October 2026
Plan Before You Form: Considerations Prior to Forming an Entity
When forming an entity, one should consider various issues that can have a significant impact on governance, information rights, tax treatment, future financing, and future transactions.
Below are three key considerations that should be weighed carefully before forming an entity.
Business Operations: Some business types benefit from, or even necessitate, a particular structure. For instance, medical, legal, and other specialized businesses may require a certain entity type, such as a professional corporation or professional LLC, or a private equity fund may benefit from the tiered structure of a limited partnership.
Ownership and Control: Ownership, income, tax treatment, and information-sharing should be weighed before deciding on an entity structure. For instance, post-tax income can be different depending on structure, or owners may have statutory or contractual rights to receive information about the company’s finances, operations, records, and other affairs. These should be considered.
Long-Term Plans: When selecting a particular entity type, it is important to consider future obligations, including ongoing legal, operational, or regulatory requirements. For instance, franchise taxes and reporting requirements can differ.
Counsel can help ensure that you make the right choices for your business. For assistance with entity formation and structuring, please contact us at 619.298.2880 or email [email protected].
September 2026
- Financing covenants. Identify and track affirmative covenants—such as financial reporting, compliance certificates, insurance, and required notices—and negative covenants restricting indebtedness, liens, distributions, investments, acquisitions, and other actions. Establish clear responsibility for monitoring compliance, with particular attention to financial covenant testing dates and lender-consent requirements.
- Notice requirements. Track notice obligations under credit agreements and other material contracts, including required recipients, delivery methods, and deadlines. A missed notice can have consequences well beyond an administrative oversight.
- Post-closing transition. Assign responsibility for remaining third-party consents, regulatory filings, employee and benefits matters, licenses, customer and vendor communications, systems and data migration, and other integration items.
- Economic and contingent obligations. Calendar earnouts, purchase-price adjustments, escrow releases, indemnification deadlines, and other post-closing payment or claim procedures.
About the author
Abbas Mahvash, Esq.
Senior Associate
Mr. Abbas Mahvash is a Senior Associate at Jacko Law Group, PC, where he focuses his practice on mergers and acquisitions, and other areas of corporate law, regulatory counsel matters, and succession...
