Services & Programs

Business Law

Everywhere we are licensed to practice has laws related to the formation of business entities, and we are familiar with all of them. Whether you need to form an LLC, corporation or partnership in Florida, North Carolina or South Carolina, we can assist you.

Usually, the paramount reason for the type of entity you select is based on the tax ramifications of each type of entity. While we can explain these ramifications to you, we often suggest that our clients also discuss their choice of entity with their Certified Public Accountant who is more familiar with their particular tax situation than we are capable of being. Only the person who regularly prepares the client's tax returns will be sufficiently familiar with that client's tax needs to fully assess and advise the client regarding entity choice. We will work closely with your tax adviser to ensure that we create the entity that is best suited to your tax situation.

Limited Liability Company

Limited liability companies, also known as LLC's, are a relatively new (legally speaking) entity structure created by state law. They are available in all jurisdictions, including those where we are licensed to practice. They provide limited liability for the owners and managers and are flexible in how they are taxed. If there is only one owner, then it may be taxed as a sole proprietorship. If there is more than one owner, it may be taxed as a partnership. However, the owners may elect to be taxed as if they are a corporation. An LLC can therefore provide the limited liability and tax benefits as if it is a Subchapter-S corporation, while avoiding the onerous formalities required of corporate entities.

LLC's are created upon the filing of articles of organization with either the Secretary of State or Division of Corporations, depending on the jurisdiction where registered. While most jurisdictions permit laymen to file their articles of organization online with a few clicks and a credit card, that is only the beginning. The more important document in the LLC's creation is its operating agreement. This document not only sets forth the agreement of how the LLC will be formed, operated, managed and dissolved, it also acts as a document that the IRS reviews to determine whether the company meets the requirements for the type of tax treatment it has elected. If the operating agreement describes a partnership or sole proprietorship, then it may disallow an S-corporation election.

We spend the majority of our time with business planning clients and their tax advisers to determine what business the LLC will be conducting and what structure will be best suited to those activities and tax needs. We then carefully craft an operating agreement that best meets these unique needs of our clients.

Corporation

Corporations are probably the most familiar business entity to laymen. They are created by state law and recognized by the IRS as entities separate and distinct from their owners, so long as certain formalities are followed.

They are created upon the registration of articles of incorporation with the Secretary of State or Division of Corporations in the state where the company is to be domiciled. The articles act as a type of constitution for the governance of the company. A corporation's name must be separate and distinct from any other name on the corporate records of the state registry, but this does not bestow trademark rights automatically on the name of the corporation. The corporation also is required to have additional governing documents such as bylaws, stock certificates, minutes of meetings, and a corporate embossing seal. The corporation and its owners (shareholders) must observe formalities of ownership and governance or there is a danger that the company's owners could be held personally liable for the company's acts. For this reason, it is important to have competent legal counsel in the formation and governance of the company.

The company is considered to be formed under Subchapter C of the Internal Revenue Code governing corporate taxation. Such corporations are permitted to have as many shareholders as they wish, retain earnings from one year to the next, and have a fiscal year that starts and ends in any month of the year, but it pays taxes on its own income. Then, when funds or property are distributed to shareholders, these distributions are taxed again. For this reason of double taxation, they are usually reserved for larger companies and special purpose companies. They are not as efficient for passing through losses to the shareholders as other types of entities are.

Most small corporations will elect to be taxed as small business corporations under Subchapter S of the Internal Revenue Code. These corporations are not permitted to have over 75 shareholders, and all shareholders must be human beings or pass-through entities. They are not permitted to carry over retained earnings from one year to the next, and their fiscal tax year must be the calendar year. They provide the same limited liability for their shareholders, but they require the same formalities of the C-corporation, but are often the recommended entity for holding income-generating assets for short periods of time (i.e. less than one year).

General Partnership

Two owners can form a general partnership on purpose or by accident. A partnership may be deemed to exist whenever two or more people or entities work together and share profits and losses of the venture. No formal written partnership agreement is required, but it is recommended. The partnership will file IRS tax form 1065 each year as an informational return to pass through the losses and income to the partners. Unlike a corporation where the shareholders are not liable personally for the actions of the corporation, partners are liable personally for the actions of the partnership as well as their fellow partners. Because of the liability issues that arise with partnerships, they are generally not the recommended entity of choice anymore. Instead, we are often called upon to advise clients as to how to avoid the accidental creation of partnerships and the liability issues that comes along with them.

Limited Liability Partnership

Limited liability partnerships are special general partnerships where the partners have made a public registration statement that they are not to be individually held liable for each others' actions nor for the actions of the partnership itself. They have all of the other characteristics of a general partnership except for the general liability of the partners.

Limited Partnership

A limited partnership is a special type of partnership where there is at least one general partner who is liable personally for the partnership's liabilities and actions. The rest of the partnership interests are owned by limited partners. They are "limited" in that their management powers within the partnership are very limited. The limited partners have no say in the daily operations of the partnership's business. The general partner instead is responsible for the day-to-day operations of the partnership. The limited partners' liability is limited to the amount of their partnership interest only. These entities are used most often as vehicles to raise a large amount of capital from partners who desire to invest in the venture without taking on the liability of the daily operations. They are also often used in estate planning for large intergenerational estates to take advantage of certain tax treatment of the limited partnership interests.

Sole Proprietorship

Sole proprietorships are the simplest form of business ownership. They are simply one owner conducting business for a profit. The profits and losses pass through directly to the owner on the owner's individual tax return each year. The owner is personally liable for the actions, negligence and debts of the business, and the owner's assets are at risk of being taken to satisfy those liabilities. The only registration required of a sole proprietorship is filing a fictitious name registration with the Division of Corporations. In the past, it was a requirement that notice of the fictitious name be published in the local newspaper. However, with statutory changes, this is no longer a necessary expense to incur. This type of ownership is rarely recommended because of the liability risk involved, and is often reserved for other limited liability entities that are merely doing business under a different name.

Mergers and Acquisitions

We often draft contracts for the sale, purchase, repurchase, merger and dissolution of all types of entities. We have been involved in many transactions where owners have bought out each other's interest or transferred to new owners. We find that many owners have failed to consider the securities laws implications of such transfers, and often work with them to ensure that such laws are followed, whether it requires a private placement, qualified investor or other exemption to avoid penalties for running afoul of the securities laws. Please contact us prior to purchasing or selling a business opportunity, or before you buy out your fellow owners. In addition to the tax implications of such transactions, you should be properly advised regarding the legal ramifications as well.

Legal Opinion Letters

We often are called upon to provide our reasoned legal opinion letters for lenders in commercial transactions where the business is either located in Florida, North Carolina or South Carolina, or if the business owns property in one of these jurisdictions. We provide opinions related to formation, authority to conduct business, authority to enter into the contemplated transaction, and opinions related to the bankruptcy remote status of the entity borrower. We are often able to provide such opinions within a matter of days after receiving the documents for review.