Why do I need to hire a lawyer to incorporate? Can’t I just do that online?

“It is often said that everyone needs a good lawyer, C.P.A. and mechanic.”


One of the most common mistakes entrepreneurs make is incorporate on the cheap. Numerous television advertisements or internet banners advertise, “For just $99.99, you too can incorporate online.” Sometimes, a C.P.A. firm will offer to incorporate a business as part of their services. However, that $99.99 internet special typically costs the business owner thousands of dollars later.

First, one of the prime considerations of incorporating, forming a limited partnership or forming a limited liability company is to protect you, individually, from liability. A lawyer can identify where your business may be vulnerable and what steps should be taken moving forward to protect your assets and minimize your risk.

Second, incorporating may not be the best option for your business. Depending upon the nature of your business, your relationship with other investors, or your long-term goals, forming a limited partnership or limited liability company may be preferable. Third, a lawyer will draft bylaws, a partnership agreement, or company agreement tailor-made on how you want to manage and sell equity in the company. Fourth, a lawyer will need to draft organizational minutes electing the company’s officers and outlining the scope of their duties, which a bank typically requires.

Most importantly, a lawyer drafts company documents with an exit strategy in mind. For example, co-owners of a company often start out the best of friends and continue to be so, especially as the business thrives. All too often, however, some event occurs that causes mistrust or the co-owners decide to part ways. Depending upon the circumstances, the company’s break-up results in an expensive lawsuit. Often a lawsuit could be avoided if the business owner simply hired a lawyer in the beginning. As discussed above, a lawyer could draft the documents that would prevent any ambiguity as to the Company’s management, sharing of profits or losses, requiring additional equity contributions or its dissolution. A lawyer should also discuss the possibilities of whether the business owner’s exit strategy is to sell to another company, his or her co-owner upon retirement or pass the company to his or her children.

The ultimate question is whether the entrepreneur is serious about starting a business or will it be just a hobby. If a business owner is serious about being successful, then the initial investment of sitting down with a lawyer in the beginning will yield big returns, or avoid costly litigation, in the future.

Adam W. Vanek
avanek@tiponjoneslaw.com
214.890.0991