Business Formation
Entity selection, operating agreements and founder terms drafted for the company you plan to become, not just the one you are today.
Overview
Most ownership disputes we litigate started years earlier with a template operating agreement that said nothing about what happens when a founder leaves, a partner stops contributing, or a buyer makes an offer. Formation work is where those problems are cheapest to solve.
We form LLCs, S and C corporations and professional entities across Connecticut, New York and Massachusetts. Every engagement starts with how you will make decisions, share profit and exit, then works back to the documents. We coordinate with your CPA on tax elections so the structure holds up at filing time.
What's included
Scope is confirmed in your engagement letter. These are the pieces most clients need.
- Entity comparison memo covering liability, tax and ownership flexibility
- Certificate of organization or incorporation filed with the Secretary of the State
- Operating agreement or bylaws with buy-sell, deadlock and exit provisions
- Founder equity, vesting and IP assignment agreements
- EIN, beneficial ownership and annual report calendar set-up
- Coordination with your CPA on S corporation or other tax elections
How we work through it
- 1
Discovery meeting
We map owners, capital, roles and your five-year plan in a 45-minute working session.
- 2
Structure memo
You receive a short written recommendation comparing two or three entity options side by side.
- 3
Drafting and review
We prepare formation filings and governing documents, then walk every owner through the key terms.
- 4
Filing and handover
We file, obtain your EIN and hand over a binder and compliance calendar for the years ahead.
Why clients choose us for business formation
Fewer founder disputes
Clear vesting, departure and buyout terms remove the most common source of partner litigation.
Cleaner due diligence later
Investors and buyers find organised records and signed IP assignments instead of gaps.
Tax elections that fit
Structure is agreed with your accountant before filing, not corrected after the first return.
Documents written in plain English
Owners can read and apply their agreement without calling us for every question.
Fees and what affects them
Sample ranges for illustration. Your written estimate depends on the facts, number of parties and deadlines involved.
Attorneys who lead this work
Formation tool
Which entity, and why
Entity choice is a decision about liability, tax and who can own a piece of you, in that order. Pick what matters most and the list reorders the seven structures we actually form in Connecticut to put the best fit first.
- Poor fit
Sole proprietorship
No entity at all. You and the business are the same legal person.
- Personal liability
- None. Business debts reach personal assets.
- Default federal tax
- Schedule C on your personal return
- Self-employment tax
- Self-employment tax on all net profit
- Ownership flexibility
- One owner only. No units or shares to transfer.
- Connecticut filing
- Trade name certificate with the town clerk if you use a name other than your own
- When we recommend it
- A side activity with no employees, no premises and no contracts worth suing over. We move most clients off it within a year.
- Poor fit
General partnership
Two or more people in business together, with or without a written agreement.
- Personal liability
- None, and each partner can bind the others.
- Default federal tax
- Partnership return, income passed through to partners
- Self-employment tax
- Self-employment tax on each general partner's share
- Ownership flexibility
- Flexible by agreement, but default statutory rules apply where the agreement is silent.
- Connecticut filing
- No formation filing required, which is exactly the risk
- When we recommend it
- Almost never on purpose. We usually meet this one after it has formed by accident between two people who never signed anything.
- Strong fit
Single-member LLC
One owner, limited liability, and a tax return you already file.
- Personal liability
- Yes, if you respect the separation: own bank account, own contracts, no personal use of company funds.
- Default federal tax
- Disregarded entity, reported on your personal return
- Self-employment tax
- Self-employment tax on net profit unless an S election is made
- Ownership flexibility
- One member. Adding a second member changes the tax treatment.
- Connecticut filing
- Certificate of organization plus an annual report with the Secretary of the State
- When we recommend it
- Consultants, single-owner trades, property holding companies and any first entity where the owner wants a shield without a board.
- Strong fit
Multi-member LLC
The default choice for two or more owners who want to write their own rules.
- Personal liability
- Yes, for all members, subject to the same separation discipline.
- Default federal tax
- Partnership taxation with a distributive share to each member
- Self-employment tax
- Depends on whether a member is active; manager-members generally pay it
- Ownership flexibility
- Highly flexible: units, classes, profits interests, vesting and transfer restrictions all by agreement.
- Connecticut filing
- Certificate of organization, operating agreement (kept privately) and an annual report
- When we recommend it
- Family businesses, partner-owned services firms, real estate partnerships and any company where the exit terms matter more than the formation.
- Workable
S corporation election
A tax election, not an entity. An LLC or corporation elects it on Form 2553.
- Personal liability
- Comes from the underlying LLC or corporation, not the election.
- Default federal tax
- Pass-through, but the owner must be paid reasonable compensation on payroll
- Self-employment tax
- Payroll taxes on the salary only; distributions above it are not subject to self-employment tax
- Ownership flexibility
- Restricted: a capped number of shareholders, one class of stock, and no entity or non-resident alien shareholders.
- Connecticut filing
- No separate Connecticut formation. Payroll registration and pass-through entity filings apply.
- When we recommend it
- Profitable owner-operated companies where the salary-versus-distribution split is worth the payroll cost. We decide this with your CPA, not by rule of thumb.
- Strong fit
C corporation
A separate taxpayer, with stock that investors already understand.
- Personal liability
- Yes, with the strongest body of case law behind it.
- Default federal tax
- Taxed at the entity level; dividends taxed again to shareholders
- Self-employment tax
- None on dividends. Owner-employees are on payroll.
- Ownership flexibility
- Unlimited shareholders, preferred stock, option pools and convertible instruments.
