A new year is here and that often brings about new beginnings and opportunities. For those who are planning on starting a new business, there are a lot of issues to consider in order to set your business up for success, right from the start. One of the most important factors to consider is deciding on the correct business structure for your new business.
In our continuing interview series, we have asked our attorneys to share important advice on topics they are passionate about, as well as share some information about their own personal life and career. Here, Bob Churchill discusses important issues to consider when choosing a business structure as well as successfully starting a new business.
What are the most common types of business structures?
There are three basic business structures. The first is sole proprietorship. This is a business with only one owner. The second is a partnership. This is a business with two or more partners. And the third is corporate, either as a stock corporation or a limited liability corporation (L.L.C.). There are different levels of structure, liability protection and taxation for each of the three.
Why is choosing the right business structure important?
The structure should match the type of business being transacted and the need for liability protection. Risk adverse businesses usually choose the corporate options.
What is the best way for a new business owner to decide which business structure is best for their company?
When setting up a new business it is best to discuss with an attorney the ownership of the business, the risks of the operation of the business and the need for tax treatment. This should be balanced with the set-up costs and the ongoing expenses required to keep the business in the proper structure.
What is your best piece of advice for someone who is just starting out with a new business?
Start out with a greater amount of money (capital) than you think necessary to open the business. The majority of new businesses do not survive five years. Not only does one have to be good at their business, but one has to be good at “ business.” Handling accounts receivable, obtaining correct insurance, dealing with employees, calculating taxes, leasing property, starting utilities, and promoting the business are all important aspects of “business” that have nothing to do with making your product or providing your service.
What is one of your favorite memories of a client that you represented?
Throughout my 50 years in the legal profession, I have had thousands of interesting clients, each with a story of their own. One of my favorite stories is of the lady who was three times widowed. The second and third husbands each had two children from previous marriages, but she never had children. Each husband left everything to her.
Every few months she changed her will. She always named only one of her stepchildren, but never the same as the last one named. Over time, each one had been her favorite, and the previous one had lost favor.
One day she called and said that she wanted to change her will again and quickly. So, the will was changed. A week later she died. Perhaps she had a premonition. Since I had been named as executor, I attended the funeral. After the funeral, one of the stepchildren asked to see me in private. He wanted to know when we were going to “read” the will, because he knew that she had left everything to him. She had shown him a copy of the will with only his name on it. I told him we didn’t “read” wills anymore, but that I would send him a copy.
On the way out the door of the funeral home, another of the stepchildren asked when the reading of the will would be, as he knew that the decedent had left everything to him. She had shown him a copy of the will with only his name on it. I told him we didn’t “read” wills anymore, but that I would send him a copy.
When the third and fourth stepchild called me with the same story, I knew there would be a problem.
I sent a copy of the will to each of them. The phone lit up with angry calls from people who decried how they had run her errands, taken her to dinner, spent money on lavish gifts, invited her over to their houses for holidays and always responded to every request she had, because upon her death they expected to receive everything she had. But that was not to be, for, you see, in her Last Will and Testament, she left everything to charity.
Working with Churchill, Quinn, Hamilton & Van Donselaar, Ltd
Clearly, we have many interesting clients, each with an interesting story of their own. And at Churchill, Quinn, Hamilton & Van Donselaar, Ltd, we provide each client with personalized service and attention in order to accomplish their individual goals. Whether that is for starting a new business, providing skilled litigation representation, assisting with real estate transactions, or customizing estate documents (as frequently as needed). Contact us at 847-223-1500 to schedule a meeting.