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Monday, December 15, 2008

Small Business Advice ..... Get Yourself A Good Lawyer

Here's some sound small business advice I'll throw into the pot: get a good lawyer and a good CPA.

Some folks like to try and start their business either by just being a sole proprietor or by "partnering up" with other individuals. This can be problematic from a liability standpoint and open the owners up to liability problems.

Additionally, if the owners decide to file their own entity (either directly with the state, or through a corporation services website) they can make choices that cause them problems later on, either with liability issues or with tax issues. And those problems cost lots of money with lawyers and CPAs to clean up. Sometimes exponentially more than the cost of using the lawyer and CPA to do the setup in the first place.

For example, if you set up your entity as an S corp and then decide you would be better off as an LLC ..... when you do the transition it is considered a taxable event by the IRS and can result in a huge tax burden.

The bottom line is getting planning advice on potential liability and tax issues (federal, state and local) on the front end is the smart thing to do. It can short cut the issues that some businesses run into down the road (such as the death of owners, divorces of owners and buyout offers). Additionally well drafted contracts (IMHO) are the best defense against litigation - which is the biggest nightmare of the business owner (it takes their money, their time, and causes stress, all while taking them away from their business).

So while cutting corners and not hiring a lawyer and CPA to start with may seem like the thing to do as a startup to save money, it may end up costing a great deal more in the long run. Money spent with a good business law attorney and a good CPA is a sound investment.

For help in this arena I strongly suggest you contact my friend Seth Hinkley at seth@hinkleylaw.com. You'll be well taken care of.


RoseCovered Glasses said...

Nice overview.

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james paul said...

Awesome blog on Small business Legal Advice. Great tips you give me.