I often meet founders after the fact. They come to my office with a thriving business—and a foundational legal problem that now threatens to undo years of hard work. They might have a handshake partnership agreement, a business structure that exposes their personal home to lawsuits, or no plan for what happens if one of them dies or wants to exit. Their success has outpaced their structure, and now their legacy is at risk.
Building a business is not just about a product or service. It is about creating a significant asset. How you treat that asset from day one determines whether it becomes a source of generational wealth or a source of protracted legal battles in a New York Surrogate’s Court. These initial steps are not paperwork; they are the first acts of stewardship.
The Corporate Veil Is Woven, Not Assumed
A founder’s most important initial decision is choosing a business entity. This choice—typically between a Limited Liability Company (LLC) or a corporation—creates the “corporate veil,” a legal separation between your business assets and your personal assets. If the business is sued, this veil is what protects your family’s home, savings, and investments.
But the veil is not automatic. It must be created and maintained. In New York, forming an LLC requires more than filing Articles of Organization. Under Section 206 of the Limited Liability Company Law, you must also publish a notice of the LLC’s formation in two newspapers for six consecutive weeks. Failing to meet this specific, and somewhat archaic, requirement can give a future creditor an argument to pierce the corporate veil and come after you personally.
This is not a mere technicality. It is a deliberate act that demonstrates to the state and the courts that you are operating a legitimate, separate entity. We see this go wrong when founders use a cheap online service, check a box, and assume they are protected. They often are not.
Your Company’s Constitution: The Operating Agreement
If the entity choice is the shield, the operating agreement is the constitution. This document—or a shareholders’ agreement for a corporation—governs how the business will handle foreseeable and unforeseeable events. It is the most critical document most businesses fail to execute properly.
A well-drafted agreement anticipates conflict and provides a roadmap. What happens if a partner wants to leave? What if a founder gets divorced, and their spouse claims a share of the business? What if a founder becomes incapacitated or passes away?
Without clear, written answers, the default is state law and expensive litigation. We work with clients to build contingency plans directly into these agreements. This often involves a buy-sell agreement, which can set a valuation method and a right of first refusal for the remaining partners. It allows the business to continue, and the departing founder or their family is compensated fairly, without a fight in court.
The Business as a Cornerstone of Your Estate
Once the business is properly formed and governed, it must be integrated into your personal estate plan. For many of our clients in Manhattan, their business is their single largest asset. Yet, it is often the asset with the least-developed succession plan.
Ownership of an LLC or corporate shares is a property right. Like any property, it needs a plan for transfer upon your death. Simply naming your children as heirs in a will is not enough. Will they inherit a functioning business or a chaotic power vacuum? Do they even want to be in the business?
This is where business planning and estate planning merge. We often use trusts to hold business interests. This allows a chosen trustee—a professional fiduciary or a trusted family member—to manage the business interest for the benefit of your heirs. This structure can provide continuity, prevent a forced fire sale of the company to pay estate taxes, and protect the asset from the creditors or future ex-spouses of your beneficiaries.
The goal is to be deliberate. A business built with intention from the start becomes a powerful engine for your family’s future. A business built on assumptions often becomes a burden they are forced to untangle.
Before you launch, or if you have already launched without these protections, the prudent first step is a foundational review. We regularly provide a 60-minute session for founders to assess the alignment between their business structure and their long-term personal and financial goals.
