A: Let me preface this answer by saying that there is no magic formula that applies universally to every person's circumstances. Generally, I recommend that people considering opening a business take some time and write out what their goals are, how they plan to achieve those goals, and what limitations or obstacles they may foresee. Once they have done that, I would encourage them to invest in the advice of legal counsel through at a minimum, a consultation. During that consultation they should explain their goals, achievement plans, and foreseeable obstacles to the lawyer so that the lawyer can them dispense sound guidance based on those elements.

Now to answer the question. Planning is critical for a broad range of reasons. Those reasons include limiting liability, protecting assets, providing flexibility for growth, business succession, and preservation of the wealth the business will hopefully produce.

I like to see small businesses formed as manager managed Limited Liability Companies (LLC) whenever appropriate. This structure will, with proper operation, shield the owner from liabilities of the company. I also like to have the owner of the LLC, also known as the "member", be a trust. The trust beneficiaries are those who are intended to benefit from the profits and proceeds of the company. With proper planning, and drafting, in some cases the trust could also be structured to protect the LLC from claims against the beneficiaries, and in some cases even claims against the trustor.

Because the member of the LLC is a trust, on death of the founder there is no interruption of ownership, and the LLC, if not already removed from the estate of the decedent founder, will be a nonprobate asset that transfers directly to the beneficiary in accordance with the terms of the trust.

While at first glance this may appear to be a complex structure, there are limited formalities to preserving the identity of the LLC, and also limited administrative duties pertaining to the trust. When counter-balanced with the benefits and protections that will be in place, the burdens of administration and maintenance are relatively minor.

When my office prepares this structure for a client, there is at some point in the planning phase, a joint conference with an independent certified public accountant, (CPA) who provides the client with a review of the accounting and tax reporting tasks that will be involved in maintaining the structure i.e. informing the client about who files what tax returns and when. The CPA can also offer guidance with respect to income tax planning matters that may concern the client.

As I indicated at the beginning of this answer. Each circumstance requires a personalized analysis based on the goals of the client, how the client plans to achieve those goals, and what limitations and obstacles the client believes they will be faced with.

This answer is provided for academic discussion only. Your specific matter may have different facts that require different recommendations than those discussed above. No attorney client relationship can be formed with my firm without having an initial conference, and entering into a written retainer agreement.