When and Why You Should Consider Changing Your Business Entity From a Sole Proprietorship

Since no formal filing needs to be completed to operate a sole proprietorship, it often is the default business structure for many new businesses. There are a few reasons why we see so many sole proprietorships. Sometimes, a sole proprietor has no intention of starting a business but just starts selling a product or service. Some people don’t want to go through the hassle or financial burden of incorporating. Other times they don’t think their business is risky enough to need that extra layer of protection. It is important to know when to consider registering a legal entity to obtain the advantages of limited liability and otherwise. Consider these instances where registering a legal entity might be a good fit:

Reduce Your Personal Liability

As previously explained in our recent blog, Which Business Structure Best Suits Your Business, sole proprietorships offer zero division between your business and personal assets, increasing your personal liability at risk. As a business grows, so can your personal risk. If you notice your business is growing quicker than expected it may be smart to consider converting to an LLC or corporation, where personal liability is limited.

Seeking Tax Flexibility

Paying taxes is inevitable but choosing the right structure can alleviate some of your personal financial burdens. As a sole proprietor, you must file self-employed or personal tax forms. You are responsible for paying taxes on all profits and revenue earned from the business and filing it as personal revenue. Converting to a corporation or LLC will allow you to only pay taxes on the profits you make from the business, and provide additional flexibility. We recommend converting at the beginning of the year to avoid filing two different tax forms for the business. Always seek the guidance of your CPA or tax professional when making tax decisions.

Seeking Investors

If you intend to have a business that seeks investors, funding, or any sort of capital, having a sole proprietorship will often make raising capital more difficult. Banks have more comfort and confidence in providing more established business structures with loans and investors typically seek some sort of ownership piece or partnership structure in return for their investment when deciding to fund a business. Considering an LLC or a corporation in this scenario will facilitate more financing options and provide the business owner with additional flexibility in raising capital.

Before making these types of business decisions, call us today to schedule a consultation so we can help you determine which business structure is right for you.

Which Business Structure Best Suits Your Business?

When beginning a business, an important early decision is to determine the optimal form of business structure you want to establish for your business. The right decision can help ensure a business’s success and better protects personal assets and property. As a new business owner, it is important to understand your options before you register your business through the state of your business location.

Determining the most appropriate business structure is among the most crucial decision you can make, affecting every facet of your business, including the day-to-day operations, agreed-upon management structure, administrative requirements, tax consequences, and so much more.

MOST COMMON BUSINESS STRUCTURES

Sole Proprietorship – this type of business structure is one of the easiest to set up and gives you complete control of your business. This structure is suited for a sole owner of a business. In many instances, the legal requirements and hurdles are minimal. You may not have to legally go through the process of setting up a sole proprietorship. In this format, you file self-employed or personal tax forms. A sole proprietor setup combines your personal and business assets, creating no divide between the two and putting you at potential risk, and not fully insulating you from liability, as well as other options.

Partnership – there are two types of partnership structures available: limited partnerships (LP) and limited liability partnerships (LLP). If you’re starting a business with two or more people, this could be a wise format to pursue. In partnership structures, it is necessary to execute partnership agreements, to eliminate any misunderstanding on how the partnership will operate. LPs and LLPs determine what is shared equally and when one partner has control of certain aspects of operations and how the other individuals will contribute and receive parts of the profits. Depending on a partner’s asset profile and the corporate structures selected, a partner may have to file self-employed or personal taxes. Be wary of the type of liability you retain.

Limited Liability Company (LLC) – if you’re seeking a business structure that divides your personal assets and liability from your business, then an LLC could be a good choice. An LLC can protect your personal liability in some important ways. Keep in mind, LLCs are state-specific and could have different regulations and obligations. This structure can involve one or more owners (members), requiring each owner to file self-employed/personal taxes.

Corporation – unlike any other structure previously mentioned, corporations protect your personal liability effectively, maintaining independence between your personal assets and your business. As an owner of a corporation, you do not need to file taxes on business earrings through your personal taxes but rather just on your individual earnings. Corporations file corporate taxes, can make a profit, obtain stocks, and can have one or more owners.

Nonprofit Corporation – nonprofits are unique as they benefit the public and are tax-exempt if filled through the IRS properly. As previously mentioned, all business structures have different regulations and rules. For example, nonprofits are exempt from distributing profit to members and political campaigns. And like standard corporations, owners are not personally liable and can be owned by one or more people.

