Recent Articles

Legal

This page is dedicated to the legal aspect of owning a business.  THERE IS NO SUBSTITUTE FOR GOOD LEGAL ADVICE.  I am not an attorney and I advise you to seek out an attorney when addressing legal matters for your small business.

The articles below are designed to inform and educate a small business owner. If you are looking for a quick and direct answer, in business there are very few. When you are talking about the law, there are a lot less direct answers. So read with an eye towards learning.

Most of the articles are written about the different forms of legal status for a small business.  Included are articles about the respective Articles in your standard agreements within the entity format.  I expect this to take several years to complete as business formation is complicated.  So if want to know something specific, ask me; I’ll write an article about the subject.

Any feedback would be appreciated, send me an e-mail via dave(use the standard ‘AT’ symbol)businessecon.org.  

FEATURE ARTICLES:

  • Types of Business Entities – Sole Proprietorship, Partnership, Corporation & Limited Liability Company

    When an entrepreneur starts a new business operation, one of the first questions (s)he deals with is the form of business existence. There are a multitude of entities that the law allows. This article describes the four main types and the decision making model that an entrepreneur should follow in determining the best for the ...
  • How to Find a Good Business Attorney

    In my 17 years of practice as an accountant I have met around 30 or so attorneys.  All the interactions were in reference to business issues for my clients.  Out of the 30 I have dealt with, two I would hire. So I’m dedicating this article to the small business owner that needs to hire an ...
  • What is a Contract?

    shoveling snowArticle 1 of the Uniform Commercial Code copyrighted by the American Law Institute is considered the primary source for the definition of a contract.  All of the 50 states have incorporated all or most of the definition of this code as statue.  A contract is defined as a legal obligation between two or more parties.  ...
  • The Sole Proprietorship – The Basics

    Of the four business entity types, the sole proprietorship is by far the most flexible and easiest to manage.  There are very few drawbacks.  In the world of business, the key is to maximize profit with the least amount of risk.  Each of these two elements is addressed as it relates to 1) decision making, ...
  • What are Trusts?

    A trust is an agreement for one party to care for the assets of another party for the benefit of a third party.  In essence, it is a business agreement.  The person creating or the original owner of the assets is referred to as the Grantor.  The party that will take care of the assets ...
  • What is a Living Trust?

    A tool in estate planning used to minimize probate costs upon the death of the grantor is the living trust.   A Living Trust is created while the grantor is alive and typically is revocable in nature. It is designed to manage assets for the best interest of a beneficiary, usually the grantor. Sometimes called an ...
  • The Basic Principles of a Partnership

    A partnership is a form of a business entity that provides many more advantages than any other form of business entity.  There are several basic principles of a partnership that once understood, the reader can use to his advantage in the small business world.  Below are a description and an explanation of the basic principles ...
  • Why You Should Incorporate Your Business

    As a small business grows, there comes a time when the owner(s) should consider incorporating the business.  A corporation is a separate entity recognized by the state of domicile for the business.  It is as if a new life is created.  The state acknowledges the existence of this entity and therefore grants limited legal rights similar ...
  • Piercing the Corporate Veil

    When shareholders invest into a corporation, there is an expectation of limited losses amounting to the financial investment made.  However, if the company is not properly run, officers, directors and shareholders are exposed to the blade of the law.  This is known as piercing the corporate veil.  Therefore it is critical for any shareholder, director, ...
  • Partnership Agreements – An Introduction

    There is a tremendous amount of information to convey to fully understand partnership agreements.  This is the first in a series of articles related to partnership agreements.  Throughout this series I will explain the various sections and issues a small business owner faces in creating a sound and fair agreement with a single or multiple ...
  • Partnership Agreements – Terminology

    Each of us has our own built in dictionary for terms we hear in our business lives.  I find it fascinating that the standard business term ‘Equity’ is interpreted differently within the business world.  I often interpret the term using the Internal Revenue Service definition because my background is in taxation.  Lawyers use this term ...
  • Shareholder Agreement – Capitalization Clause

    Shareholder AgreementThe shareholder agreement lays out the rules of the relationship between the shareholders of a company.  Most often the agreement is poorly written because the legal team fails to understand the business aspect of each of the respective sections.  One of these sections is referred to as the Article of Capitalization or commonly called the ...
  • Partnership Agreements – Managing, General and Limited Partners

    Every partnership consists of at least two or more partners.  In many partnerships, there are dozens of partners.  Each partner is classed into a particular group.  There are Limited Partners, General (sometimes referred to as Operating) Partners and of course somebody who is in charge – the Managing Partner.  Each of these classes of partners ...
  • Limited Liability Company – Introduction to Basic Principles

    The Limited Liability Company or LLC is really a fusion of two forms of business entity status.  Each has unique positive attributes and legal protections.  The first is the corporation.  Every state allows this form of business entity status.  It basically protects (shields) the owner from lawsuits and financial recourse.  The second entity status that ...
  • Limited Liability Company – Step By Step Setup

    There is multi-step process to establish a Limited Liability Company (LLC).  You must first be recognized by the state of origin and then apply to the Internal Revenue Service to identify the particular tax entity arrangement.  Both recognition processes have several steps involved.  This article guides the entrepreneur through each of the steps to create ...
  • Cross Purchase Agreements – Business Issues

    In the world of small business the ownership of a company is often held by more than one individual.  In most of these cases a family owns the business.   This ownership format is referred to as a ‘Closely Held’ business.   Well, just as in marriage it often doesn’t work out between the owners and some ...
  • Aggregate and Entity Theories of Partnership

    A partnership is defined as an association of two or more persons to carry on as co-owners a business for profit.  The premise is built around the notion that the combined power of the partners exceeds the sum of the value the partners could generate independently.   It is the old adage that the whole is ...
  • Corporate Documents – Introduction

    ‘The job isn’t done until the paperwork is complete’, a popular axiom used especially in business.   It identifies with the requirement that every corporate entity maintain its legal status and understanding between all investors and the management team.  These understandings are the essence of the “formation” of the corporate entity.  Failure to do the paperwork ...
  • Forms of Business Ownership

    When an entrepreneur starts out on his long journey of building a legacy with his business; he almost immediately focuses on the legal status of his business.   His thoughts include:  ‘Should I become a limited liability company or an S-Corporation?’;   ‘What if I take on partners?’; ‘How do I get more capital without giving up ...
  • Joint Venture

    The average person may not realize this, but the most notable joint venture in existence today is the National Football League.   It figuratively owns every Sunday in the fall of each year.  It is an association of 32 clubs agreeing to compete with each other, i.e. engage in athletic entertainment.  Each venturer is its ...