- Connecticut filing
- Certificate of incorporation, bylaws, initial resolutions and an annual report
- When we recommend it
- Companies raising priced institutional rounds, granting broad option pools, or planning to hold profits inside the business.
- Strong fit
PLLC or professional corporation
The licensed-profession version of an LLC or corporation.
- Personal liability
- Shields you from business debts and from a colleague's malpractice, never from your own.
- Default federal tax
- Follows the underlying form, and can make an S election
- Self-employment tax
- Same analysis as the underlying LLC or corporation
- Ownership flexibility
- Owners generally must hold the relevant Connecticut licence, which narrows who can buy in.
- Connecticut filing
- Professional entity filing with the Secretary of the State plus the licensing board's own rules
- When we recommend it
- Physicians, dentists, veterinarians, architects, accountants and attorneys, including every practice buy-in we document.
Statutory and filing details change. Formation and annual report requirements, professional entity rules, S corporation shareholder limits and federal beneficial ownership reporting have all moved in recent years. Treat every requirement above as a starting point to confirm with us and with your accountant against current Connecticut and federal law.
Succession tool
The six Ds every buy-sell agreement has to answer
Most ownership litigation we see began with an operating agreement that was silent on one of these six events. Each tab is a drafting checklist: the mechanism, how the purchase is funded, how the price is set, and the clause that usually fails.
Does the surviving owner buy the estate out, or does the family become a partner?
- Mechanism
- Mandatory purchase. The estate must sell and the company or surviving owners must buy, so neither side can hold out.
- Funding
- Life insurance owned to match the structure: the entity owns the policies in a redemption, each owner insures the others in a cross-purchase.
- Valuation
- Agreed value certified annually, with an independent appraisal if the certificate is stale.
- What usually fails
- Policies bought once and never revisited, so the cover no longer matches what the interest is worth.
How long does an absent owner keep drawing before the buyout starts?
- Mechanism
- Optional purchase after a defined elimination period, with a written definition of disability that does not rely on a doctor's opinion alone.
- Funding
- Disability buyout insurance, or an installment note with a defined term and interest rate.
- Valuation
- Same formula as death, often at a small discount to reflect the instalment terms.
- What usually fails
- No definition of disability at all, which turns a health crisis into a dispute about whether the trigger has occurred.
Can a former spouse end up holding voting units in your company?
- Mechanism
- The company or the other owners get a right of first refusal over any interest awarded in a dissolution.
- Funding
- Installment note, usually over several years, because divorce rarely arrives with cash on hand.
- Valuation
- The agreement's own formula, so the family court has a number to work from rather than a contested appraisal.
- What usually fails
- Spousal consent never obtained at signing, so the restriction is argued over at the worst possible moment.
What does a voluntary leaver get, and when do they get it?
- Mechanism
- Put and call rights with notice periods, plus a distinction between leaving for good reason and simply walking out.
- Funding
- Sinking fund or installment note, with a cap on the annual payment so the company survives the buyout.
- Valuation
- Formula value, often with a discount for a departure inside an agreed minimum service period.
- What usually fails
- No cap on payments, so the buyout drains the working capital the remaining owners need to keep trading.
Two equal owners, one decision, no agreement. What breaks the tie?
- Mechanism
- A named tiebreaker, then escalating options: mediation, a shotgun or Texas shoot-out clause, or an agreed sale process.
- Funding
- Whatever the winning side can raise, which is exactly why a shotgun clause favours the better-funded owner.
- Valuation
- Set by the offering owner in a shotgun, or by an independent appraiser in a gentler mechanism.
- What usually fails
- A shotgun clause dropped into a fifty-fifty company where one owner could never fund the purchase.
What happens when an owner breaches, competes, or loses the licence the business needs?
- Mechanism
- Compulsory transfer at a reduced value, defined narrowly so it cannot be used to squeeze out a difficult but compliant owner.
- Funding
- Installment note, with the right to set off provable damages against the payments.
- Valuation
- Formula value less an agreed adjustment, stated as a number rather than left to argument.
- What usually fails
- A default definition so broad that it invites litigation over whether the trigger fired at all.
Three ways to set the price, and what each one costs you
Agreed value certificate
Owners sign a value each year and the most recent certificate governs.
Cheap, fast and predictable while it is kept current.
Goes stale within a year or two of being signed, which is when it is usually needed.
Formula
A multiple of a defined earnings measure, with the adjustments written out.
Self-updating and hard to argue with if the definitions are tight.
A multiple set in a good year can look absurd in a bad one.
Independent appraisal
A named appraiser, or one appraiser per side plus a third to break a tie.
Defensible, and the right answer for large or contested interests.
Slow and costly, and the appraisal itself becomes a negotiation.
Drafting guidance for a demo website, written generally. Whether any mechanism suits your company depends on its entity type, tax position, insurance and the people in it. Nothing here is legal advice.
Business Formation questions
An LLC is a legal structure and an S corporation is a tax election, so many clients form an LLC and elect S status once profits justify payroll. We decide this with your CPA using your projected income, not a rule of thumb.
For a single owner with simple plans, sometimes yes. The risk is the missing operating agreement terms: buyouts, deadlock, death or disability of an owner. We are happy to review documents you already filed.
Yes. Our attorneys are admitted in Connecticut, New York and Massachusetts, and we coordinate Delaware formations for clients raising outside capital.
Related practice areas
Discuss your business formation matter
A 45-minute first meeting with a written summary and a clear fee estimate. Same-day callbacks, Monday to Friday.