Business Formation Alabama

Articles Tagged with: Business Formation Alabama

Options for Forming a New Business Entity in Alabama

Long before your business comes to fruition, a great deal of planning and foresight is required. In addition to creating a general vision for your endeavor and attempting to innovate with respect to a given market and industry, you also have to think through the policies, procedures and practices that will come to typify the way you do business. But beyond the substantial questions associated with who you are and what you do, there are also vital considerations associated with more structural implications like tax liability and your responsibilities as an owner or partner. Put simply, the kind of entity you wish to form must be an essential priority.

Given the legal nature of these implications, you may wish to consult with an attorney immediately. By doing so in advance, you may spare yourself the eventual cost and frustration associated with potentially winding up on the wrong side of the law. Averting penalties and other legal consequences will assure that your company can focus on what it does best, for other business or consumers alike.

If you are looking to begin a new business, you should briefly familiarize yourself with the various options before speaking with an attorney about what makes the most sense.

Business Entities And What They Mean

As most savvy entrepreneurs know, not all business entities are the same. While the differences don’t always create a significant impact on your daily routines, they may still be important with respect to your bottom line.

There are several options in Alabama. Once you have a clear sense of your business identity, those options include C Corporations, S Corporations, non-profit corporations, sole proprietorships, limited liability companies (LLCs), partnerships, limited liability partnerships (LLPs), limited partnerships (LPs) and limited liability limited partnerships. At first glance, the differences may seem insignificant. Over time, however, implications for your finances and responsibilities may become far more pronounced.

Corporate formation, often ideal for larger companies with greater resources and multiple employees, is an optimal mechanism for those looking to limit personal liability and rather allow that ownership adopt the form of shareholders. As consequence of this arrangement, however, tax structure may be a bit more complicated and require superior finance and accounting resources.

Sole proprietorships are the preferred form for any individual owner. This owner is then entitled to all profits associated with venture while incurring any liabilities, losses and debts associated with operation.

Partnerships of each kind entail at least two owners who enjoy shared ownership of an enterprise. In general, each partner makes certain kind of unique contributions that are in themselves commensurate with their entitlement to profits and responsibility for any debt or liability. The nature of their relationship between one and another depends upon the kind of partnership that has been adopted.

Obtaining Legal Assistance Regarding Entity Formation

Depending upon the nature of your expertise, understanding the distinctions and advantages associated with various business structures may come fairly easily. That said, a legal opinion regarding, for example, the nature of liabilities incurred may be quite valuable.

If you need assistance in regards to starting a business in Alabama, Cloud, Willis & Ellis can help. Contact us today for more information.

Resource:

atlasalabama.gov/info/business-entities/

Starting a Small Business in Alabama

Recent statistics on business formation are promising: According to the New York Times, emerging markets are currently bouncing back from a six-year slowdown. However, if you are thinking of starting your own business, this doesn’t necessarily help calm your nerves, given how taking that initial step to start your own company can still come with its fair share of anxiety and uncertainty.

To this end, working with a checklist can often help provide some structure to where you want to go with your business. That being said, the next step is working with an experienced business attorney to ensure that your company gets off the ground in the right way and in compliance with both federal and state law.

Business Plan

Your business plan is your roadmap or blueprint. It should not only outline your future plans, but include the specifics, such as financial projections, company description, market analysis, and any other relevant information. Business plans can also be helpful if you are seeking a business loan or other financing for your business.

Financing

There are numerous expenses that come with starting a new business. Some of these include rent, salaries, materials, and regulatory fees, amongst other costs. Most business startups get off the ground with a bank loan, however, today there are additional options, such as crowdfunding campaigns and related options. You will want to work with an experienced attorney with connections to financial experts in order to understand what your options are and all the potential financial ramifications that come with those options.

Location

Do you want to start out by running your business from home, or do you need an actual physical location if you are working in retail, etc.? Discussing the pros and cons of your options—especially when it comes to particular tax benefits—can be especially helpful in figuring out this basic first step.

