Legal Considerations of Forming a New Business Part 3/3

Part 3/3 of a series of blog posts on the legal considerations of forming a new business authored by Ginny Morris, Four Athens partner and in-house legal counsel. 

Finally, in deciding what organization structure your company should have, you need to consider future growth.  While it is always possible to convert from one organizational structure to another, it is expensive – new filing fees are just the beginning – and it could be cumbersome with regard to record-keeping and external contacts.  If you plan for future growth at the time of your initial organization, the process down the road will be smoother.  Do you want to dilute your ownership stake as you gain investors or can you issue additional shares of stock?  Will your proposed organization allow for the easy addition of subsidiaries if you need to segregate business lines?  Do you have a mission statement that will keep you focused on that business in which you are most experienced or do you want to allow for expansion into new and completely different areas of business?         How much control do you want over any future expansion?  Draw a dotted line across the page at the bottom of your current organizational chart and in a different color ink, draw what you want your company to look like in 5 years; then figure out how that affects your organizational structure choice.

The bottom line is that you need to think carefully before you decide which organizational structure works best for your company and before you file anything with the Secretary of State.

(stay tuned in the coming weeks for Ginny’s next legal blog post:  “What are my choices for company organization?”)

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