The right structure, be it a corporation with or without a Sub Chapter S election, and LLC, a partnership, or a management company with subentities, all with different classes of stock? The choice is so highly dependent upon your specific facts – we cannot tell anyone in a FAQ section. But we have put together a series of thought pieces for your consideration, and to help you make better, informed decisions.
So what is the first step? Once you have your idea, and people ready to move forward, here is what you should do – and must do.
Between yourself and all partners, shareholders, co-workers, spouses, significant others, and investors, you must draft a (MOU) memorandum of understanding. The MOU should clearly set forth the duties and requirements of all parties as well as all of the party’s intentions and expectations.
Draft a business outline (like a plan but only maybe five pages) complete with a cash flow forecast for the first 18 months. Clearly identify all of the needs, uses, and sources of cash to fund your operations. They will be imperfect – but do it.
Take these documents to both a small business lawyer and a good small business CPA, not a book keeper or a tax preparer, and discuss your options.
Yes, we know it is like saying – brush your teeth and comb your hair before you leave the house. However, without exaggeration – 90% or greater of the small business problems we face working with young companies could have been addressed pre – or at formation.
Try driving without a map and see how patient you passengers remain when you are trying to find the path and their arrival expectations are no longer tolerant of one other.