Taxes & Registration

Registering with local, state, and federal tax authorities is another important to first step in order to ensure that you are operating in compliance with the law from the get-go. You will need to work with an experienced local business lawyer in order to ensure that you don’t end up with regulatory violations and subsequent fines.

Legal Classification

Do you want to form an LLC, partnership, joint venture, sole proprietorship, or operate as an independent contractor, etc.? This is where your business attorney can help advise as to the pros and cons of each classification and what makes the most sense based on what you are specifically looking to do.

Experienced Business Formation Attorneys Serving Birmingham, Mobile, and Surrounding Areas

Working with an experienced business entity/formation and litigation attorney while forming your business is crucial. It can make all the difference in terms of avoiding expensive mistakes and dealing with the subsequent liability as a result.

If you have any questions about business formations, the experienced business litigation and corporate law attorneys at Cloud Willis & Ellis can help. Our offices are based in Birmingham and Mobile, Alabama. We’ve helped countless small business clients navigate a broad spectrum of issues that arise during business formation. Contact us today to get started.

Resource:

nytimes.com/2017/04/17/business/dealbook/turkey-referendum-emerging-markets.html

What You Need To Know About Business Formation & Funding Under the Current Regulatory Environment

Entrepreneur featured an interesting article on February 24^th concerning the regulatory environment surrounding funding a business startup, and how the amount of capital—and how you obtain it—will inevitably influence what type of business you are involved in. This is why working with an experienced business entity/formation and litigation attorney while forming your business—regardless of how small or large that business is—is crucial, as it can help you with issues that come up later on in the business’ lifespan, such as debt restructuring or commercial workouts.

The vast majority of entrepreneurs do not have savings or retirement accounts to get things started; in fact, most do not even have stellar credit or a bulletproof job history, assets that can be helpful in approaching a bank seeking a loan for your startup company. And without collateral and a high FICO, it’s likely that you cannot obtain a bank loan.

While changes coming to Dodd-Frank are expected—and may one day make it easier for banks to make loans to small businesses—until then, entrepreneurs will have to look elsewhere for their startup capital. Some of those options include the following:

Peer-To-Peer Lending

Peer-to-peer lending involves lending to people or entities through online services which match the lenders with the borrowers. These lending companies can often operate at a lower overhead than financial institutions, and thus borrowers can borrow funds at lower interest rates.

While traditionally more expensive than low-interest bank loans, this is still less expensive than many of the payday loan firms. However, this option can sometimes be inflexible and require set daily or weekly payments.

Revenue-Based Financing

Revenue-based financing involves investors injecting capital into a new business and, in exchange, obtaining a percentage of that business’ gross revenues. Many of these investors expect the loans to be repaid within four or five years. This tends to be a more flexible approach and does not require hard assets.

Targeted Loans

Reaching out to community banks and organizations—or even online lenders—who offer loan benefits for very specific groups—such as the underserved or specific minority classes—may help you launch your business in a particular area, or as a specifically-labeled minority-owned business.

Self-Funding

Some entrepreneurs choose to self-fund, i.e. keep their existing job while they launch their entrepreneurial effort.

Know That Things Have Changed…

It is, arguably, easier to launch a business with less capital than was required twenty years ago due to the existence of modern software and other platforms and services (such as apps) that allow you to operate with minimum on-site equipment.

Attorneys Who Can Help

Starting up a new business can be extremely challenging: you have to ensure that you are complying with countless laws and regulations at the local and federal levels. If you have any questions about business formations, the experienced business litigation and corporate law attorneys at Cloud Willis & Ellis can help. We have offices based in Birmingham and Mobile, Alabama, and we’ve helped countless small business clients navigate a broad spectrum of issues. Contact us today to get started.

Resource:

entrepreneur.com/article/283358

Starting Out On Your Own?

Starting a business is an exciting adventure, but can quickly become stressful when you begin to learn about all the different components of the start-up process that must be considered. Especially for new small business owners with limited experience on the legal side of the process, the task list associated with starting a business in Alabama can seem overwhelming. Between tax registrations, obtaining business licenses, and investigating the need for local permits and how to obtain them, the process can be daunting. After the initial start-up process, the task list continues with tax withholding, hiring, documentation, and insurance processes. One of the first steps, however, is choosing which type of business entity you wish to establish.