Knowing the importance of this step for business owners, we have a team dedicated to discussing your options, providing counsel, and assisting with the filling process – we invite you to contact us for a free consultation.

What We’ve Learned From Countless Business Partner Breakups

Navigating a business partnership requires more than just a trustworthy partner on your side. Going into a business partnership prepared and with the proper framework in place could lead you to a successful, long-standing, lucrative business. From our experience, here are partnership situations we recommend avoiding:

Not Implementing A Partnership Agreement at Inception

Approaching a business partnership without an executed partnership agreement is probably one of the biggest mistakes you can make. We have seen countless business partnership breakups. Although it may seem pessimistic, every business relationship should be approached with the end in mind. Just as in a marriage; it is unromantic to contemplate a breakup on the way into the relationship but ensuring an agreement that spells out how each partner will go their separate ways is critical. We generally counsel businesses not to spend too much money on legal niceties up front but rather to focus on operational success. However, the one exception to that rule is creating a business agreement up front that spells out how the parties will divide assets or buy one another out.

The foundations of a partnership agreement should be completed with a qualified lawyer familiar with business agreements, contracts, and transactions, like The Markarian Group. We make sure business agreements are structured to ensure straightforward and enforceable provisions to guide all parties. Contracts can outline partnership structures, tasks and responsibilities, and how buy-outs will be managed.

Relying Too Much On The Internet

Our experience has taught us that business agreements that are available online are best avoided. We have had more business than we would like, generated by people who need advice because they entered an inferior online agreement. Avoid online contracts because a contractual agreement needs independent and well-reasoned advice that considers the specific and unique situations involved in your business, properly defines important terms and addresses all discernable risks.

Not Setting Up The Correct Partnership Structure

The thought of pursuing a new endeavor with someone that hopefully shares your vision is exciting, but be realistic, remember that businesses are sometimes difficult to sustain, and business partner relationships could sour.

Almost all business partners enter a relationship full of optimism and hope for the future with a lucrative business. The right time to strike an agreement and set parameters as to how the relationship may end, is when emotions are positive. The Markarian Group can guide you and your business in the right direction. Call us today to schedule a consultation.

How to Choose the Right Attorney

Choosing and finding a qualified attorney takes more than a Google search. It takes time, research, and the right questions to ensure you select a lawyer most suitable for your needs. As someone seeking legal representation, it is important to conduct thorough interviews with whomever you consider hiring, preferably in person or via video conferencing.

These considerations are among those important to consider before the interview process:

  • Define and outline your legal needs and the ultimate desired outcome.
  • Identify lawyers that specialize and concentrate in your area of legal needs.
  • Obtain referrals from friends and colleagues.  Talk to those who have experienced the same situation you are facing.

Once you have identified your legal needs and have refined your list of lawyers to interview, the next step would be to prepare for the interviews by crafting a list of questions to help you guide the conversation. Having a plan and asking the right questions will ensure a productive meeting. The following are key questions to consider asking while interviewing a lawyer:

  1. How long have you specialized in this specific area of legal practice? It is important to hire an attorney that specializes and is an expert in the legal areas you are seeking representation. Not all lawyers are created equal. At The Markarian Group, our team is versed in over 10 practice areas, tailoring to all business types and needs.
  2. How long have you practiced law?
  3. What are your familiarities with cases, businesses, and situations similar to mine? Ask for a thorough analysis and case study and know that not every case is the same, so approach this with an open mind.
  4. Besides you, who else from the firm will be involved in our business relationship?
  5. Retainer and Billing. Although not a direct question, it is important to understand how long you will potentially have to retain a lawyer and the billing structure.

In addition to having the right questions, an attorney-client relationship is essential to a successful outcome.  Also, your “gut” instinct can be very important.  Choose a lawyer that is a good match for you and that you feel comfortable with.  Add to that level of comfort the right combination of experience, communication methods, strategy, personality and reputation, in order to ensure you choose wisely.

Finding the right lawyer and team of attorneys can be very case-specific and these questions should provide you with a good start. At The Markarian Group, we offer potential clients no-cost consultation meetings, and we are here to help you weigh your options. Call us today to schedule a consultation call.

