Just Started a Business? Step Back and Make Sure You Took the First Critical Steps.

Filling out the required paperwork to open a new business can look like a daunting task, but it’s a prerequisite for long-term success

Just Started a Business? Step Back and Make Sure You Took the First Critical Steps.

Devin Shanley, principal of Shanley Law, based in Green Bay, Wisconsin

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Portable restroom operators don’t just wake up one day and say, “Surprise! I’m open.” Before they hang up their shingle, they need to attend to a host of details. These details include the state and federal legal documents that establish the company’s identity, organizational structure and taxation.

Attorney Devin Shanley, principal of Shanley Law in Green Bay, Wisconsin, recommends a two-step approach to making legal decisions for a new business. On day one, determine how to get into business and address problems you may encounter as a business owner. On day two, decide how to get out of business and create a way to ease the transition.

“This goes beyond the documents and into a legal strategy,” Shanley says. “This is where a lawyer is going to be more than a document vending machine and a little bit more of a planning guide.”

It’s inadvisable to skip the legal paperwork because it puts you in a vulnerable position. You’ll be operating as a sole proprietorship without the protections of the law. “It’s the most classic form of business. You just go out there and do it,” Shanley says.

This arrangement is problematic on a number of levels. Liability is one concern. If you’re taken to court, you face the potential of losing not just your business, but your personal property and assets, too.

“There’s zero protection,” Shanley says. “You’re totally exposed.”

LIMITED LIABILITY COMPANY

A limited liability company provides better protection for owners. An LLC establishes a business as a legal entity. With an LLC, business and personal finances are separated, and personal finances are protected from lawsuits, business debts and losses. An LLC can be created for a sole proprietorship, a partnership or a corporation.

“In Wisconsin, it’s stupid-easy to form an LLC,” Shanley says. “The Department of Financial Institutions literally puts the form as a fill-in-the-blank on its website. Individuals enter their information and pay a fee.

“Suddenly, you’re an LLC. Isn’t that grand?” Shanley adds. Yet there’s more to consider.

The articles of organization used to form an LLC require the name of the organizer (essentially, the person filling out the form) and the registered agent (the person who accepts the official correspondence and is publicly associated with the company). Filling in these blanks may be as simple or sophisticated as an owner wishes, handled with or without an attorney.

LIMITED LIABILITY PARTNERSHIP

If two or more owners decide to form a partnership, an LLC or a limited liability partnership is recommended. The LLP is like the LLC, but it is specifically designed for partnerships. In addition to their LLC or LLP agreement, partners should negotiate an operating agreement. This agreement sets guidelines for how the business will be run.

“It’s going to say how people vote, how decisions are made, who’s in control, who represents the business and how to sell,” Shanley says.

Incorporation requirements vary by state, and business owners should check with a local attorney or their secretary of state to see what other documents are necessary. On the federal level, the IRS issues employment identification numbers to new businesses. Small-business owners quickly learn that obtaining an EIN is a necessity.

“Most independent business owners are going to hit this wall when they go to open a bank account,” Shanley says. Visit the IRS portal at www.irs.gov to apply for free.

SETTING UP CORPORATIONS

While some PROs operate as sole proprietorships or partnerships, others form corporations instead. Corporations require their own set of documents.

“Instead of forming articles of organization, you file articles of incorporation,” Shanley says. “Instead of an operating agreement, you’re going to set up bylaws. Instead of setting up ownership interest, you are going to be selling stock.”

Consulting with an accountant can help you determine which type of organizational structure makes sense for your business based on tax implications and state requirements. For instance, some states require an annual meeting.

OTHER DOCUMENTS

You may also need specific licenses and certifications, which vary depending on the municipality and state. Government officials, established restroom contractors and trade groups such as the Portable Sanitation Association International can help you determine what licenses are necessary in your region.

PROs who work solo face different decisions than partnerships or corporations.

“If you take that person out of the business, what is left? The owner needs to take a look at this,” Shanley says. Powers of attorney documents or a trust can provide a backup plan if something happens to the owner unexpectedly.

“Make sure you have documents that say someone can walk in and run the business if something happens to you,” Shanley says. “Partners will generally be able to figure something out, mostly because another partner or partners still have the power to run the business. But what is the plan for a solo owner who has no one else?”

Once you hire employees, a new set of legalities surface. You’ll want to set up a payroll system to withhold taxes, obtain workers’ compensation insurance, post the required notices and abide by other state labor laws.

Working with business consultant, attorney or accountant can help you form the foundation necessary for a successful business.

“A lawyer’s job is to think through terrible situations all day,” Shanley says. “We naturally assume the worst thing is going to happen, and we try to steer you so it doesn’t.” 



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