Guest post by Ryen Rasmus, Esq., The Lipp Law Firm, PC
Congratulations! This is an exciting time in your professional life – you’re getting ready to launch a new business. Whether you’ll be continuing the same kind of work that you’ve been performing for many years or setting out on a brand-new venture, starting up your new company is a big step that carries major opportunities, but also more than a few risks. As an attorney, I help my start-up clients to mitigate their risk as much as possible, and one of the simplest and most
effective means of doing so is housing your business within the appropriate legal entity.
There are four major entity types from which an entrepreneur may choose: sole proprietorship, partnership, corporation, and limited liability company.
Sole Proprietorship and Partnership
The first two types, sole proprietorship and partnership, require no formal filing to set up, but rather arise automatically by operation of law when people start doing business. A sole proprietorship is the default when a single person starts doing
business, while a partnership is the default when two or more people join together to perform work and share profits.
Although these entities are easy to form, they come with major downsides. A sole proprietorship and its owner are treated as one and the same in the eyes of the law, meaning that if someone were to sue the sole proprietorship, the owner’s personal assets (i.e. house, car, and bank accounts) would be on the line and available to satisfy judgments against the owner’s business. Not only is the same true for partnerships, the act of one partner is presumed to be the act of another if it is within the ordinary course of business, meaning that you can get in trouble for your business’s partner’s bad
judgment. Moreover, all partners are presumed to be equally liable for a partnership’s profits and debts, even if only one partner does all the work or incurs all the liabilities on the partnership’s behalf.
Corporation and LLC
For this reason, most businesses should be housed within either a corporation or LLC. Each entity insulates its owners against personal liability for the company’s debts, which is a major protection. These entities also provide structure for businesses, as they call for officers, and give the owners more control over the apportionment of profits and liabilities, often based on the roles that the owners perform with respect to the business in practice. To apportion these factors
appropriately, the owners should come together to draft a governing document for these entities – a “shareholder agreement” for corporations, or an operating agreement for LLC’s. This document can set forth the parties’ respective duties and obligations and provide certainty that the less formal entities (sole proprietorships and partnerships) often lack.
Of all entity types, the LLC is often the most advisable for new businesses. It is most flexible from a tax standpoint, as an LLC may be taxed as a disregarded entity, partnership, S-Corp, C-Corp, or not-for-profit so long as appropriate prerequisites are met. It also requires satisfaction of fewer formalities than a corporation, disclosure of less information, and (in most jurisdictions) less money to set up and maintain. Unless you’ll be seeking outside investment in the short term, and barring the presence of other specialized business factors, an LLC is usually the right choice.
Specialized Entity Types
There are other, more specialized entity types that may be available depending on the nature of your business, such as non-stock corporations (for not-for-profit ventures), professional corporations (for those in certain regulated professions like doctors and lawyers), and limited partnerships (when different owners will be doing markedly different things for a business).
The decision about a choice of entity is usually very fact-specific, so be sure to consult with experienced legal counsel before making a final decision about what is best for your new enterprise. Congratulations again on this new step in your career, and good luck in moving through these early but crucial steps!
Disclaimer: This material is intended for general information purposes only and does not constitute legal advice. For legal issues that arise, the reader should consult legal counsel.
About the Author. Ryen Rasmus is an attorney at The Lipp Law Firm, PC. Ryen has comprehensive experience in the fields of intellectual property, complex business transactions, and business-related litigation. He specializes in the drafting of contracts and operations documents; resolution of business and intellectual property-related disputes; and counseling in the fields of corporate, employment, and software law. Ryen also serves the firm’s clients by providing mergers and acquisitions-related advice and conducting regulatory oversight reviews to ensure that clients’ businesses are compliant and protected to the maximum extent.
The post Choosing the Right Entity for Your New Business appeared first on Startup to Growth, LLC.
This post from Ami Neiberger-Miller , founder of Steppingstone, LLC. It is an intriguing look into how a small Loudoun County business faced a PR Crisis with no Crisis PR plan in place.
Crisis PR Matters: Even for Small Business Owners Who Don’t Know How to Use the Internet
“I don’t know how to use the Internet” is not an excuse that holds water in this day and age – not if you have a small business and deal with the public. And not if you are facing a public relations crisis.
Nichols Hardware prides itself on being a “step back in time” – where service is personal, the floorboards are creaky, and receipts are written by hand. The century-old family hardware store in Purcellville came under fire recently. A customer took to Facebook in May 2018 to share she witnessed a store employee belittle a Boy Scout in uniform and his father – when the boy came into the store to ask if supplies for an Eagle Scout project could be donated.
In the customer’s telling, the employee was rude to the boy and his father – threw them out of the store – and tossed in some anti-gay slurs and negative comments about boy scouting. Other employees in the store did nothing.
This had all the makings of going nuclear – and it did.
The customer’s Friday Facebook post was shared over the weekend and generated calls for a boycott. By Sunday, there was a story in the Washington Post about the controversy.
It didn’t help the store when the one employee willing to talk to the reporter would only give his first name (this is a great way to look like you are doing something you shouldn’t when dealing with the press) and called the allegation “hearsay” (hello, it happened 24 hours ago, do you not know what happened yet? Time to be clear is now). Their response improved and the store clawed its way onto firmer footing when he told the Post, “I won’t put up with it,” he said. “If it turns out to be true, he will be terminated.”
