Multi-Member LLCs: New Partnership Audit Rules
You will remember that difficult discussion with your small business attorney about how you wanted your limited liability company to be treated for purposes of taxation. If you do nothing, then your multi-member LLC is taxed as a partnership. And in this article, when we refer to a “partner” or a “partnership,” we are generally referring to a member in a LLC that is taxed as a partnership. If you want to be taxed as a corporation, you need to file an election. This article highlights the new audit rules and whether you may want to consider making changes to your multi-member LLC.
- Published in Business formation and startups, Limited liabilty company, Taxes
Small Businesses Required to Disclose Ownership: Corporate Transparency Act
Some owners of small businesses want to keep their ownership anonymous for various reasons. That just got a lot harder. The trend in many states is to require disclosure. Just last year, the District of Columbia joined other states in enacting legislation requiring the disclosure of beneficial ownership. Other states like Delaware have resisted the change. Now the federal government has entered the fray with the enactment of the Corporate Transparency Act (CTA). If you are a small business or if you are a small business lawyer assisting a small business, you definitely want to familiarize yourself with the CTA. Under the CTA, small business will have to submit beneficial ownership information to the Department of the Treasury’s Financial Crime Enforcement Network. The information will not be available to the general public. The new CTA accelerates that trend and it will become increasingly difficult to shield beneficial ownership information from government authorities and eventually the public at large.
Funding for Startups: Seed Financing
Most entrepreneurs are constantly looking for money to support their small businesses. Startups have three major options for funding: self-funding; loans; equity. In this article, we discuss seed financing, when owners give up equity in their small businesses in exchange for funding from third parties. Article discusses Simple Agreements for Future Equity (SAFEs), convertible notes and preferred shares.
- Published in Business formation and startups, Securities, Small business investing
Foreign Investment in the U.S.
If you own a foreign company and are thinking of opening up for business in the United States then you should read this article. Despite the challenges, foreign businesses continue to flock to the United States. This article gives an overview of the major decisions that foreign businesses must make as they explore entering the U.S. market. They usually set up a subsidiary not a branch, and confront issues of where to form the new entity. They consider issues dealing with tax, immigration, CFIUS reviews, corporate structure and other issues as they enter the U.S. market.
Corporate Law for Startups
If you spend the time and expense to incorporate your small business, then you should make sure you observe the corporate formalities. There are many reasons for observing corporate formalities. The most important reason is that if you don’t, you are leaving yourself open to someone trying to “pierce the corporate veil”—getting at your personal assets for the liabilities of the corporation. This blog describes the corporate formalities for a small business.
- Published in Business formation and startups, Corporations, Small business attorney
Fiduciary Duties 101
You may have heard about fiduciary duties, something about loyalty and care, but truth be known, you have no idea what that all means. Let’s set the scene. Your startup company is up and running. You have consulted with your startup lawyer about forming the company as a limited liability company. What duties do you owe to those who have invested in the company. They are after all part owners and have invested their hard-earned money into your company. You talk with your startup lawyer and he or she explains that you owe the owners a fiduciary duty—fiduciary what, you ask? If you violate these fiduciary duties, you may be personally liable. Well, that should get your attention. This article discusses what a fiduciary duty is and who it is applied to.
- Published in Business disputes and litigation, Business formation and startups, Limited liabilty company, News & Resources, Small business investing
Manager-Managed and Member-Managed LLCs: What’s the Difference?
There are several essential questions that you must discuss with your small business attorney before forming a limited liability company. You must determine the name of the company. You have to decide in which jurisdiction the startup company will be formed. You need to decide how the company will be treated for tax purposes. The focus of this article is the management structure of the LLC, whether the business be managed by its members or by one or more managers.
Choice of Entity Considerations in the Aftermath of Tax Reform
Entity-choice-after-tax-reform. When you are ready to form your new small business, you probably have reviewed with your small business attorney various entity choices. The small business attorney likely discussed possible legal entities such as corporations, partnerships and limited liability companies (LLCs). Which entity is the best form for your business depends on many variables such as structure, liability, management as well as tax considerations. You have likely heard that there was a big change to the United States tax code starting in 2018 under the Tax Cuts and Jobs Act. Many of the tax reform provisions affect businesses. In this article, we will discuss how these changes may affect the calculus in deciding which legal form your want to choose for your startup business.
Business Divorce: Outcomes and Resolutions for Small Businesses
This article summarizes possible outcomes from a business divorce. There are rarely good options in a business divorce, only ways to minimize the risk and uncertainty. It is not unlikely that the partners will engage in a self-defeating street fight with only losers and no winners. There are several issues that may affect the partners’ respective negotiating positions. In terms of the company, there are a limited number of possibilities: the company will continue to exist or it will be dissolved. There are of course other variants such as the assets of the company may be purchased or the company may be merged into a different company. In terms of damages or other remedies to the aggrieved party, courts try to fashion a remedy depending on the alleged harm. Whatever the outcome in a business divorce, usually none of the parties is particularly happy. The best medicine is preventive medicine. You should go into business only with those whom you trust and those with whom you can manage a long term relationship. And before you go forward with that partner, even the most compatible partner, make sure you speak with your small business attorney to craft an agreement for what you and your partner should do when you disagree.
Business Divorce and Small Businesses
At one time or another there will be an end to your business. When you started your business, you should have developed an exit strategy, but sometimes things don’t go as planned. The business may end happily in a merger or acquisition and sometimes less happily by dissolution or bankruptcy. Without clear guidelines at the outside, you will find that extricating yourself from your partners may be costly. A business divorce may have similar acrimony to a family divorce. In a family divorce, there is the combustible combination of kids and money. In a business divorce, the business partners undoubtedly will also argue about money—and will contend for control over their business, which for founders, can be like an extension of their families. The disputes among partners are not easy disputes. And business divorces like their family counterparts have numerous moving parts in various areas of the law such as business organizations, contracts, unfair trade practices, employment law and trade secrets. This article summarizes some of the considerations you should keep in mind when discussing with your small business lawyer what steps you and your partners should take to minimize the risk of a messy divorce with your partners down the line.
- Business disputes and litigation
- Business formation and startups
- Business transactions
- Corporate compliance
- Government contracting
- International business transactions
- Limited liabilty company
- Mergers and acquisitions
- News & Resources
- Non-profit law
- Rosten Law
- Russian articles
- Small business attorney
- Small business investing