Small Business Business Organizations - Free Enterprise

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Starting and running a business is ripe with risks, both to the individual and the business. However, when an individual elects to run their business as a sole proprietorship, they are personally taking on the business's legal risks. The most frequently raised concern of sole proprietors involves their personal liability for business debts.

For example, if a customer is injured, a sole proprietor could be personally sued, and his personal assets seized in a judgment, whereas if the business were structured as a separate entity, the business owner could potentially avoid personal liability. For a sole proprietor, liability is a complex topic and, surprisingly, it can actually cut both ways.

Maybe you're just getting ready to start your small business. Or maybe you've been plugging along for a couple years and are finally ready to take your operations big time. Or, you're unhappy with the current legal structure of your business and are looking for an alternative.

Either way, you may be considering forming a partnership. But you should know that partnerships, as all corporate structures, come with legal complications. Here are five legal issues that business partnerships may run into.

Theranos, the once revolutionary laboratory testing company, may be facing a new secret lawsuit from their former partner Walgreens. In a filing on Tuesday, Walgreens asked the Federal District Court in Delaware to permit the company to file a lawsuit "under seal" against Theranos that is based on the contracts that the two companies held with each other.

The motion filed by Walgreens explains that the two companies signed a non-disclosure agreement (NDA) relating to Theranos's business and technology. As a result of the NDA, Walgreens explained to the court that the allegations in the complaint, if disclosed in a public filing, would likely violate the terms of the NDA exposing them to liability.

Married small business owners often overlook a common reason why some businesses fail: divorce. In most states, one spouse's small business can be considered a marital asset or marital property. When a couple divorces, assets need to be divided, and that small business can be a couple's largest asset. That's why it's important to make sure your business is divorce proof from the outset.

Fortunately, there are ways to protect a small business after a divorce has been filed. Nonetheless, it is a good idea to protect the business from division before divorce happens. To understand your situation, you first need to know if your business will be separate or community property.

If you forgot to divorce-proof your business before filing for divorce, your only option may be to give up other assets, such as the house, cars, or retirement accounts in order to maintain control of your business.

It happens all too often that when a small business owner wants to retire they realize that they have no exit strategy. Sometimes the lack of an exit strategy is due to the expectation that a child will take over running the business. Unfortunately, what often gets overlooked is that not having an exit strategy can leave that child in a situation where much of the business is lost.

The sooner a small business owner recognizes the need for an exit plan (aka a succession plan), especially if that plan is simply to transfer the business to their kids rather than sell it off, the better off the business will be. The following checklist, while broad, should help small business owners plan their exit and transfer the business to their kid(s).

Most entrepreneurs start and end their careers as a sole proprietor. However, the more successful ones eventually incorporate, and the most successful ones start, run, and sell, multiple businesses at the same time. For the serial entrepreneur, there is no one right way to go about structuring multiple businesses.

Sometimes a serial entrepreneur will have multiple businesses all focused in one industry. For instance, a surf shop owner may own the surf store, as well as make surf boards, bikinis, offer surf lessons, sponsor a professional surf team, and make surfing videos. Apart from being one of the most motivated surfers to ever ride a wave, this serial entrepreneur would really benefit knowing the different kinds of corporate structures and how to structure multiple businesses.

The most iconic record store in Berkeley, California, Amoeba Records, is in the process of renovating their store to provide an independent medical marijuana dispensary with a storefront shop in what used to be their jazz section. Citing the decline in record sales over the past decade, the store's owners hope that the pot dispensary will provide the necessary capital needed to keep the record store's doors open.

Having just celebrated their 25th anniversary, Amoeba Records has been approved by the City of Berkeley's City Council to be one of the city's half-dozen medical marijuana dispensaries. The San Francisco Amoeba Records store has had a medical marijuana evaluations clinic operating independently in a separate space located within the store since 2014.

Starting a small business can take many forms: consulting out of your living room, building in your garage, or cutting the ribbon on a storefront. And your small business can exist in many corporate structures: a sole proprietorship, partnership, or LLC. In almost all of these iterations, however, there is normally just one owner or a small group of investor-shareholders.

But what if you want to do something different? They say that giving your employees stock options can incentivize them to work harder and smarter for the company, so what happens if you make all of your employees owners? Here's what you need to know about employee-owned businesses:

In today's small biz world, many startups, especially Silicon Valley-based tech companies, are asking early employees to forgo high salaries in favor of shares in the company, essentially betting on their own future success. Such equity arrangements can be great for employees and entrepreneurs alike, but they may come with a snag: how can new employee-shareholders find out how much of the company they're getting and how much their shares are worth?

For publicly traded companies, it's easy -- check the share price. But for privately held startups getting that kind of information is more difficult, if not impossible. But an oft-overlooked Delaware incorporation law may be opening the books to shareholders. Here's what you need to know:

Turning your dream job into an LLC can make you feel like you finally made it. Or it can feel like a needless hassle that will corporatize your mom and pop shop. Most often, what incorporating your small business will mean is legal protection for both you and your company.

So if you're still weighing your options, or if you've just begun the incorporation process, here are seven big questions you'll want the answers to: