Starting a business is exciting, and it can be daunting. New business owners often focus on a company’s fundamental elements; selling products to customers or producing something of value. Nevertheless, new venture’s owners need to stop and consider the many details that govern the organization’s functions. Decisions must be made regarding a company’s formal structure (e.g., corporation or LLC), managing taxes, creating partnership arrangements, securing permits and licenses, and detailing long-term ownership goals and objectives.
These and many other components of a company’s formation can either accelerate or delay the venture’s long-term success. At Haque Law, we are keenly aware that correctly organizing a business is vital to that business’s health and well-being. Our attorneys have more than 50 years of combined experience managing healthcare, pharmacy, and other companies, as well as providing legal advice to clients in many specialties. You can count on Haque Law to be the right choice to help you design the organization you need to support your new venture.
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Medical and Non-Medical Agreements
Independent Contractor and Sales Agreements
Many businesses operate as partnerships. In Texas, it is essential to establish a formal working relationship between partners, even if the individuals are close associates or family members. In Texas, if no partnership agreement exists, the partnership is governed by the Texas Business Code. While the Code is in place to establish joint operations rules, the specific elements may be unfavorable to one or the other partner.
Instead of relying on the Texas Code, individuals in business together should create a formal partnership agreement. Typically, an agreement should be in place in advance of starting the business. This agreement establishes the working relationships, percentage of ownership, liability arrangements, and other important business functions. Creating a formal agreement smooths business operations and, often, saves headaches and disputes as the business moves forward.
Operating agreements are similar to partnership agreements, except they apply to limited liability corporations (LLC’s) instead of partnerships. These agreements specify ownership interests, voting rights, cash and revenue distribution, job duties, and other operating functions. LLC’s are generally taxed as partnerships; therefore, structural features often overlap. Nevertheless, significant differences exist, and individuals forming a company must consider the pros and cons of a partnership versus an LLC.
One crucial difference between partnerships and LLCs is the treatment of company liabilities. While every situation can be different, partnership associates are usually personally liable for all partnership liabilities. By contrast, in most cases, members of an LLC enjoy limited liability for the total business debt. The extent of an LLC member’s liability may vary based on circumstances but remains limited under state law. Haque Law’s attorneys are experienced in designing all forms of business structures.
Non-Disclosure Agreements (NDAs)
Intellectual property and trade secrets are critical to business success and, in many cases, can represent the key ingredient in a company’s progress. Protecting the value of intellectual property is a crucial job in today’s highly competitive marketplaces. Because product ideas and business information are often shared with outside entities, it is vital to use correctly formulated non-disclosure agreements (NDAs.)
An NDA executed by someone with access to your intellectual property helps protect you by holding the receiving party responsible should the proprietary information be disclosed. If your company needs to share important information with an outside entity, be certain you are protected by working with Haque Law to formulate valid and binding non-disclosure agreements.
Medical & Non-Medical Employment Agreements
Both medical and non-medical employment contracts are essential in running any business. These contracts spell out both the employee and the employer’s duties and responsibilities and help ensure all parties understand their respective obligations. Should a dispute arise, the agreements can be referred to for guidance and clarification.
Medical employment contracts specify all party’s responsibilities, roles, restrictions, and professional commitments. Because healthcare organizations are heavily regulated, it is essential that medical organizations utilize properly constructed contracts. Creating employment agreements explicitly designed for healthcare industry organizations is a specialty of Haque Law.
Non-medical employment contracts serve the same function as medical contracts, although job duties and responsibilities vary according to the business type. Most contracts enumerate the agreement’s major elements, including the length of employment, job duties, compensation and benefits, confidentiality, termination, and other details of the employee/employer relationship.
Indepenent Contractor & Sales Agreements
When organizations need a single service performed, which is not necessarily an on-going business requirement, an independent contractor can fulfill this role. Independent contractors are hired under contractor agreements and are not classified as employees. Their responsibilities usually cover a single job but may include multiple requirements.
Sales agreements apply to the transfer of title and delivery of goods rather than services. Specifying the terms of the transaction in a sales agreement is essential to prevent misunderstanding of factors such as delivery dates, warranties, inspection periods, and returns. Contracts for the sale of medical services, such as laboratory tests, must comply with numerous federal and state laws prohibiting certain unethical activities, such as kick-backs.
