Businesses Under $500,000 in Revenue

This page covers the legal work that typically comes up for an owner-operator or an early-stage company generally earning under $500,000 a year. The revenue band is a guide to what tends to matter at this size, not a rule about what a business must have. A two-person consulting firm earning several times that amount and a busy retail shop earning a fraction of it can both fit the pattern described here. What tends to hold true at this stage is that the owner signs every lease, contract, and hire personally, usually with no one else to hand it to.

Fisher Stone works with owners at this stage for a flat fee, quoted up front before any work begins. A licensed New York attorney handles your matter directly from start to finish and stays reachable by call, email, or text as questions come up.

Choosing and forming the entity

Most businesses at this stage choose between operating as a sole proprietor, forming a limited liability company, or forming a corporation. A sole proprietorship needs no separate filing, but the owner remains personally liable for every debt and claim against the business. Forming an LLC or a corporation through business formation creates a separate legal entity, which is the starting point for keeping business liability away from personal assets, though how well it holds up depends on how the business is run afterward.

The two structures are also taxed differently, which is worth reviewing with your accountant as part of choosing between them. Neither choice is dictated by revenue. It depends on how many owners there are, how formally you want internal decisions handled, and what the business actually does.

The operating agreement, even with one member

New York law requires the members of a limited liability company, including a single member, to adopt a written operating agreement, regardless of the common assumption that a one-person LLC does not need one because there is no one else to reach agreement with.

For a single owner, the operating agreement still does real work. It documents that the LLC is being run as a separate entity rather than as an extension of the owner personally, which matters if that separation is ever questioned. It also sets out what happens to the business if the owner becomes incapacitated or dies, which nothing else about a single-member LLC addresses on its own. Our operating agreements service prepares this document as part of forming the entity, or afterward for an LLC formed without one.

Keeping the liability separation real

Forming an LLC or a corporation separates the business’s liabilities from personal assets, but that separation is not automatic protection. It stops in a few specific places.

Personal guarantees. A guarantee signed on a lease or a loan makes the signer personally responsible for that obligation regardless of the entity behind the business.

Commingled funds. Paying personal expenses from the business account, or business expenses from a personal one, blurs the separation between the owner and the entity.

The owner’s own conduct. An entity does not shield an owner from responsibility for their own wrongful acts. It limits exposure for the business’s obligations, not for what the owner personally did.

Keeping the separation real matters as much as which entity was chosen: a business bank account from the day the entity is formed, income and expenses running through it exclusively, and records kept apart from personal ones.

The first commercial lease and its personal guarantee

A first commercial space is often where this comes up directly. Landlords leasing to a new or early-stage business commonly ask the owner to personally guarantee the lease, so the owner stays responsible for the rent even though the business, not the owner, is the tenant on paper. Whether the guarantee is negotiable, and how to limit its scope, is worth raising before signing rather than after. Our commercial real estate practice reviews and negotiates commercial leases alongside this kind of work.

Contracts with customers and vendors

Early sales and vendor relationships often run on templates found online, or on whatever document the other side sends over. A generic template is written for no business in particular, so it rarely matches what a business actually promises customers, what it needs from a vendor, or how New York law treats the terms inside it.

A contract drafted or reviewed for the business sets out scope, payment terms, what happens if either side does not perform, and who is responsible if something goes wrong. Once a working set of contracts exists, most new deals can be built from it rather than negotiated from nothing each time. Our contract drafting and review service builds and checks these agreements before they are signed, not after a dispute makes the wording matter.

The first hire: employee or independent contractor

The first person a business brings on is often treated as a contractor by default, paid on an invoice with nothing withheld, because it is simpler to set up. Whether that classification is correct depends on the facts of the working relationship, not on the label written into the agreement or how the parties prefer to be paid.

Getting it wrong carries real exposure for back pay and unpaid taxes, and that exposure does not go away because the arrangement was informal or short-lived. It is worth deciding deliberately, before the person starts, rather than defaulting to whichever classification involves less paperwork up front. Our employment agreements service prepares the paperwork correctly once that decision is made.

Registering the name and the licenses to open

Protecting the business name

Registering a business name with the state secures it for filing purposes, but it does not by itself stop someone else from using a similar name in a way that confuses customers. Trademark protection is the separate step that protects the name, and often the logo, as customers come to associate it with a specific business. Our trademarks service handles the search and the registration for owners who want that protection in place from the start.

Licenses and permits

Many businesses cannot legally open without a specific license or permit tied to the industry, the location, or the activity itself. Which ones apply depends entirely on what the business does and where it operates, and the requirements sit with different agencies at the city, state, and sometimes federal level. Our licenses and permits service identifies what a specific business needs and handles the applications.

Growing past this stage

The pattern described on this page tends to hold while the owner is still signing everything personally, before the business adds staff, a lease, and recurring customers worth documenting in a repeatable way. Once a business grows past $500,000 in revenue and takes on that kind of complexity, the legal work shifts toward the topics covered on our page for businesses in the next revenue band. For the full range of business law work Fisher Stone handles, see our business law practice.