Part of the American dream is to take advantage of the great opportunities available in order to be successful. Across the county, there are more than 23 million small businesses that account for 54% of all sales in the United States. In today’s business environment, more and more people do business through entities such as a corporation, a limited liability company, or a partnership. There are distinct advantages and disadvantages to the different entities. Sometimes, the success of a business is determined by the choice of entity made at the start.
Corporations, S-Corps, and Limited Liability Companies
Corporations are artificial entities that are created at the state level by a group of persons who desire to do business as a single entity. The owners of a corporation are shareholders. A board of directors, who are elected by the shareholders, makes the corporation’s business decisions. The day-to-day operations of the corporation are overseen by executive officers, such as the Chief Executive Officer, the Chief Financial Officer, and more recently, a Chief Technology Officer, and a Chief Security Officer. The corporation is an independent legal entity that has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes. The most important aspect of a corporation is limited liability. That is, shareholders have the right to participate in the profits, through dividends or the appreciation of stock, but are not held personally liable for the company’s debts.
A subset of corporations is the S-Corp, which has the limited liability protections of a corporation, but has flow-through taxation. S-Corporations do have certain limitations, such as a maximum of 100 shareholders, a single class of stock, and shareholders must be citizens of the United States or resident aliens.
A limited liability company (“LLC”) is a more recent entity. The LLC is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. The owners of a limited liability company are members. The LLC is managed by either its members or managers. Similar to the corporation, the LLC is an independent legal entity that has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, and own assets. Notably, taxes are assessed differently for LLCs than for corporations. For this reason, LLCs have become more popular over the last two decades as the entity of choice for business.
Choosing the correct business entity will have significant implications for your business. The strategy should not only focus on the now, but also on where you expect to go with your business. For example, if you plan to be the next Internet startup that makes a big splash with a large initial public offering, then a corporation may be for you. In contrast, if you are planning to engage in a series of independent transactions under the umbrella of a single entity, then limited liability companies may be more appropriate. Part of your strategy should be to speak with an experienced corporate law attorney to assist you.
Corporate Law Experience
Yolofsky Law has assisted corporate clients with all of the following:
- Advising a international infrastructure project management group on obtaining and executing a maritime infrastructure agreement in Dubai, United Arab Emirates;
- The creation and implementation of private equity funds to invest in commercial real estate in frontier markets;
- Acting as outside general counsel to an international telecommunications company to assist with licensing and distributor agreements in the United States, Latin America, and the Caribbean;
- Acting as outside general counsel to a private security consulting group that specializes in school security.
Global Perspective: International Corporate Law
We approach a client’s business transactions by examining the short-term and long-term client goals. Some businesses look to concentrate their efforts on their local area; others have a more global perspective. Fortunately, the basic planning and organization points are similar. When a business adds an international element to their plans, new challenges arise. Our goal is to ensure that we are able to assist every step of the way.
When a business goes international, things can dramatically change. Some important points to consider are:
- What law will govern my operations? This is a twofold question because the local law will dictate what happens inside of a particular country (and sometimes city) borders, but the agreement that brought your business to that location may have different terms.
- Do I need a local contact? In many jurisdictions, foreigners are not permitted to operate a business. Many countries require that foreign businesses operate with a local partner in order to do work or deliver goods in their country. However, there are many free zones across the world that allow American businesses to operate in that limited area.
- Am I safe doing business in ____________? Security of personnel, assets, goods, and money are an important point to be analyzed in the formation of international agreements.
- What happens if something goes wrong? Dispute resolution is one of the most frequent questions businesses have when going abroad. Bringing a case against a foreign entity in a United States court is not always a simple matter. International arbitration and dispute resolution are the preferred methods of solving this type of problem. In fact, foreign countries tend to enforce arbitration awards over US court judgments.
Yolofsky Law practices corporate law in an effort to become your business’ trusted advisor. The governance of a business differs with the type of entity you have chosen. Different persons are responsible for making business decisions. This is one of the most important aspects of corporate governance, especially in a small business; yet, many businesses do not completely address how decisions will be made.
For corporations, there are regular meetings of the board of directors and at least annual meetings of the shareholders. In a limited liability company, the members will also have annual meetings, but there are also meetings of the managers and officers. Business entity law requires certain formalities be met for these meetings and the topics discussed be recorded. Many people are familiar with the notices of board meeting or annual meeting of shareholders that are sent through the mail every year. However, there are also special meetings that are needed to complete particular company business. These meetings must also be properly noticed; otherwise, the decisions made could potentially be invalidated.
Yolofsky Law practices corporate law with an awareness for, and utmost level of respect to, compliance issues. You focus your business efforts on satisfying clients and earning repeat business. In the modern business environment, there are a slew of laws and regulations that govern a business. Moreover, many customers may want to confirm that your business complies with the appropriate local, state, federal, and sometimes international rules of doing business. While you are out working on your next deal, Yolofsky Law is regularly reviewing the laws that regulate your business to ensure that all obligations are being met.
Some different examples of regulatory compliance include:
- Developing a Foreign Corrupt Practices Act Compliance Policy;
- Coordinating with local authorities to do business in a foreign country;
- Drafting contract language that meets the requirements of a foreign jurisdiction;
- Meeting the requirements for the registration of investment advisers at both state and federal levels
General Counsel Services
Yolofsky Law provides Clients who do not maintain in-house counsel due to their size, recent entry into the U.S. market or for other reasons, engage the firm to provide them general counsel services to address the need to efficiently handle day-to-day legal issues. Such general counsel services may include matters related to matters such as employment, leasing, general contract and commercial issues that are of a type customarily handled by in-house counsel. We are happy to discuss with potential clients the needs they may have for general counsel services and the basis upon which the firm would be prepared to undertake such an engagement.
The firm regularly advises start-up and emerging companies in addressing the broad range of issues these companies face in order to succeed. Our services include assisting clients in the critical and fundamental issues related to the formation, capitalization, shareholder arrangements, protection of proprietary information and intellectual property critical to early stage enterprises. Understanding the need for legal services of entrepreneurs at the very early stages, we offer fixed-fee legal services to address the more common issues of establishing businesses.
To learn more about corporate law services, contact Yolofsky Law, P.A. online or call 305-702-8250.