Know Your Entities: Preparing for the Initial Consultation with Your Business Attorney

Starting a business is a serious endeavor that opens you up to many new legal considerations. Be prepared for your initial meeting with an attorney by learning about key business entity concepts.

Single owner

You are a solo practitioner who has been baking and giving away cakes for years. Now people offer you money to bake more. In this situation, if you simply limit yourself to baking cakes in your home kitchen without much fanfare, it may not be necessary to establish a formal entity.

Typical sole proprietors

– Small business
– Operating with a minimum of frills
– Comfortable taking personal financial risks


It has been a sole proprietor for some years. Orders have been coming in steadily and he has hired additional workers. After borrowing his neighbor’s truck to deliver a wedding cake to his first out-of-state client, he realizes that this relationship could help him grow his operations. This could be the time to establish a partnership. Here, you and one or more people agree to share ownership of the business. The partners decide the proportional share of the property. Depending on their status, the partners can share the risk equally or share the risk proportionally according to their agreement. Although it is tempting to rely on a friendly handshake to seal the deal, with so many considerations, it is important that both parties have an attorney review their agreement.

Typical associations

– People who have chosen partners with whom they are likely to work well both professionally and personally.
– Colleagues who have invested time and capital in the business.
– Partners who are willing to personally assume responsibility.

Limited liability company

The bake sale association has been booming and you and your neighbor agree that it is time to start a store. While the association worked when you were in your own kitchen, installing a commercial kitchen requires permits, contractors, and licenses. Above all, you must purchase insurance. This makes you reconsider whether you want to remain personally responsible. What if someone puts on some frosting and sued? The creation of a limited liability company will create a separation between you, the person and the business entity that you operate. In other words, if something bad happened, the company would be responsible, not you and your neighbor.

Typical limited liability companies

– Operate in an industry susceptible to lawsuits
– It can be of any size
– Requires less personal financial investment


Twenty years have passed and you are a Cake Don. In addition to making cakes for all occasions, she has an online baking show, podcast, and line of baking products. This is all fantastic and you are a millionaire, but your hands hurt and you wonder what will happen when you want to slow down. His family steps in and asks to participate, prompting him to establish a corporation. This form of business is run by a board of directors that, depending on the type of corporation, may or may not own shares in the company. If you want to ensure the long-term success of your cake business, having a corporate board available to help make decisions is critical.

Typical corporation

– Has a larger budget
– It can be for profit or not for profit
– Must comply with strict regulations if the corporation goes public

Be sure to work with an attorney to ensure you stay compliant while running a thriving business, no matter the type.

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