Starting Out Small

There are a number of different business entity types available to choose from. Each one has its own potential advantages and disadvantages, and what is right for one type of business may not be right for another. The sole proprietorship is the simplest type of business entity. With this type of business, one person owns and manages the business. They alone are solely responsible for all of the transactions, including tax payments, as well as the debts and liabilities of the business. The owner is free to sell the business whenever they want to or they could pass it along to an heir. Paperwork and formalities are not as extensive for a sole proprietorship as with other types of business entities, but sole proprietors do need to comply with all licensing and local permit issues in the locality of the business. One of the more attractive advantages of a sole proprietorship is that they are the easiest and fastest type of business entities to start up.

Making A Name For Yourself

Some sole proprietors just use their own name for their business, but others may want to conduct their business under a fictitious name or ‘doing business as’ – commonly referred to as ‘DBA.’ In Alabama, if you want to use anything other than your own personal name for your business, you must register for a trade name. It is important to note, however, that even if a sole proprietor chooses to use another name for the business other than their own, the structure itself is not changed and all of the responsibilities and liabilities still remain with the business owner.

Starting Out Right – Contact Cloud Willis & Ellis, LLC For All Your Business Attorney Needs

Whether you are just starting out with a new business or you already have an established company, you will likely have a need for legal work at some point. Particularly when starting a new business, you want to make sure you get things started off on the right foot. The office of Cloud Willis & Ellis, LLC is the place to turn for professional legal guidance and representation. Our experienced attorneys have assisted countless Alabama businesses of all sizes with their legal issues of all types. Contact the office of Cloud Willis & Ellis, LLC today to schedule a time to meet with our legal professionals and learn how we can help your business with all of its legal needs.

Resource:

sba.com/alabama/

Alabama’s New Limited Liability Company Law

Deciding to form a legal business entity and selecting the business structure that best meets your needs can be a tricky process. It is important to understand the potential benefits and downsides associated with each type of business structure before selecting one. Additionally, it is also important to be aware that changes to your state’s business code can affect a company’s rights and responsibilities. For example, if you are involved with a limited liability company (LLC) in Alabama, or are considering forming one, it is important to note that the new Alabama Limited Liability Company Law of 2014 governs all LLCs filed since January 1st, 2015, and that it becomes retroactively effective on all LLCs as of January 1st, 2017.

Significant Changes Implemented Via Alabama’s New LLC Law

While Alabama’s new LLC law departs from our state’s current law in a number of different ways, there are a few components of the new law that are particularly important to be aware of. These key changes are outlined below.

Operating Agreements: An ‘operating agreement’ is the agreement that LLC members enter into that governs the business and outlines the members’ financial and managerial rights and responsibilities. Under Alabama’s new LLC law, operating agreements are not required to be in writing and can be oral or implied.
Series Segmentation: The new law allows internal ‘series’ in order to divide liabilities, members, etc. The idea behind a series limited liability company is that one series can be protected against the liabilities of another series. In some situations, this change in the law will eliminate the need for multiple LLCs. However, be aware that the IRS has not yet indicated how it will treat series LLCs for tax liability, and it also is not clear how certain issues in pending litigation, such a general liability, will be treated under Alabama common law.
Right To Contract: The new law removes many of the old default provisions, and almost all of the default provisions that do remain can be contracted around in the LLC agreement.
Conversions: Alabama’s new law provides a one-step conversion between LLCs and other types of business entities. After the conversion takes place, the converted entity will own the same assets and will be responsible for the same liabilities as it did before the conversion took place.
Management: Under the new law, LLCs in Alabama are member-managed, rather than manager-managed, unless otherwise provided in the LLC Agreement. Additionally, a member or a manager’s authority to bind an LLC is governed by the LLC Agreement. If the LLC does not have such an agreement, then agency law governs their ability to bind the LLC.
Reinstatement: LLCs governed by Alabama’s new law can be dissolved and then come back to life.
Ability To Limit Liability Of Members For Breach Of Contract: When drafting the LLC Agreement, an LLC can now waive its ability to hold a member liable for breach of contract.
Clawback Distributions: Under Alabama’s new law an LLC member can now be held liable for receiving distributions in excess of the fair market value of the assets.

