Incorporate Your MLM Business
By Jeffrey Babener, © 2013
When you become a network marketing distributor, you create a new business entity. What legal form should that
entity take? While most distributors’ businesses are sole proprietorships, and some are partnerships, increasing
numbers of networkers are deciding to incorporate. A corporation offers liability advantages, as well as certain tax
benefits, that may make it right for you.
If you decide to incorporate, you will want to meet with a corporate attorney. Here are some helpful tips and basic
topics for your first meeting with your professional advisor.
First, Get Yourself to a CPA
Other than yourself, the most important person your corporate attorney will work with is your accountant. Your
accountant will provide valuable input on corporate financial structure, funding, capitalization, allocation of stock,
etc. Your lawyer will be looking to your accountant to provide an opening balance sheet for the corporation from
the time your business moves from sole proprietorship or partnership to corporate status.
Contact your attorney ahead of time with the proposed name of the corporation. A quick phone call to the
Corporation Commissioner will discover whether the proposed corporate name is available. Also, decide whether
your corporation will have a special mark or logo that needs federal trademark protection or state registration.
Who will be the officers of the corporation, such as the president, vice president, secretary, and treasurer? Will
there be a chief executive officer or chief operating officer? It may be that the bylaws of the corporation should
have a special description for specialized corporate officers.
How many shares should your corporation be authorized to issue? How many shares should be issued at the
commencement of a corporation, and how many held in reserve for future issuance? Should there be separate
classes of shareholders? Should some shareholders be preferred shareholders and thus receive first crack at
dividends? How many shareholders are anticipated? Will the number of shareholders trigger any securities
Board of Directors
Who will be on the board of directors? How many initial directors will there be? Will respective shareholders have
the right to elect proportionate numbers of members of the board of directors? Is there a mechanism built in to
prevent voting deadlocks by the members of the board of directors? Should the shareholders consider an
independent director for breaking a deadlock, or a mechanism for submitting decisions to arbitration?
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