How To Establish A Business in Florida

If you’re reading this, chances are you are interested in learning how to establish a business in Florida. Florida is appealing to new business owners because it has one of the most business-friendly tax and regulatory environments in the country. In Florida, you can form a business yourself or hire a service to do it for you. But regardless of which option you choose, use the following steps to get you through the process. There are basic requirements you must satisfy, which we will address later in our six steps.

For starters, it is vital to emphasize the process of selecting the best type of business entity form for your business. According to the Small Business Association, the type of business entity you wish to establish influences several business practices: from how you’ll file annual taxes, to the day-to-day operations of your business, and even how much of your personal assets are at risk.

Types of Business Entities/Structures

  • Sole Proprietorship
  • Partnerships
  • Corporations
  • S Corporations
  • Limited Liability Company (LLC)

Each business entity/structure type has its pros and cons, and our experienced team of attorneys is here to carefully walk you through your options to help decide which is best for you. We’re happy to discuss the benefits and risks associated with each type of entity structure and invite you to contact us here for a free consultation.

Once you establish the form of business you want to pursue those best suits your needs and business, follow these steps to establish a business in Florida:

  1. Establish a Name – Follow Naming Guideline for Florida

Do your research, and make sure no other business has your desired name or one similar enough that can cause confusion for your customers and clients. To check if your business name is available, you can do a name search on the SunBiz Florida website. If you’re creating an LLC, your name must include the phrase “limited liability company or “LLC/L.L.C.”

  1. File Articles of Incorporation

Form your business by visiting www.SunBiz.com to file your Articles of Incorporation. You can file your business online or via mail. Non-Profit, Profit, LLC, and Partnership business types all have different and separate Articles of Incorporation. Be sure to fill out the corresponding form for your business type. You are also required to register your business with the Florida Department of Revenue

  1. Choose a Registered Agent 

Florida requires that you nominate a Registered Agent for your business, who is the business’ point of contact with the state. The registered agent can be an individual within the company, or an authorized services company authorized to do business in the state of Florida. The authorized agent will send and receive legal papers on the business’ behalf, including correspondence such as legal summons and document findings to properly maintain business. 

  1. Register Your Business Name 

If you selected to open your business as a Sole ProprietorshipThe Fictitious Name Act  (s.865.09, F.S.) requires any person (which, by definition, includes an individual, as well as a business entity) to register their “fictitious name” or “dba” name with the Florida Department of State prior to conducting business in Florida.

Registration of a fictitious name under the Fictitious Name Act allows:

  • An individual or business to operate under a name other than their legal name.
  • The public to search SunBiz to determine what individual or business is operating under the fictitious name.
  1. Seek Legal Advice

If you established a business where more than one owner or individual is involved, seek legal advice to create an operating agreement. Whether you’re starting a new business or revising your existing business structure, our experienced team of attorneys can help you draft an operating agreement tailored to your needs. We’ll make sure your agreement complies with applicable laws and regulations, and provides the protection you need to keep your business running smoothly.

  1. Get an EIN for your Florida LLC

What is an EIN? The Employer Identification Number (EIN), is a nine-digit number issued by the Internal Revenue System (IRS); an Employer ID Number is used to identify a business entity and keep track of a business’s tax reporting.

If you are looking to establish a business in Florida, it is important to follow the proper steps and seek legal assistance. The Markarian Group has a team of experienced attorneys who can help you navigate the complex process of starting a business in Florida. We understand the importance of getting your business set up properly for success, and will work diligently to ensure that all necessary paperwork is filed and that your company is compliant with state laws. Contact us today for more information about our services or to schedule a consultation with one of our attorneys.

