Good luck and please remember the information here is very general and may not apply to your specific situation. Nothing here should be considered legal advice. For information on your situation, contact your lawyer or the appropriate government agency.

LLCs are also extraordinarily easy to form. In Missouri, anyone with an Internet connection can form an LLC and have a copy of his or her official Certificate of Organization in hand in less than 15 minutes. No joke. See the process for yourself at the Missouri Secretary of State website. Answer seven or so simple questions, plug in your credit card number, agree to pay the $105 filing fee, and you’re official. It’s a nice system, but note that the registration process begins with a warning — one I will reiterate here.

Organizing an LLC is easy. Setting up and operating your LLC in a way that will insure that you benefit from the liability and tax advantages is the hard part. Plunking down the $105 and getting your Certificate of Registration makes business formation so beguilingly simple that many people think the job is done. In truth, while you are “official”, all you’ve done is provide notice to the state and the general public that you’re in business–and let people know where they can reach your LLC if they want to sue it. The next step is is the crucial one — and one that will require much more effort. You need an Operating Agreement.

An Operating Agreement is the foundation for your company. It will specify who’s involved, what they do, and how the company will be operated. Most importantly, it defines the relationships between you and your partners and between you (and each other founder) and the company. Specifically this is likely where you’ll formally limit the liability of individual owners and employees of the LLC. This is also where you will address any special tax allocation issues. A properly drafted Operating Agreement can stand you and your company in good stead for years, providing for such events as the departure of a member, loans from members to the LLC or vice versa, bank loans, and other items that come up over the life of a business. A solid Operating Agreement is a signal of a well organized business and respect for the limited liability form — items which, if unimportant to you know, will likely prove extremely comforting should you find yourself on the wrong end of a lawsuit involving your LLC.

An Operating Agreement does not have to be an all knowing document full of provisions for unlikely events or doomsday scenarios. It can be a relatively simple set of ground rules that grows with your business. If the Operating Agreement is not perfect or does not provide for every possible contingency, it can always be amended, updated, added to, or replaced as a whole. Doing any kind of business without an Operating Agreement, on the other hand, is a very unwise move. The lack of an Operating Ageement with some no-brainer basic provisions can leave you without the kind of protections you thought you were getting when you registered your LLC with the state. At best you will be at the mercy of state default rules for LLC operation. Worse, you could end up personally liable for financial problems of your company, whether or not you caused them.

Good luck and please remember the information here is very general and may not apply to your specific situation. Nothing here should be considered legal advice. For information on your situation, contact your lawyer or the appropriate government agency.

There are a range of options for the development of business formation documents, from self-help books, to online services, to large full service law firms. For many entrepreneurs, there is a great attraction to the savings offered by the low end of the spectrum. There has been a recent growth in “commodity” legal service companies, operating mostly via the Internet, that claim to blend the low cost of the self help methods with the individual attention and peace of mind that come with traditional legal service.

My thought: don’t be fooled. The problem with services of this type, such as LegalZoom, is that they are set up to have no real accountability to you. This is for two reasons: first, you have no idea who you’re dealing with, or even whether you’re dealing with a lawyer. This leaves you little recourse when something goes wrong. You may be able to complain to the company, and maybe they’ll listen — but this is far different than the duty owed to you by a real lawyer, licensed in your state, who has a host of legal and ethical obligations to you and to the state bar to which he or she is accountable for professional lapses. The second, and more important, reason is that you may not become aware of a defect in your formation documents for years. As with many legal documents, the quality of formation documents gets little attention when things are going well. The first time you are likely to become aware of the problem is sometime down the road — probably at a time when there are significant financial, liability, or tax stakes. Flaws in organization documents have a way of hiding until there is a lot money involved — when they suddenly blossom, often causing suspicion among long time partners and turning friends into enemies. Sure, you may be able to place some of the blame on the document service at that point, but time has a way of muddying things, and anonymous online services have a way of not being attentive to the changing needs of new and growing businesses.

When you add the “hide the ball” pricing tactics that many such services employ (quoting a low price, then charging outrageous amounts for revisions or updates, unreasonable service and shipping charges, and the like), this type of service may put you in a position of spending far more than a self help method and having far less than the peace of mind offered by a lawyer.

My feeling, of course, is that anyone serious about starting and running a business should consult with a lawyer licensed to practice in his or her state. Many lawyers specializing in small businesses offer flexible rate arrangements that can make the cost of services far more palatable. For those of you who really can’t see the value in having a local lawyer help organize your business, go with a good self help book. The cost is low, and you’ll get the opportunity to gain an understanding of all of the factors involved in forming your business.

Some readers may feel that, as a lawyer, I have an axe to grind when it comes to long distance “legal” services — after all, they compete for the same business as I do. There may be some truth to that. However, before you go attributing too much of my attitude to sour grapes, have a look at what the folks at Legal Zoom have to say about their own services (it’s at the bottom of every page)

Disclaimer: The information provided in this site is not legal advice, but general information on legal issues commonly encountered. LegalZoom’s Legal Document Service is not a law firm and is not a substitute for an attorney or law firm. ..

Oops. And that’s just what’s on every page. Click over to the disclaimers for even more bad news.

