When starting a business, there are various forms to choose from for legally structuring the company. One form that may seem appealing to some entrepreneurs is called the “not created by an agreement” business form. However, it is important to understand that this form does not actually exist.
The phrase “not created by an agreement” often refers to a situation where two or more parties come together to start a business without creating a formal legal agreement. While this may seem like a simple and easy way to start a business, it can lead to serious consequences in the future.
Without a legal agreement, there is no clear definition of each party`s rights and responsibilities. This can lead to disagreements and disputes among the co-founders, potentially resulting in costly legal battles.
Additionally, this form of business structure does not provide any protection for personal assets. If the business fails or faces legal action, the personal assets of the owners may be at risk.
Instead, entrepreneurs should consider forming a legally recognized business structure, such as a partnership, limited liability company (LLC), or corporation. These structures provide clear guidelines for ownership, management, and decision-making, as well as protecting personal assets.
When deciding on a business form, it is important to consult with a legal professional and consider the specific needs and goals of the company. While the “not created by an agreement” form may seem like a simple and easy option, it is not a valid or recommended choice for structuring a business.