Folks make wills declaring what will happen to their worldly possessions upon death. For tax planning and to avoid probate, people form trusts. Married couples enter into prenuptial agreements declaring what will happen to their assets in case of divorce. Why do people do these things?
People want to avoid the default. They want to avoid the law telling them how it is going to be. They want to control their assets, possessions, and valuables. They want to determine how things will be divided and distributed. If there is not a will, if there is not a trust, if there is not a prenuptial agreement, laws and statutes will determine how your assets are divided and distributed.
What if, when forming a business, you could outline how the owners would share profits, sell and transfer ownership in the business? What if you, not the law, could dictate when and how the company was managed? What if you could decide, when the business dissolved, for whatever reasons, what would happen at the end of the day? Guess what? You can.
With by-laws of a corporation and an operating agreement of a limited liability company [LLC], you can decide, within limits, how your profits will be distributed, who can buy and own interest in the business, when and under what circumstances the business dissolves, and numerous other things.
Yes. You can give the Secretary of the State a piece of paper and $100 or so. Whoula. You have a business. But, if you could decide how your business uses its money; if you could decide who can own your business, and if your business continues to exist, why won’t you. Why would you allow laws and statutes to tell how it is going to be? If you are going into business with a partner[s] or if you are thinking of having partner[s] in the future, or if you just want more control of your business, make sure you business has by-laws or an operating agreement.
Ask us about asset planning for your business. Click here. Complete the questionnaire to learn if an corporation or limited liability company is right for you.