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Many small businesses start as a part-time effort that grow over time, and eventually become a profit generating venture. One of the difficult questions

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

for a small business owner is, “When do I need to form an entity?” A follow-up question is which type of entity to form such as a corporation (sub-chap

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

er S or C Corporation), limited partnership (LP), limited liability partnership (LLP), or limited liability company (LLC).

The business person who is a

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

ole proprietor should be aware that his/her liability is virtually unlimited. When you do not have the protection of an entity under which your business

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

operates, it is your personal assets that are at risk. Therefore, if a party were to sue you, your personal assets would be exposed. Many states, such

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

s Texas, offer homestead protection so that creditors cannot foreclose on an individual’s home, but such laws vary from state to state.

The formation of

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

a legitimate business entity offers varying forms of protection for a business person’s personal assets. Entity formation is the process wherein one esta

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

lishes an entity authorized to conduct business within a certain jurisdiction. In Texas, one would file entity formation papers through the Secretary of

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

State’s office. Each state has a government office that handles entity formation. Generally, an entity can be created for as little as $50-$250 per app

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

ication. Though this step often occurs later as a business grows, it is a small financial investment to make early on. Creating an entity also gives y

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

ur business credibility in that you have taken the steps to define it as a functioning entity. The most common entity formed by a new start-up business

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

is the LLC (Limited Liability Company).

Limited liability companies are designed like partnerships, and therefore suitable to small businesses, but have

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

asset protection similar to a corporation. When your entity is set up you will also receive a tax ID from the state comptroller. Therefore, you will li

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

ely have to file a franchise tax return in your state(s) of operation. You should also request a federal tax identification number (FEIN). You may want

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

to consult a CPA to determine which type of entity offers the most tax advantages in your state.

The other component in protecting personal assets is to

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

purchase business liability insurance. Most insurance carriers have business divisions which write general liability insurance polices. Contact your cu

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

rent carrier and see if you can obtain insurance this way. Additionally, you may be covered under your homeowner’s policy depending on the business you a

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

e in, anticipated revenues, and the potential exposure. Speak with your insurance carrier to find out what you need to do to protect yourself.

You can

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

pply for the entity yourself or with the aid of an attorney. As mentioned earlier, you should speak with a tax attorney or CPA about which entity offers

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

you the best tax advantage in your state.

Disclaimer: This article does not constitute legal advice nor does this create an attorney-client relationship

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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Answers - Small Business Entity Formation - Protect Your Personal Assets

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