Do I Need to Register My LLC?

Under Alabama’s Door Closing Statute (Alabama Code section 10A-1-7.21), a business entity that has not registered in Alabama, and is not a corporation or other organization formed under federal law, may not maintain any action, suit, or proceeding within our state. Alabama’s Door Closing Statute is just one reason why you may want to consider registering your business entity in Alabama. However, there are also many other practical advantages of registering your LLC, including:

Limits certain liability exposure,
LLCs are able to enforce good faith and fair dealing among members,
Encourages equitable income distributions among members,
Provides the ability to limit the authority of certain members/employees to bind the LLC,
Allows conversion of partnerships or other entities to LLCs,
Provides the ability to limit the fiduciary duties of members to only those with ‘oversight’,
Affords remedies against non-performing members,
Allows greater freedom for LLC members to contract privately, and
Enables LLCs to better protect their assets and exposure to all types of potential litigation and/or disputes.

What Can We Do to Help?

If you live in Alabama and are interested in registering your LLC, contact the experienced business law attorneys at Cloud Willis & Ellis, LLC today by calling our Birmingham office at (205) 322-6060 or our Mobile office at (251) 545-4844.

Thinking Of Starting A Business? Middle Market Companies In Alabama Are On The Rise

Starting your own business may seem like a dream come true and be incredibly daunting at the same time. When deciding to form a legal business entity, timing can be everything. According to a recent article in the Birmingham Business Journal, many entrepreneurs have decided that now is the time. The article notes that mid-market companies are on the rise in Alabama.

Middle Market Businesses In Alabama

What is a ‘middle market business’? A middle market business is generally defined as a company with between $10 million and one billion dollars in annual revenues. The Birmingham Business Journal points to a study conducted by American Express, which indicates that middle market businesses in Alabama grew 80 percent between 2011 and 2016. Our state is now home to an estimated 2,500 middle market businesses.

Nationally, middle market firms are very important for job creation. The American Express study found that middle market companies are responsible for a whopping 53 percent of job growth across the nation since 2011. Additionally, mid-market companies employ approximately 25 percent of the American workforce. Although Alabama’s middle market saw huge growth from 2011 to 2016, other states saw even greater growth and therefore Alabama’s growth is ranked 31st nationwide.

New Business Creation Across The Country

Milwaukee’s Journal Sentinel recently reported that new business growth in the United States is very imbalanced geographically. Statistics in support of this statement indicate that between 2010 and 2014 only 2 percent the nation’s counties saw 50 percent of the nation’s total job growth. Additionally, out of the approximately 3,000 counties in the United States, 50 percent of the new businesses started during this time period were clustered in only 20 counties. The article notes that counties with the highest rates of new business formation and job growth included Chicago, Dallas, Houston, Los Angeles, Miami, Minneapolis, San Francisco, and Seattle.

Why are the majority of new businesses and new jobs clustered geographically in such a limited number of counties? While there are undoubtedly many factors that have contributed this the phenomenon, a study from the Economic Innovation Group notes that access to capital is at least partially to blame. Currently, prosperity geographically correlates strongly with the location of venture capitalist investment firms in ‘knowledge economy cities’. Venture capitalists have the ability to fund companies that would not otherwise have the resources necessary to get off the ground. Additionally, venture capitalists are particularly important today because many entrepreneurs are not financially able to secure a business loan from a bank. Many potential business owners lack the capital to fund their own businesses because they lost home equity when the housing market bubble burst and/or because young Americans owe billions of dollars in student debt.

How Can We Help?

If you are interested in starting your own business it is a good idea to consult with a competent attorney who can lead you through the business entity formation process from start to finish. The experienced corporate lawyers at Cloud Willis & Ellis, LLC have offices in Birmingham (205-322-6060) and Mobile (251-545-4844) and are happy to assist you.

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