Building Bridges with your Business Partner During COVID-19 Times

There are few issues that are more dominant than the Covid pandemic, which has changed our society in ways no one anticipated less than two years ago. Despite the broader, more recognizable impacts that all of us have seen, the pandemic has also forced some uncomfortable situations that may not have existed before 2020. Consider vaccinations, which have proven effective in either preventing serious illness or hospitalization, or infection altogether. Though this may be true, not everyone shares the belief that vaccinations should be mandatory, but rather a personal choice. So what happens in a work environment where two partners share this difference of opinion? Dave Markarian, Partner, The Markarian Group, says it is a reasonable question to consider as the issue grows in relevance. This can be approached in several ways:

  • Approach Interactions With An Open Mind: We have to acknowledge that there are going to be differences of opinion, even in what seems obvious. Attempt to remain open-minded and understand your partners’ or coworkers’ points of view and listen generously.  Trying to convince them they are “wrong” and you are “right” will be unproductive and can foster an even more emotional reaction, making working together more difficult.
  • Be Respectful: It’s acceptable to disagree. Respect the reasons for other’s decisions that differ from the choices you’ve made, and speak about them rationally, with a spirit of understanding.
  • Figure It Out: This might seem like a challenge, but there’s always room for negotiation. Once you can work through differences respectfully, you can set boundaries on what kind of workplace environment is best.  A little cooperation all the way around can yield a result that allows everyone to feel safe while allowing for a sense of self-direction. Understanding the basics will go a long way.
  • It May Not Be Forever: The final point to realize is that this might be temporary. It’s difficult to imagine, but the science and treatments are changing every day. Make it clear as you work through these conversations that it isn’t personal – this is just a way to get through the current circumstances.

The key to keep in mind; avoid trying to convince your fellow worker that they’re wrong, and instead focus on sensible give-and-take solutions. It will make working together a lot easier. Stay calm and committed to establishing the best practices for everyone involved – including yourself!

We Help People and Business in Times of Crisis

Increasingly, the firm is retained to represent people and companies in crisis, during paradigm shifts, and during moments of uncertainty. In other words, at times when the stakes could not be higher:

  • A business owner learns that a trusted employee set up a competing business, moving all of that businesses’ customers, employees and suppliers to the new company in the dead of night.
  • An employer unfairly seeks an injunction against a former employee, keeping her from working in support of her family, at tremendous emotional and financial cost.
  • Suit is threatened against a respected community member that may lead to irreversible injury to reputation.
  • A high school athletic association wrongly denies eligibility to a promising football player, threatening the athlete’s scholarship opportunities at the very time that college scouts would make final decisions effecting his future – prejudicing what is likely his best ticket to a lucrative degree and to lift himself beyond his modest upbringing.
  • An election must be challenged within 10 days of its certification.
  • A business professional receives an administrative complaint against her license, threatening suspension or revocation potentially resulting in professional and reputational ruin.
  • A business’ trade secrets are to be exposed by subpoenas issued in an unrelated dispute between two business rivals in a tangential line of work.
  • Husband-and-wife business partners see both their marriage and business prospects crumble simultaneously, with the soon-to-be ex-husband resorting to financial hijinks to “maintain control” over the soon-to-be ex-wife.
  • A public official is wrongfully included in litigation in the midst of a re-election campaign, requiring forceful response followed by immediate, discrete resolution. Property or bank accounts must be immediately seized to prevent fraudulent transfers or dissipation of assets.
  • A family burdened by costly estate litigation finds itself victimized by an unreasonable sibling’s meritless, retributive legal challenges.
  • A record label filed bankruptcy, and the purchaser of its assets is seeking to void or materially change financial obligations to the artist.
  • A former business partner disables a business’ email domain and website, threatening to interrupt and potentially halt lucrative and necessary business operations.
  • A nursing school receives an administrative complaint which threatens to close the school down, displacing young soon-to-be nurses when our communities need them the most.An applicant for an administrative business license receives a notice of intent to deny, potentially preventing implementation of years of strategic planning and investment. potentially preventing implementation of years of strategic planning and investment.

The stakes of these important David vs. Goliath and “bet the company” contests led us toward law school in the first place, and they still cause our brains to race and our feet to hit the ground running each morning before day-break. In other words: this is what we train and prepare for.

The nature of our work requires the ability to file quality legal petitions, often in the course of just a morning, in order to quickly get the matter before a court for emergency rulings in the blink of an eye. We purposefully maintain extra bandwidth amongst our legal team in order to be able to routinely deliver “thread the needle” legal excellence under tight time deadlines.

At the same time, despite the urgent nature of these contests, sound strategic planning remains the foundation for all our successful legal challenges. We recognize not only the importance of a well thought out “Plan A,” but also the ability to nimbly respond to any potential development with carefully considered alternative courses of action, mapped out in advance. We believe that the best outcomes also occur when we partner effectively with our clients, including them in our inner circle of decision-making and preparation so they can also pay attention to even the smallest detail.

