Business Formation

Have an idea for a business? Where do you start transforming that idea into a business? Determining business formation is one of the first and most essential steps to starting a business. It can affect taxes, liability, profitability, growth, and more. Getting it right from the very beginning is critical.

The Dohrwardt Law Firm will review your business idea with you and advise you on all your best legal options. From then on, we'll be able to guide you through the process, proactively ensuring you have all the forms, documentation, and other necessary information and strategies for a successful venture. Contact the Dohrwardt Law Firm to discuss how I can help you get business done.

How Do You Form a Business?

When forming a business, one of the first and most important decisions is the structure you will use. A business structure is the legal classification of a company that determines taxes, liability, and other legal rights and responsibilities. 

A range of business structures is available, including:

  • Sole proprietorship
  • General partnership
  • Limited partnership
  • Limited liability company (LLC)
  • Corporation 
  • Cooperative 

The best business structure for your business depends on various factors. 

What Factors Influence Business Formation?

Here are some factors to consider when choosing the best structure for your business. 


A major deciding factor when structuring your business is often the degree of control you want to retain over your company. This is especially true where multiple owners are involved.

A sole proprietorship allows for the most total control. As the only owner and operator, a sole proprietor can run their business however they want. In comparison, corporations are answerable to shareholders who elect a board of directors to manage the organization's day-to-day business. 


Your business structure also determines the extent of your personal liability for the business's liabilities, debts, and obligations. Some structures offer better protection against personal liability. However, liability and control are usually directly proportional. The less your liability, the less authority you typically exercise over the business. 

In a sole proprietorship, for example, the owner is responsible for the business's liabilities and debts. Their assets may be used to satisfy the business's obligations. They can also be sued about the business's activities. 

In comparison, in a limited partnership, partners have a separate legal identity from that of the business, and their liability is limited to their investment in the company.


The structure of a business determines the applicable tax regime. Many business structures – sole proprietorships, partnerships, limited liability companies, and S corporations – are pass-through entities. This means the business doesn't separately pay tax. Instead, the tax liability is passed to the owners who pay taxes on the business profits via tax returns. 

Other forms of incorporation, like C corporations, are treated as separate entities from their owners and taxed according to the relevant corporate rate. 


The degree of administration of a business typically becomes more demanding as the complexity of the business structure increases. 

Sole proprietorships and partnerships typically have the least complex paperwork, while corporations have strict reporting obligations and complicated paperwork to file when forming and running the business. 

Five Important Ways the Dohrwardt Law Firm Helps Your Business

The Dohrwardt Law Firm can advise you on various issues when forming a business. 

1. Choosing the Right Structure for Your Business

Choosing the proper structure is the key to building a solid foundation for your business and its future growth. The Dohrwardt Law Firm can advise you on the pros and cons of each available structure relevant to your circumstances. 

This will help protect both your interests and your business's interests in the future.

2. Industry-Specific Advice

The Dohrwardt Law Firm can give you advice specific to the industry in which you operate and the product or service you're offering. This includes helping you understand the applicable regulations and any necessary licenses or permits. 

3. Drafting and Negotiating Legal Documents

Business formation typically involves preparing various documents, such as business registration papers, intellectual property registrations, and other commercial documents. The Dohrwardt Law Firm can help you draft these documents accurately. 

Notably, the Dohrwardt Law Firm can draft legally binding contracts or negotiate the terms of a contract to benefit you and your business. These are essential to running a business, for example, partnership agreements. 

4. Understanding Your Tax Obligations

Failing to properly understand your tax obligations can result in significant tax liability. Taxation is a complex area, so engaging a business lawyer and a qualified accountant is the best way to ensure compliance. 

They can also advise you about what tax breaks, credits, and deductions are available based on your business structure and circumstances. 

5. Employment Law

If you hire employees, you must comply with employment laws and regulations. The Dohrwardt Law Firm can help you navigate these and draft effective employment contracts that protect you and your employees. 

Termination can be a legal minefield, so reliable legal advice is essential. 

Contact the Dohrwardt Law Firm Today 

The Dohrwardt Law Firm can help you make strategic decisions if you are considering starting a new business. Contact the Dohrwardt Law Firm to discuss how I can help.

I look forward to helping make your new business a successful one.

Bray Dohrwardt is Responsible For the Content of this website

Bray Dohrwardt is licensed to practice law in Minnesota and Texas. Please contact the Dohrwardt Law Firm to discuss how the firm can help you get business done.