The first step in most entrepreneurial endeavors is to form a new entity for your franchise to protect the personal interests of the owners. There are a number of factors to consider when deciding to form a new entity, such as:
- What type of entity to form – a corporation or a limited liability company?
- What state do you decide to form your entity in?
- Are you issuing stock or certain membership interests?
- What should the name of your new entity be?
- Who will own the entity?
- What is the agreement between the partners?
- How are profits split up?
- Who controls the management?
- What if the owners don’t get along?
- And a myriad of other questions, hypotheticals, and future considerations…
Every situation is unique, and it is highly recommended that you discuss your business and its goals with an attorney prior to forming a new entity. You need a business attorney who will take the time to understand your goals, needs, and unique situation in order to receive quality legal advice. Forming the entity is the easy part, what you do with it and what happens next is where you need experienced guidance.
Employer Identification Number (“EIN”)
The entity will need to file for an Employer Identification Number (“EIN”) with the IRS. The EIN number is the equivalent of a Social Security number for your business. An EIN number is crucial to conducting any transactions on behalf of your business, such as opening a bank account or paying your taxes.
It is imperative to get an EIN assigned to your entity soon after it is formed. If you form an entity without getting an EIN or without transacting any business in the entity’s name, you risk losing any legal protection. This is counterproductive, as the purpose of entity formation is to protect your business against copycats.
Work with an Experienced Law Firm
Please call us today at 202-803-5676 if you have any general questions or to discuss the specifics of your situation. We look forward to speaking with you soon and helping you on your journey toward business ownership. For more information regarding forming a new entity for your franchise, check out our blog or schedule a consultation with one of our attorneys.
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