Why Your Startup Should Probably Be A Corporation

One of the most common mistakes startups make is to not begin as a corporation. A sole proprietorship is the most simplistic way to start a business and requires the least legal paperwork. However, if you consult with business transaction law services, you'll likely be informed that you will expose yourself to less liability and pay lower taxes if you form a corporation. 

Sole Proprietorships 

With a sole proprietorship, the startup capital for the business comes entirely from one person. If you would like to receive additional capital, you'll either need to take out a loan, form a partnership, or go public so that investors can purchase shares in your company. 


Forming a partnership can be complicated because you will need to create rules for how you will share power and responsibilities to your business. Otherwise, the state that you operate in will determine these rules for you. Like with a sole proprietorship, the owners will be liable personally for any of the debts that they incur. 


While you will want to form the right type of corporation and form it in the right way, this is not as difficult when you are working with business transaction law services. A lawyer can help you determine which option will allow you to pay lower taxes and will also help you through the process of forming a corporation. If you start a business and do not attempt to form a corporation, your business will be assumed to be a sole proprietorship. To form a corporation, you will need to follow specific laws in your state.

Security Laws When Selling Shares

If you form a corporation, make sure to follow securities laws when you are issuing stock to friends, family members, and angel investors. The sale of shares needs to follow specific requirements and failing to meet these requirements can lead to significant financial penalties. The best way to follow these requirements is to hire a lawyer.

Legal Counsel When Forming a Corporation

Not having the right legal consultation can lead to your startup becoming a financial disaster. There are several types of lawyers you should consider consulting with, of which a business transaction lawyer is one. For example, if you will be handling customer data, you may need to consult with a cybersecurity lawyer. With the right legal team, you can make decisions that can set you on the road to success.

For more information, speak with someone familiar with business transaction law