The actual act of incorporating or organizing a limited liability company in California isn’t all that difficult. The documents you need are available online; you file articles of incorporation to form a corporation, and articles of organization to form an LLC. If the Secretary of State accepts your articles for filing, your corporation or LLC will be active.
Filing some forms? This sounds simple enough. So why hire a lawyer to set up your corporation or LLC?
Because getting the entity active and recognized by the Secretary of State isn’t the end of the process. It’s just the end of the beginning. The real work begins once the corporation or LLC is active, and that’s where the pitfalls lie.
To illustrate, let’s suppose that you’ve chosen to incorporate your business, and you’re successful in getting the corporation active with the secretary of state. This is a good start. But what many business owners don’t recognize is that post-formation, a corporation still needs to take several steps to ensure it is properly set up and will protect its owners, as it’s meant to. For example, it has to appoint directors, hold organizational meetings, elect officers, issue shares, prepare bylaws, obtain an employer identification number, decide whether to file an S-corporation election, file required post-formation documents with the government, and ideally, have its shareholders enter into a buy-sell agreement. These are all important steps in setting up a corporation that will shield its owners from liability for business debts—which is one of the main benefits of incorporating in the first place.
But the problem for typical owners is that these legal issues are piled on top of everything else they already have to deal with in building up a business. Most owners simply don’t have the time or expertise needed to adequately address the legal issues involved with operating a business, and as a result these issues fall by the wayside until they later become a problem. A good attorney can help owners identify and navigate the complexities of setting up their corporation or LLC, allowing them to keep their time and resources focused where they belong: on running the business.
Starting a new company isn’t something to be entered into lightly. It’s sometimes expensive, usually all-consuming, and always has lasting consequences. With this much on the line, it’s prudent to consult with an attorney and ensure that the legal foundations for your business are strong enough to support the enterprise you’ll build on top of it.