In our last article, we covered the first decisions new business owners need to make when starting a business in Michigan. Another important decision facing new business owners is financing options - equity or owner capital vs. debt or borrowed capital. While equity financing has its advantages, sometimes, businesses are left with no choice but to take loans.
Every business entity should have a properly drafted agreement to correctly reflect the ownership and management of the business. This document is important for the entities internal use, as well as to provide to third parties dealing with the entity. LLCs use an operating agreement, Corporations use a shareholder agreement and partnerships use a partnership agreement.
For corporations, stock certificates will need to be prepared to reflect the shareholders ownership in the company. Corporations should also maintain minute books to comply with Michigan Business Corporations Act’s requirement of recording the proceedings of its shareholders, board of directors and business executives.
Today, LLCs have become the preferred choice of doing business due to its flexible structure, limited liability to owners, decentralized management amongst its owners and favorable pass through federal tax treatment.
Now you may be wondering - why hire a layer when starting a business? Firstly, an attorney can help you choose the most appropriate form of business entity to best suit your needs. A lawyer can also assist you in preparing and reviewing any loan documentation from any bank or other source, to better protect your interests. With hiring a lawyer comes confidence and peace of mind in knowing that your business has been set up properly and legally so you're free to focus on the million other things on your to do list.