Do I really need a lawyer to incorporate, or can I use an online service?

You can use an online service for a simple, single-member LLC, but you should hire a lawyer if you have co-founders or investors. Online services like LegalZoom or Stripe Atlas are essentially "fill-in-the-blank" forms; they cannot advise you on whether your specific equity split is fair or if your bylaws create a deadlock risk. A lawyer acts as an architect, customizing your corporate charter to prevent future disasters, whereas an online service is like buying a pre-fab shed—cheap and fast, but it might collapse if you try to add a second floor (investors) later.

Why do so many businesses incorporate in Delaware, and should I?

Businesses flock to Delaware because it has the "Court of Chancery," a specialized court system with judges who are experts in corporate law (no juries), making legal outcomes highly predictable and business-friendly. However, if you are a small local business (like a coffee shop or consulting firm) operating only in your home state, incorporating in Delaware is often a waste of money because you will have to pay fees in both Delaware and your home state ("foreign qualification"). You should generally only incorporate in Delaware if you plan to raise venture capital or operate nationally.

What is a Founders' Agreement and why is it critical?

A Founders' Agreement is a "pre-nup" for your business partners that defines roles, responsibilities, and what happens if someone quits or gets fired. It is critical because the number one reason startups fail is co-founder conflict; without this agreement, a founder who leaves after three months could legally keep 50% of your company forever, making it "uninvestable" to future VCs. This document handles sensitive topics like equity vesting, IP ownership assignment, and decision-making power before tensions run high.

Can a lawyer help me draft an Operating Agreement for my LLC?

Yes, and this is arguably the most important document for an LLC because it overrides the state's "default rules," which might not work in your favor. For example, some states legally require an LLC to dissolve if one member dies or goes bankrupt unless an Operating Agreement says otherwise. A lawyer drafts this to specifically outline how profits are distributed, how managers are voted in, and how members can sell their interest, ensuring the business survives the exit of a partner.

What is the difference between a registered agent and an incorporator?

An Incorporator is the person who simply signs and files the initial formation paperwork with the state; their job is done the moment the company exists, and they have no ongoing authority. A Registered Agent is a third party (or service) designated to receive official government mail and service of process (lawsuits) on behalf of your company during regular business hours. While you can be your own registered agent, most businesses hire a service so that a sheriff doesn't walk into their store and serve them a lawsuit in front of customers.

What permits and licenses does a lawyer help obtain for a new business?

A lawyer helps identify and apply for a web of federal, state, and local licenses that vary wildly by industry, from standard "General Business Licenses" to specific "Zoning Permits" for your physical location. For highly regulated industries like alcohol, firearms, or healthcare, a lawyer is essential to navigate complex compliance hurdles where a single error can lead to a shutdown. They also ensure you have the correct Sales Tax Permits and Employment-related registrations (like EIN and workers' comp) to avoid immediate fines from the IRS or state labor boards.

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PORFERIO L. BORJA JR.

MG Madrid & Company

Business Formation · Philippines

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Business Formation FAQ

The choice depends on your goals for funding and taxes. An LLC (Limited Liability Company) is the most flexible and popular for small businesses because it protects your personal assets while allowing "pass-through" taxation, meaning you pay taxes only once on your personal return. An S-Corp is a tax designation (not a business entity itself) that allows owners to save on self-employment taxes by paying themselves a reasonable salary, but it has strict ownership limits (only US citizens, max 100 shareholders). A C-Corp is the standard for high-growth startups; it faces "double taxation" (taxes on corporate profit + taxes on shareholder dividends) but is mandatory if you plan to raise venture capital or go public, as investors generally refuse to invest in LLCs.

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