Legal contracts important when deciding on a business entity

Choosing the right business entity is an important decision for entrepreneurs consideringforming an LLC, and an attorney writing at VentureBeat recommends considering all the possibilities to avoid future legal issues.

The corporation and LLC offer liability protection for owners in the event of a lawsuit. However, the LLC is relatively new, and Curtis Smolar writes that there isn’t as much legal precedence for LLCs. Forgetting a key aspect of business formation could create problems in the event of a legal proceeding.

For business owners choosing an LLC, Smolar recommends having a professional assemble the required paperwork and contracts, even if it costs a little more.

Another important aspect to consider when forming a business is termination agreements. Smolar recalled one of his clients with two partners. One partner wanted to quit the business; the other didn’t. Since there was no termination agreement, the situation created legal problems.

Having all the issues covered with a solid contract can also help with the processes of selling a business. Owner-financing is increasingly being used to entice potential buyers, and having a clear termination agreement and contract with all partners and stakeholders will assure all options are available.ADNFCR-3052-ID-19940145-ADNFCR

Melissa Clark
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Melissa Clark

Head of Content & Customer Marketing at Incfile
Melissa sets the vision for Incfile's content marketing and customer relationship management. Melissa has more than 10 years experience in various marketing roles, and a passion for supporting small businesses as they incorporate and grow. She loves sharing information that will help business owners maximize their LLCs, Corporations and Nonprofits. In her spare time, Melissa is an active member of The Junior League and enjoys running half marathons.
Melissa Clark
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