Why Tax Planning Is Essential for Your Business

A corporate attorney should work closely with a client’s other business advisors, including financial advisors and accountants. This team approach for a business attorney is critical in structuring business transactions and also choosing the appropriate entity structure that will help achieve the best tax consequences for clients. This process may include copying other advisors on completed entity formation documents and contracts, so that these advisors have all necessary information at tax time. However, that may be too little, too late. A good business attorney will know when to bring in the client’s other advisors early so that they can contribute information to the planning process of any legal project, whether it is the structure of a form contract for liability protection or the formation of a new business entity such as a corporation, partnership or LLC.

A good business law firm takes tax planning into account when choosing the best entity type for a business. They look at different tax advantages and disadvantages and match those with the needs and goals of the founding members. This ensures the correct type of business entity is chosen to meet the needs of the business, and that any new business entities are set up correctly. When lawyers assist a client with the choice of entity decision for new businesses, they address potential state franchise taxes and involve the company accountant to account for any income tax consequences for the company and owners. This is especially important in California where the franchises taxes differ significantly between a corporation and a partnership or limited liability company. A corporate attorney will also work with the company’s accountant to ensure that all of the company’s advisors have the same future expectations. This allows each advisor, including the corporate attorneys, to advise the business owners accordingly. The team approach results in better protection for the business and its owners.

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