What type of business entity should I choose when starting a business?
The appropriate entity depends on the business’s objectives, ownership structure, management model, liability considerations, tax strategy, and regulatory requirements. Common structures include LLCs, corporations, partnerships, and other specialized entities. For regulated businesses, including RIAs, broker-dealers, and private fund managers, entity selection should also take into account ownership, governance, and applicable registration and compliance requirements.
What legal documents are needed to form a new business?
Formation usually involves filing the appropriate organizational documents with the state and preparing governing documents such as an operating agreement, partnership agreement, or bylaws and shareholder agreement, depending on the entity. Businesses may also need employment or independent contractor agreements, intellectual property assignments, and other contracts appropriate for their operations. Regulated financial services businesses may require additional regulatory filings, client agreements, and compliance documentation. Properly establishing these documents provides a foundation for governance, ownership, decision-making, and future transactions. The documents should also be reviewed periodically as the business grows or its ownership and operations change.
What should I consider when forming a business with multiple owners?
Businesses with multiple owners should address ownership percentages, voting and management rights, capital contributions, compensation, distributions, transfer restrictions, owner departures, valuation of ownership interests, and procedures for resolving disputes and deadlocks. Buy-sell provisions can establish procedures for events such as death, disability, retirement, or a voluntary sale of an ownership interest. Addressing these issues when the business is formed can reduce uncertainty and help prevent costly disputes later.
What should a new financial services firm consider beyond forming the entity?
Entity formation is only the beginning for a regulated financial services business. Depending on the business model, an RIA, broker-dealer, private fund adviser, or other financial services firm may need to address regulatory registration, ownership and governance, employment and licensing, client agreements, disclosure documents, compliance policies and procedures, books and records, privacy, cybersecurity, and business continuity. These requirements should be considered alongside the firm’s actual operations, including its services, fee structure, technology, custodial relationships, and client onboarding process.
What legal issues should I consider when expanding or restructuring an existing business?
Business expansion or restructuring can affect ownership, governance, contracts, employment relationships, regulatory obligations, intellectual property, tax considerations, and liability exposure. Changes such as adding an owner, creating a new subsidiary, entering a joint venture, acquiring another business, or moving into a new line of business may require amendments to existing agreements and corporate documents. For regulated financial services firms, expansion may also trigger new registration, disclosure, licensing, or compliance requirements. Evaluating these issues before implementing a structural change can help identify legal and operational consequences and ensure the business’s corporate structure continues to support its objectives.
How can corporate counsel help with business formation and growth?
Corporate counsel can assist from selection of entity type through the development and management of the business. This may include formation filings, governance documents, ownership arrangements, buy-sell agreements, employment agreements, contracts, regulatory filings, corporate recordkeeping, and amendments as the business evolves. For financial services firms, counsel can also help coordinate corporate structure with applicable regulatory and compliance requirements. As the business grows, counsel can help address ownership changes, restructurings, M&A transactions, succession planning, and other significant corporate events. Having legal counsel involved early can help identify structural issues before they become obstacles to growth or future transactions.
