Corporate formation is an essential part of the early life cycle of most businesses. Industry-specific regulations affect the process significantly, though, in some sectors. Here are four ways industry-specific rules may impact the formation of your business.
Licensing
Many businesses are subject to state-backed licensing regimes. For example, numerous businesses operate in the building and remodeling trades. Lots of states now require all contractors working within their borders to submit to professional licensing requirements. Consequently, a business lawyer will need to help a contractor to establish some form of incorporated entity or limited liability partnership. This creates a single entity that operates under the license.
Similar issues appear in many industries. Doctors, nurses, lawyers, financial advisors, and accountants are among the most regulated professions. There are licensing regimes in the beauty industry, too, and regulations often affect nail or hair salons.
Securities Laws
Issuing securities like stocks and bonds is a greater way for companies to take in capital. If a firm needs money to move from the startup phase to a rapid expansion, it might incorporate a shareholding business. However, the company is then subject to securities laws. Depending on the size and nature of the operation, this could mean federal reporting requirements that hit as often as quarterly.
Before you try to organize your company this way, it's prudent to talk with a business attorney. They can help you decide how to organize and understand which securities laws are likely to apply.
Financial Institutions
Banking, investing, and other financial activities are also tightly regulated. Numerous local, state, and federal laws apply. Also, most banks and even some bank-like organizations need charters under at least one state's rules.
Even if your firm isn't subject to these regulations, it needs to steer clear of activities that would make it subject. If an app development business wants to include in-app transactions, for example, it has to be careful to avoid what are fundamentally banking activities.
Environmental and Health Rules
Manufacturing, mining, lumber, and energy businesses are often subject to environmental regulations. The major factor affecting their corporate structures is legal liability. Corporations often are targets of lawsuits related to pollution, especially health concerns related to water run-off and airborne particle emissions.
If you're trying to exploit a mine on your property, for example, you want to be sure that you have a corporate structure that insulates personal gains from the company's liability exposure. For more information, contact a business attorney near you.
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