Business Planning
LLCs, Corporations & Business Entities
Starting a business involves more than filing a form with the state. The entity you choose affects ownership, management, liability, taxation, and how the business can grow or eventually transfer.
Cardon Law can help you choose and form an LLC, corporation, or other business entity, prepare the organizational documents, establish who has authority to act, and coordinate the structure with your broader business and estate planning. Additionally, Cardon Law can assist with entities formed outside Utah, sometimes working with local counsel when another state’s law requires it.
Choose the Structure That Fits the Business
LLCs, corporations, partnerships, and sole proprietorships are different legal structures. Each creates a different framework for ownership, management, liability, and decision-making.
Tax treatment is a related—but separate—decision. Every business operates in two different worlds: the legal world and the tax world. An LLC, for example, is a legal entity created under state law, but there is no separate “LLC” category in the federal tax system. Depending on its ownership and elections, an LLC may instead be taxed under rules that apply to a sole proprietorship, partnership, S corporation, or C corporation.
That means forming the business correctly involves more than choosing a name and submitting articles to the state. The governing documents, ownership records, authority, capitalization, and tax treatment need to work together.
The right entity is not simply the one that can be formed. It is the one whose legal structure, tax treatment, ownership, and operation fit what you are actually building.
What Goes Into a Complete Business Entity Setup
A well-organized entity should make it clear what the company is, who owns it, who can act for it, and how the legal and tax structure are intended to operate.
Entity Selection
An LLC works well in many situations, but it is not automatically the right fit for every business. Ownership, growth plans, investors, tax considerations, and future transactions can all affect whether an LLC, corporation, partnership, or another structure makes the most sense.
Legal Structure and Tax Treatment
Your legal entity and your tax treatment are related, but they are not the same decision. An LLC may have several tax options, and a corporation may be taxed differently depending on its elections. The governing documents should support the tax structure you intend to use.
Formation and Governing Documents
Forming the entity starts with the document filed with the state. A complete organizational package may also include an operating agreement or bylaws, initial consents or minutes, tax applications, and other records that establish how the company will operate.
Ownership, Capitalization, and Authority
Company records should clearly show who owns the business and who has authority to act for it. Depending on the structure, that may include capitalization records, ownership certificates, resolutions, or statements of authority used for banking, financing, leases, and other business decisions.
Registered Agent and Official Notices
Every chartered business entity needs a registered agent. Cardon Law provides registered-agent services, which can receive formal legal and governmental notices for the company and help keep the owner’s home address from being used for that purpose in the public record.
Estate Plan and Succession Coordination
For many owners, the business becomes one of their most valuable assets. Clear ownership records help coordinate the entity with the estate plan, establish what a trust owns, and make it easier for successors to understand who can act and what happens if the owner dies or becomes incapacitated.
A Critical Distinction
Your LLC and Your Tax Election Are Not the Same Thing
One of the easiest mistakes in business formation is assuming that choosing an LLC, corporation, or partnership also answers the tax question.
It does not.
The entity is created under state law. Federal tax treatment operates under a separate system. An LLC, for example, may have different tax options depending on its ownership and elections. The governing documents and ownership structure need to support the tax treatment you intend to use.
Jeff regularly sees situations where those two systems do not line up—for example, documents built around partnership concepts even though the company has elected S corporation tax treatment. That mismatch can create tax consequences the owners never intended.
A tax election should not be treated as something added after the legal work is finished. The legal documents, ownership structure, and intended tax treatment should be designed together.
The legal structure and the tax structure need to tell the same story.
Start with the business itself. Consider what you are building, who will own it, how it will be managed, how it may be taxed, whether investors are anticipated, and what future growth or transfer may look like. Those facts help determine which legal structure is appropriate.
Create the entity and build the organizational record around it. That can include state filings, governing documents, ownership records, capitalization information, tax applications and elections, initial approvals, and documentation showing who has authority to act for the company.
Once the entity exists, use it as the separate organization it was designed to be. Keep company activity, authority, records, and ownership organized as the business changes. An entity that was properly formed can still become disconnected from reality if it is never maintained or revisited.
From Formation to Operation
Building the Entity in the Right Order
A business entity becomes useful when the decisions behind it are carried through from selection to formation and into actual operation. Choosing the structure is only the first step. The legal documents, ownership, authority, tax treatment, and day-to-day use of the company should all support the same plan.
Business Entities Serve Different Owners in Different Ways
The same legal structure does not serve every owner for the same reason. The right entity depends partly on how the business will operate, grow, hold assets, and eventually transition.
Business Owners
An established business may need an entity that clearly separates ownership and management, supports contracts and financing, accommodates additional owners, and coordinates with the owner’s estate plan. As the company changes, the structure may need to change with it.
Founders
A founder anticipating outside capital has different structural concerns from a closely held family business. Businesses entering the professional investment or venture-capital world commonly operate as corporations taxed as C corporations, although the circumstances still need to be evaluated individually.
Real Estate Investors
Real estate investors frequently use LLCs to hold properties and separate different investments or activities. As the portfolio expands, ownership, management authority, trust coordination, and the relationship among multiple entities become increasingly important.
Formation Should Match the Business You Are Actually Building
Online filings can make creating an LLC look almost automatic. The filing itself may be straightforward. The harder questions are what should be created and what the structure should accomplish after it exists.
Who owns the company? Who manages it? Who has authority to sign? What tax treatment is intended? Do the governing documents support that treatment? What happens if an owner becomes incapacitated or dies? How should the ownership interest coordinate with a trust?
Cardon Law can help form the entity and build the organizational package around it so the legal structure reflects the business you intend to operate. The goal is a clear record of ownership, authority, governance, and purpose—something you and the people who may eventually step into your shoes can understand and use.
Start With the Right Business Structure
Whether you are creating your first LLC, bringing new owners into an existing business, preparing for outside investment, or trying to coordinate a company with your estate plan, the structure should be designed around what you actually need it to accomplish.
Cardon Law can help you choose the entity, form it, prepare the organizational documents, establish ownership and authority, and put the legal structure on a sound footing from the beginning.
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