope of your business, the likelihood of you having personal liability for the damage is limited substantially without the damaged party meeting the significantly increased burdens required to give rise to your personal liability beyond the legal business entity you established.
By properly forming a business entity according to North Carolina law, you can make further application with the Internal Revenue Service to operate your business independently of your personal checking account.
Once you have properly formed a business entity, you can obtain a Tax Identification Number (“TIN”)/Employer Identification Number (“EIN”) from the Internal Revenue System, then you can use the TIN/EIN like a social security number to open business financial accounts to manage your necessary financial transactions, as well as to establish credit for your business, enter into contractual relationships with vendors and customers, and own assets separate and apart from you and your personal assets. Further, as your business grows and you need to hire employees and expand your asset base, it is easier to manage that growth through your business entity, accounts and its TIN/EIN than through your personal financial accounts.
There are multiple opportunities for an attorney can help you during the formation and initial years of the development of your business, which can help your business avoid the pitfalls many businesses face later, because they try to handle everything on their own.
At KJT-Law, in addition to putting you in contact with other professionals, who will be best suited to help you with the new and increasing needs of your business, we will perform the following to help you set up your North Carolina business entity properly:
- Describe the various business structures from a legal perspective:
- Sole Proprietorship;
- General, Limited or Limited Liability Partnership;
- Limited Liability Company, Professional Limited Liability Company or Non-Profit Limited Liability Company; and
- Corporation, Professional Corporation or Non-Profit Corporation.
- File the necessary paperwork to establish your business, usually Articles of Organization or Articles of Incorporation, and other initial filings;
- Draft your Operating Agreement, Bylaws or other initial corporate documents;
- Set up your company records book, train you to conduct necessary meetings and maintain records of important decisions made in the life of your company, and educate you how to keep your company records up-to-date;
- Design your company setup plan of action, considering:
- Obtaining TIN/EIN;
- Opening financial accounts;
- Establishing employees-compensation, taxes, various types of insurance;
- Accounting issues;
- Acquiring assets or another business, the meanings of certain terms of negotiation and the practical considerations of the deal;
- Securing financing to grow your business and how it will affect your business; and
- Facilitating your understanding of certain key terms in various types of contracts: leases, sales, employee, and, etc.
Contact us now to get started