Dispelling Business Formation Myths

March 27, 2023


Starting a business is the dream of many people in the United States, the “land of opportunity.” According to the Commerce Institute, five million businesses were started in 2022. More than one million new businesses were formed in each quarter of the year. Though many living among us or even living abroad want to own businesses here, misconceptions about business formation abound, and can slow the start-up process and make it difficult to move forward. 


If you’re looking to start and operate a business in Troy or anywhere else in Michigan, including Oakland or Macomb counties, contact me at Redmond Law Group. As a business law attorney, I’m ready to guide you through every step of the business formation process. Set up a consultation today. 

Common Questions & Misconceptions about Business Formation

The first step in starting a business after deciding what type of business you want to operate is to choose the business format that suits you best. Your basic choices are a sole proprietorship, a partnership, a limited liability company (LLC), or a corporation. 


Your personal liability in your business venture will hinge largely on the format you choose. If you run a sole proprietorship, you as the owner are personally responsible for all debts and lawsuits should the business fail, or even while it succeeds but runs into difficulties. The same is true with a partnership—the partners are personally liable. With an LLC, the co-owners are known as members, and for the most part, the business itself will be held liable. The same goes with a corporation—the corporate entity is liable, not the shareholder owners.


With that background, here are some common misconceptions I’ve encountered from people looking to start a business:

Choosing a business entity is only important for a large enterprise.

This is not exactly true. Shielding yourself from liability is a huge concern when you’re going into business. Starting a sole proprietorship is the simplest and fastest route to opening a business, but it exposes whoever runs the business to personal liability. Only when you form an LLC or corporation can you escape, for the most part, from any personal liability. There are also tax considerations. 

You must be a U.S. citizen to own an LLC.

Though foreign nationals are not legally authorized to work here without a visa or obtaining permanent resident status, the same restriction does not apply to starting a business here, including an LLC. You will need to follow the formation rules of the state where you hope to operate, but being a foreign national is not a bar to business formation.

Incorporation provides absolute immunity.

While forming a corporation can be a shield against personal liability in that the corporation is the liable entity, there are filing, recordkeeping, and ongoing administrative duties that must be adhered to. There is also the concept of “piercing the corporate shield.” This refers to the legal process of showing that the corporate identity is merely a cover-up and that the business is really run by and for the owner or owners to dodge liability. If you want to incorporate, you’ll need to follow all the rules that bind the entity, including the requirements of the Internal Revenue Service (IRS).

You won’t have to pay taxes if you form an LLC in another state.

There can be advantages to forming a limited liability corporation in certain states in terms of cost and the overall process, but if you operate the LLC in another state, you will still be subject to business taxes and other fees in that state.

A sole proprietor can’t have employees.

Unless your sole proprietorship is operating out of your home office via the Internet, you’ll probably need to have employees to help you sell your goods or provide your services in a brick-and-mortar setting. So, yes, sole proprietors can and probably usually do have employees. Then, of course, the business will be subject to federal and state employment laws and regulations and also to withholding taxes and other obligations.

You don’t need an attorney to start a business.

It is not advised to start a business without the experience and guidance of a lawyer. While it’s true that you can obtain your permits and licenses—and complete other necessary actions—on your own, a business attorney can help you strengthen your business from the very beginning. After starting your business in whatever format you choose, you will need ongoing legal advice and assistance. Be smart and have legal help at your fingertips throughout the whole formation process and the subsequent operation of your business.

Take Legal Action Today

If you’re looking to start your own business in or around Troy, Michigan, do your homework and make sure you have reviewed all the legal requirements and protections you need for a successful enterprise. Contact me immediately at Redmond Law Group, and I will advise and guide you through the entire process, and then function as your ongoing legal counsel once you’re up and running.

Preparing for Business Litigation

December 13, 2023
Dec. 13, 2023  As a business litigation attorney , I've seen firsthand the importance of preparing for potential legal disputes. If you're a business owner, it's not really a question of if you'll face a lawsuit, but when. And when that time comes, how you respond can make all the difference. In this post, I'm going to share some insights on how to prepare for business litigation. I'll walk you through what to do if your business is being sued and give you an overview of the litigation process. If you're currently facing a lawsuit, reach out to a business litigation lawyer immediately. The sooner you get help, the more prepared you'll be. If you're in or near Troy, Michigan, let me shoulder your legal burdens. Contact my firm today to set up a meeting.

Can a Partner Withdraw Without Dissolving the Business?

November 28, 2023
Nov. 28, 2023  It’s relatively easy to form a general partnership in Michigan. There are no papers to file or licenses to obtain from the state, but the locality where you intend to conduct business may well impose licensing, permitting, and zoning requirements. While you and some of your friends, family members, or associates may shake hands to form a partnership to market widgets, there are still many details to be ironed out. For instance, who among the partners is going contribute what? Are all just going to ante up a share of the start-up costs, or is one or more partners going to contribute in another way, perhaps through professional expertise? Who is going to manage operations, everybody together or through a kind of managing agreement over who does what? Then, in drawing up the partnership agreement—which should be in writing and agreed to by all the partners—you also must address the issue of what happens if one partner wants out. Does that mean the partnership ends with that person’s departure? In other words, if you create a partnership without an overall partnership agreement addressing the full range of issues that might arise during the course of the partnership’s existence, you might indeed find yourself in a corner, where the departure—or demands—of one partner may well sink the whole enterprise. It’s the Boy Scouts’ motto writ large—“Be prepared.” If your partnership in or around Troy, Michigan, is facing the possibility of one partner departing, and thus leaving the fate of the partnership in question, reach out to The Law Offices of Barton Morris . I have helped countless others draw up agreements and contracts to protect their rights and interests, and I can advise you too, whether you have a written agreement or just a few handshakes. I also proudly serve clients throughout Oakland and Macomb counties.