The store’s manager told the Post that he was worried about what the fuss might mean for the store. “It’s costing us business,” he said. But he noted there was no way he would know what was happening online. “I don’t use the Internet,” he said. “I don’t know how to use the Internet.” Herein rests mistake #2 – not keeping up with what people are saying about your business on social media.
A stronger response to the Washington Post could have dispelled the issue and perhaps headed off broadcast coverage. But no. In the interview with the Post, the store comes across as not fully aware of what happened, hiding something, and not in touch with a huge segment of the community that was venting its anger and stewing over the situation on social media. The Washington Post story was a missed opportunity for the store leadership to right the ship.
Meanwhile, the father of the belittled scout wrote on the Yelp review for the store: “Thrown out!!! Can’t believe it, I have shopped here since 1985. Went in with my son to get help with his Eagle Scout project. We were told to leave because the boy has been removed from Boy Scout. The employee started a rant about the scouts being destroyed allowing girls and homosexuals to join scouting. We won’t be back.” The story continued to gain traction and Yelp put the store’s account under “monitoring” because so many negative reviews came in.
By Monday, the entire town was aflame with comments. Many expressed dismay and surprise that the store’s ownership had not said something yet about the controversy.
Supporters of the hardware store did not help its situation by defending some of the employee’s views on scouting and circulating appalling memes showing girls ages 10-12 in girl scout uniforms who were made to look pregnant – with text noting this would happen with boy scouts now including girls (apparently the meme creators aren’t aware that Boy Scouts have had co-ed camping trips with girls age 14 and up for several years through the Venturing program – and the last time I checked, high school band trips, safety patrol trips to DC, and many other youth activities were co-ed).
This is what made the situation a truly epic PR crisis – the connection of poor customer service and bigotry – with a larger cultural war about changes in scouting. And with a story published in the Washington Post – more press would soon be following. The Loudoun Times Mirror promptly piled on with a story.
On Monday afternoon Nichols Hardware hustled up someone to make a Facebook page for the store (finally…only about 8 years late). The creator helpfully uploaded a couple of flip phone quality photos and posted at 3pm, “*Note* Management and owners are looking into an unfortunate event which took place this weekend and will be making an official statement later today.” Then they didn’t post a statement that day as promised (epic fail).
By Monday afternoon, NBC4 had rolled into town and was outside the store. And so was WUSA9, the CBS affiliate. Purcellville may be small, but this was enough to draw the attention of television crews in the 6thlargest TV news market in the country.
And again, the store’s leadership botched an opportunity to address the issue. It was now 72 hours since the original incident on Friday afternoon that started all of this. Even if the store’s owners had spent the weekend befuddled over the existence of Facebook and Yelp – by Monday morning they should have been working hard to find out what happened and formulated a response.
They could have invited the TV crews in, said look, here’s what we think happened, we don’t countenance homophobia, we apologize for what one of our employees said, and here’s what we are doing to make the situation right. If they had said those things, that moment of honesty and clarity would have been in the TV stories, countered the negative elements swirling, and gone a long way to re-assuring the community about the store, its leadership and their views.
Instead, they did nothing. They told the TV reporters no one from the store would go on camera. They were silent and gave up opportunities to earn back trust. So NBC4 did a story and WUSA9 did one too. The store façade made a great back drop – and it looked like the owners were hiding out in there biting their nails and still unsure of what to do. The Washington Post story meanwhile syndicated into other publications, like the Chicago Tribune, giving not only the store, but the community a none-too-nice reputation.
Being silent – sends a loud message – and not a positive one. Being silent left the store in league with their homophobic and rude employee. Being silent let them paint their accuser – a customer who observed the incident – as an attention-seeker – and granted license to their defenders and their horrible memes. Being silent let them hide their heads in the sand – as if closing one’s eyes and yelling “I’m invisible” can work. It doesn’t.
If you own a business today – even if you don’t like social media or the Internet – you have to be aware of it and monitor it. Your customers are there. They are paying attention and they will use these platforms to talk about you – not just in negatives – but in positives too. And if controversy erupts – you cannot in this day and age give up opportunities to explain yourself in the media if you make a mistake. You have to get a handle on the situation and respond quickly – because social media and today’s press can quickly make a situation bigger.
Personally, I live in Purcellville and I’ve shopped at Nichols Hardware in the past. They are old-fashioned in terms of how they operate, and it once took me 30 minutes to return a tea kettle that wouldn’t whistle, but I’ve never had trouble and the service has been professional and personal for me. I was rooting for them even while ticking off mistake after mistake in their response to this crisis.
Finally, they responded a day late on Facebook, asking their employee to post a short statement indicating that the employee involved had been terminated and that they do not share his views. It’s too bad they didn’t get a PR person to proofread the statement – it’s pretty good – but a pro would have caught the use of “even” when “event” was intended. If you are only going to speak a little, you have speak correctly.
Unfortunately, that post on May 22, 2018 was their last one. And while it’s gotten a huge numbers of comments and shares and the controversy has faded, it appears the store’s leadership has not learned much from this experience and is not engaging in social media regularly. It’s too bad, because other businesses with historic and proud legacies have used social media to draw in new customers, build rapport, and attract business.
Ami Neiberger-Miller is a public relations strategist and writer. She is the founder of Steppingstone LLC, an independent PR practice near Washington, D.C. that provides public relations counsel, social media engagement, writing services, and creative design for publications and websites. Follow her on Twitter @AmazingPRMaven.