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Our firm represents a vast portfolio of clients in the business and healthcare industry. With over 40 years of combined experience, not only do we have in-depth legal knowledge, but we have direct hands-on experience inside the business and healthcare industry as owners and operators of pharmacies, executives of clinics, and managers of micro-hospitals. Our team is dedicated to building long-term personable relationships through long-lasting solutions. We achieve this by taking the time to better understand our clients goals and needs. Our ability to relate to our clients’ needs sets us apart from other law firms.
It’s rare to find a group of attorneys that have both operational and legal experience in the healthcare industry. More importantly, it’s even harder to find a law firm that’s built on long term relationships. It’s our experience and relationships that help us tackle any and all issues that our clients may face making us the best in the business.
It is easy to solve problems. It’s much harder to keep problems away. Our approach to issues and resolutions is what stands us apart from other law firms. Our ability to relate and think outside of the box allows us to put policies, procedures, resolutions and agreements in place to keep our clients compliant.
Your Success Is Ours
We define success by our clients success. Oftentimes, the needs of our clients is to simply establish relationships with others in the industry. Watching our clients’ success grow by the relationships we establish is the core to our success ratio.
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Frequently Asked Questions
What is the best type of entity to choose when opening a business?
There are many different considerations when choosing the appropriate business entity. The type of entity chosen often depends on the intended purpose for the entity (for example, to make an acquisition). These most common entities:
- Limited liability companies (LLCs).
- Limited partnerships (LPs).
This list does not address sole proprietorship, non-profit corporations, public benefit corporations, professional corporations, professional LLCs, or series LLCs.
For more information about some of these entities download our comparison chart.
What are the general tax classifications of business entities?
For tax purposes, a business entity is treated as one of the following:
- Disregarded entity.
However, the state law classification of a business entity is not always the same as the tax classification of a business entity (for example, a state law partnership can often elect partnership or corporation tax status).
The tax classification of a business entity is important because the tax rules that apply to a disregarded entity, C-corporation, S-corporation, and partnership are quite different.
A business entity that is treated as a disregarded entity for tax purposes is an entity with a single owner that is generally ignored for tax purposes even though it is a separate legal entity for state law purposes. The owner of the disregarded entity is considered to own the assets (and is subject to the liabilities) of the disregarded entity for tax purposes and reports the entity’s income and expenses on its own income tax return. In other words, a disregarded entity is treated like a sole proprietorship or in some cases as a single-member LLC.
It’s important to recognize that a single-member LLC is treated as a disregarded entity and a multiple-member LLC is treated as a partnership for tax purposes unless the LLC elects C- or S-corporation tax status.
Please note this is not legal advice. For more information about tax classifications, please download our business chart and contact us to better assist you.
What is a sole proprietorship and are they required to file a formation document with the Texas Secretary of State?
A sole proprietorship is a natural person who directly owns all assets used in the business. A sole proprietor is not required to file a formation document with the Texas Secretary of State. If the sole proprietorship will transact business in Texas using a name other than the owner’s name, it must register the trade or fictitious name (DBA) with each county in which it will transact business.
For more information about some of these entities, please give us a call.
Why are most corporations incorporated in Delaware?
Delaware is the most common state for incorporation for a variety of reasons such as:
- Low franchise taxes.
- Ease of filing and online services.
- A well-developed body of corporate law.
- Respected judicial bench in corporate law.
- Business-friendly statutes and decisions.
Although Delaware is the most common state for incorporation, it is not the only state. The stockholders should also consider where the corporation will primarily transact its business and if there are any business, tax, social, or policy reasons for choosing a particular state. For example, if someone living in Delaware was considering forming a corporation that would primarily do business in New York, then incorporating in New York may be more appropriate.
What is the most notable difference between a C-corporation and an S-corporation?
The most common corporate form is the
C-corporation and references to corporations are usually to C-corporations.
C-corporations are subject to two levels of US federal income tax:
- At the corporate level when earned.
- At the stockholder level when profits are distributed as dividends or other distributions.
This double taxation can be avoided by electing to be treated as an S-corporation, which is a “pass-through” entity for US federal income tax purposes. The S-corporation does not pay an entity level tax. Instead, profits and losses pass through to its stockholders who report, and are taxed on, their respective share of those items on their own US federal income tax returns, whether or not distributed.