Remember, your business documents are serious legal agreements that, should you achieve business success, will govern rights and responsibilities to amounts of money far in excess of the amount you’d pay even the priciest law firm for business organization. Do you want to trust those documents to a company that disclaims responsibility for their contents before you’ve even pulled out your credit card? For those of you who note that I carry a disclaimer of my own at the bottom of each post, please also note that a) I am not marketing the information on this site as a solution to any specific legal needs; b) I am not charging anyone for the information on this site; and c) even if it were not grossly unethical, I would never, ever attempt to make such a disclaimer about the effect of my services to anyone who actually came to me for legal services.

However you go about it, make sure you do the research. The Internet offers a wealth of information on all of the services you might use to get your business formed, including numerous spots for reviews and rankings. A little more research and (maybe) a little more expense at the outset of your venture could have huge financial and emotional benefits in the future.

Good luck and please remember the information here is very general and may not apply to your specific situation. Nothing here should be considered legal advice. For information on your situation, contact your lawyer or the appropriate government agency.

Entity selection depends on a number of factors. Some of the more common considerations are:

1. Acceptance of /aversion to personal liability

Avoidance of personal liability is often considered the most important consideration in business law. Without proper planning, your personal assets (house, cars, bank accounts, etc.) could be used to satisfy a debt owed by your business. This can go beyond expected business debts – even legal judgments and settlements, or regulatory penalties or fines assessed against your company may become your responsibility if you do not organize the business in a way that can shield you from personal liability. The issue of personal liability is not all doom and gloom – there are relatively simple and inexpensive ways to limit your liability. Many common business risks can also be insured. The important thing here is that you carefully consider the implications of your entity choice on your level of personal liability.

2. Desired tax treatment

The issue of tax treatment goes far beyond that of how much of your profits you will have to share with various government entities. Tax treatment is a large and significant topic — and one that deserves special attention. Consult with an accountant or tax attorney on the implications of taxation on your choice of entity.

3. Costs of formation and administration

Different business entities come with different filing and administrative requirements. Some can be quite expensive and time consuming, some are practically free. A sole proprietorship, for instance, is pretty much automatic and, at base, carries administrative requirements no more burdensome than those of running the rest of your life. A C-Corporation, on the other hand, generally brings with it significant up-front costs in the form of legal and planning fees, as well as ongoing costs of running and documenting meetings, keeping up with filings, finances and other administrative overhead. SO why bother with a corporation? It offers significant advantages when it comes to many of the other considerations discussed here. The good news here is that you can generally move from the low cost/low maintenance end of the spectrum to the more expensive side as business needs and finances dictate.

4. Financing

If you plan to raise money for your company by any means other than organic growth, your choice of business entity will probably matter a lot. Your specific needs will depend on how you intend to raise money, how much money you intend to raise, your financing sources, and whether you will be financing via debt or equity, among other things. Most importantly, your funding source will probably have its own requirements of your business, including acceptable entity choices. Fundraising, and its implications on entity choice, is a huge topic that is best left for another time and place. Suffice it to say for now that if you are looking to raise outside money in any way from any source, you should organize your business in some form that limits personal liability. To put it more strongly: if you are looking to raise money, have lawyer review your business and fundraising plans before you do anything else. The upfront cost may appear prohibitive, but it is likely far less than the cost of any of the missteps you could potentially make.

5. Survivability

Survivability simply means the ability of the company to continue without its founders. This may not matter to you much when forming the company, but if you are looking to raise money, retire, leave the company to heirs, or otherwise divest your ownership, it will matter a lot. Typically, sole proprietorships and partnerships cease to exist when their founders leave. Corporations and correctly formed limited liability companies will survive the departure of founders.

Working through the above issues should help you in determining the business entity that is correct for you and your business. Be aware, however, that the discussion above provides only a brief outline of each of the areas discussed, and only discusses some of the major issues involved in entity choice. There is a great deal more depth to all of the issues discussed, and other issues you may need to consider. The good news is that very few of the decisions you make when starting your company are set in stone, and most can be changed as needs dictate. Find a good lawyer and tax adviser if you haven’t already — the services they will provide will prove invaluable to your company as it grows.

Good luck and please remember the information here is very general and may not apply to your specific situation. Nothing here should be considered legal advice. For information on your situation, contact your lawyer or the appropriate government agency.

Fortunately, as long as you’re collecting the appropriate amount of tax, many of the potential administrative headaches are diminished because you remit all collected sales taxes to the MO Department of Revenue, which then forwards the appropriate amounts to any city or county that gets a share. So the trick is making sure you collect the right amount of sales tax and apply it to the proper sales.

Determining the amount of sales tax is relatively simple. When you file for your sales tax registration for your business location(s), the state will let you know your rate. If you’d like to know the rate for a particular location, you can look it up here or print out a full rate card for your location.

Once you know your rate, it’s just a matter of making sure that it is properly collected on each taxable sale. If you are selling physical items, other than food, to end consumers, you can almost be assured that the sale is fully taxable. Note that sales of certain services are taxable and that certain food items are taxed at a lower rate. If you have questions about the appropriate tax for an item, check with your lawyer, or with the Missouri Department of Revenue.

The actual mechanics of collecting the tax on each sale are dependant on the specifics of your POS system, so check with your POS system vendor to make sure that sales tax is being collected appropriately.

For more info on handling the Missouri sales tax, you can check out these resources:

General info/FAQs

Info on taxability and exemptions

Forms for sales tax registration

Good luck and please remember the information here is very general and may not apply to your specific situation. Nothing here should be considered legal advice. For information on your situation, contact your lawyer or the appropriate government agency.