The Covid-19 crisis made it more challenging to enforce legal rights, at least in part because of the suspension of jury trials and other limits on the function of the court system. The conduct of nearly all legal proceedings through video raises the emphasis on compelling story-telling and use of the latest in electronic presentation tools – our forte. We make it a point to be fair and honest with our adversaries, and respectful and helpful to our presiding judges as they labor with difficult decisions.

Most important: we play to win. In our business, winning is paramount, and in this arena, winning favors the litigant with the most compelling story, represented by the legal advocate best able to tell that story most convincingly.

Dave Markarian

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Business of the Month

We have the privilege of working for great people, causes and industries. We represent those who are brilliant at business, as well as those with brilliant ideas, that ultimately become great businesses. Each month, we’d like to tell you about one of our great business-partners and friends, and what they’re doing to make our daily lives better.

This month, take a moment to meet Patrick Powell, CEO of AXE Trailers. Located in Boca Raton, AXE is America’s premier heavy haul trailers provider, working with top manufacturers throughout the United States to provide the highest quality trailers in the industry. A fellow Florida State Seminole, Patrick uniquely understands the power of marketing. With an all gas, no brakes attitude, and a modern approach to the truck and trailer industry, AXE has grown from 4 to 20 employees exponentially. His company is changing the business landscape and finding better ways to serve their customers every single day.

We’re big fans of AXE, and hope you’ll check them out here.

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Safe Covid Practices Protect You and Your Business

Shortly after many communities shut down businesses and schools, etc., we were called upon by our business clients to provide them with a safe framework from which to do business. We set out to craft a plan to safeguard the health of business employees and customers, and do so without incurring crippling liabilities.

Our First effort involved harnessing as much of the known scientific knowledge and mainstream thought as we could and incorporate that into a businesses’ contingency plan. We next incorporated documents that would serve as checklists for companies to ensure safe practices, crafted agreements that businesses could have their subcontractors sign and adhere to (including among other things weekly testing of subcontractors employees, and a signed pledge, verified each week, that the employees have not been exposed to certain conditions, or suffered certain symptoms.

While state and federal government failed to quickly insulate the workplace from Covid liability, we went to work investigating and crafting reasonable steps that could be taken to ensure a safe and secure work environment, including workplace rules and regulations for social distancing, daily sworn documentation of non-exposure, how to enter and exit a workplace, how to sanitize it and how to ensure the spacing of people throughout offices, etc. We counseled businesses as to the type of chemicals to use in keeping their premises clean, the frequency of cleaning, temperature taking and rules on hand washing.

We paid perhaps the most attention to those businesses that could not function, and in fact would go out of business, if they were unable to have their workforce enter customer premises or homes to perform services or deliver materials.

One formula that we believe was most effective was a deliberate effort to assure customers that meaningful steps had been taken for their safety. One business we counseled sent out the notice to customers on the day before a scheduled visit to remind them of the business’ focus on safety, and careful attention to the range of solutions it employed. Customers gained confidence through these creative efforts to ensure as much normality as possible.

We are happy to report that all of the businesses that we’ve counseled, who depend upon working in or on the customers premises or home, are doing well and holding their own, and we’re proud of them.

By David Markarian

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It’s Our Privilege

We have the privilege of working for great people, causes and industries. We represent those who are brilliant at business, as well as those with brilliant ideas, that ultimately become great businesses. Each month, we’d like to tell you about one of our great business-partners and friends, and what they’re doing to making our lives better. This month, take a moment to meet Dean and Tracy Ernst, two of the nicest people you’ll ever meet, and the proprietors of Essential Candy, who make their home in Wellington. Some years ago, due to their desire to help a dear friend overcome the effects of chemotherapy experienced in the wake of cancer, they experimented with batch after batch of variations of concoctions of hard candies infused with CBD, until arriving at just the right formula. After establishing admirable business success, they continue to adhere to their roots – caring for others. A meaningful percentage of every dime they collect is donated and re-purposed for causes that help those with this terrible disease. They call it “Candy With A Purpose.” We say, they do well by doing good. We love them, and hope you’ll check them out here.

Learn more about them in an interview in VoyageMIA Magazine