I must confess I am much more comfortable writing a contract than a blog.  Being unsure of what topic might be more salient to ConnectBlogs readers has resulted in weeks of not posting.  Much is written in Connect about entrepreneurship.  I work and have worked with a good number of entrepreneurs, their companies and those who invest in them.  There are a number of legal matters that regularly face those in the entrepreneurial world.  I have decided there might be some value in a series of blogs related those legal matters.  My hope is that at least some of you will find this blog worthwhile and useful, if for nothing else, to get you thinking about these issues.  My intent is not to give legal advice and my ramblings should not be construed as such (if you didn’t recognize, that was my CYA disclaimer).  Actually, my hope is that some of you will respond and even challenge me.  I would love this to be a collaborative effort.

I should also note that I plan to keep these posts fairly short.  I am doing this for two reasons: (1) to enable me to post more often and give the impression I am more of a productive blogger than I really am and (2) I don’t like reading long blogs and figure I am not alone.

With that, Topic 1…

Part 1:  Entity Formation - To Form or not to Form?

There is a lot to say here, and I could see this topic turning into several subtopics.  However, I’ll start from the beginning with what I think are some basic considerations.

Suppose you just invented a better mousetrap or perhaps a kit to make a snowman.  You begin having visions of success and decide quit your secure day for your shot at independent wealth.  What are the next steps?  Putting aside the bothersome details of creating and executing on a business plan, you need to determine whether to create a formal entity through which to operate your business, and if so, when (and what type - which I’ll cover on another post).  I can think of few if any good examples where a serious business endeavor (or at least one that has more permanence than, say, a lemonade stand or a yard sale) should not to form a business entity.  I recommend doing this prior to beginning business operations.  Businesses operated without creating a formal legal entity are deemed to be either sole proprietorships (1 owner) or general partnerships (more than 1 owner).  Sole prioprietorships and general partnerships offer little or no protection from personal exposure to the liabilities of the company (including those arising from lawsuits).  Better said, there isn’t a legal distinction between the sole prioprietorship or general partnership and their respective owners.  In other words, you could lose much more than just your investment in the company.  To the extent you begin business operations before you create a legal entity, you are exposing yourself (and most people don’t want that).  If you must conduct business operations before creating an entity, be careful (not to say shouldn’t be careful after you create an entity).

[Next topic: Entity Formation - Choice of Entity]