Mental Health and Gun Rights

November 9, 2023
Nov. 9, 2023  One of the more sensitive topics when it comes to firearm laws has to do with mental health and gun rights, and specifically what mental illnesses prohibit you from having a gun. This can be fairly complicated to address because both federal and state regulations come into play with gun rights. If you have questions about this topic or are concerned about your own rights to own a gun, call me at the Redmond Law Group for help in Troy, Michigan, and throughout Oakland County and Macomb County.

Wrongful Denial of Firearm Purchase/Transfer

October 3, 2023
Oct. 3, 2023  Getting a denial when trying to purchase or transfer a firearm can be frustrating and confusing. If you believe you have been wrongfully denied a firearm, I can help. As a gun rights attorney at Redmond Law Group, I am dedicated to fighting for clients to protect their constitutional right to gun ownership. I have helped many of my clients in Troy, Michigan, and throughout Oakland and Macomb counties to turn around an adverse decision when trying to purchase or receive a firearm.

Police Encounters When Carrying a Gun

August 30, 2023
Aug. 30, 2023  If you carry a firearm in Michigan, it’s essential that you know and fully understand Michigan’s gun laws. Knowing the laws can be invaluable if you have an encounter with police while you are carrying a firearm. If issues arise, it’s also important to seek advice and representation from an attorney. If you need help after an encounter with law enforcement while carrying a firearm, call me, Ian Redmond , at Redmond Law Group in Troy, Michigan. I can help you understand your gun rights and represent you if you’ve had an encounter with the police.

Firearm Carry Restriction Exemptions

July 27, 2023
July 27, 2023  If you possess a firearm or intend to possess a firearm in the future, it’s imperative that you stay informed about your rights and responsibilities. You are responsible for your own safety and the safety of others, and you should know your rights around carry restrictions—including some notable exemptions. If you require a Second Amendment attorney, call me, Ian Redmond, at Redmond Law Group , serving Troy, Michigan, as well as throughout Oakland and Macomb counties. I can work with you to help you understand your gun rights.

Private Party Firearm Transfers

June 1, 2023
June 1, 2023 When it comes to guns, the Second Amendment to the U.S. Constitution states that “the right of the people to keep and bear Arms, shall not be infringed.” That hasn’t kept some states from enacting restrictions not only on how guns can be sold and transferred, but in many instances, also on the guns themselves—what's allowed and what isn’t. Michigan is one state that is among those who “infringe” as little as possible. When it comes to the sale or transfer of firearms on a personal basis, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) recommends that this be done through a Federal Firearm Licensee (FFL) dealer, so the purchaser or transferee must go through a background check. In Michigan, however, rifles and shotguns can change hands by unlicensed individuals with no background check or licensing required. Handguns are different. The purchaser must obtain a handgun purchase license or already possess a concealed carry license (CCL), both of which require background checks. If you have questions or concerns about the private sale or transfer of firearms in or around Troy, Michigan, contact me at Redmond Law Group. I have been representing Michigan clients for more than 15 years , and I will zealously protect your rights to own and bear arms or to sell or transfer them. I also proudly serve clients throughout both Macomb and Oakland counties.

Understanding Gun Seizure and Returns

May 2, 2023
May 2, 2023  As a firearm owner, it can be unsettling to think about the possibility of the police seizing your weapon. However, there are certain circumstances in which law enforcement officers have the authority to take possession of citizens’ firearms. If your firearm was seized by federal law enforcement or local police, you need to understand gun seizure and return procedures. As a gun rights attorney at Redmond Law Group, I can explain the laws pertaining to gun seizures and make sure that you are informed of your legal options throughout the process. From my office in Troy, Michigan, I serve gun owners throughout Macomb and Oakland counties.

The Difference Between “Material” and “Immaterial” Contract Breaches

By Ash Walker • April 10, 2023
April 10, 2023  Running a business involves developing ties with other people and business entities. Of course, you need customers, but you will also often need suppliers, service providers, and professional assistance. In other words, to keep your business operating, you will need to forge agreements to help you in the operation of your business. These agreements will usually be a contract, whether it’s oral or in writing. A contract requires both parties to live up to what’s been agreed upon. For instance, you, as a retail store operator, would most likely have to enter into contracts with suppliers to bring you the products to sell. In return, you generally must pay them for those products. The contract the two of you agree to requires both sides to fulfill their obligations. For example, Supplier A must deliver 100 widgets every other Tuesday, but suddenly the shipment stops. This can be considered a breach of contract as the vendor failed to deliver the goods. However, the supplier contacts you and says that due to weather conditions, the shipment will be delayed until the week after. Is this still a breach? In legal terms, there are immaterial or minor breaches and material breaches. A week’s delay would no doubt be considered an immaterial breach, but if the shipments stopped altogether or for a substantial period of time and put your business in jeopardy, that would be considered a material breach. Material breaches can lead to lawsuits if not resolved in negotiations. If you’re involved in a contract dispute in or around Troy, Michigan, contact me at the Redmond Law Group. I am a business attorney with extensive knowledge of contracts, and their enforceability, and will help you resolve the situation, even if it requires courtroom action. I also proudly represent clients throughout Oakland and Macomb counties, Michigan.