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Corporate Law
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Contested and Uncontested Tender Offers |
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Real Property Purchase Sale and Leasing |
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Joint Ventures |
Sale of REO Property |
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Leasing |
Security Agreements |
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Leveraged Buyouts |
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Loan Agreements |
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Mergers, Acquisitions and Divestitures |
Taxation |
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Obtaining corporate reinstatements as well as other kinds of documents
through NYS Dept. of Taxation & Finance,
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Obtaining gains tax clearance through the Gains Tax Processing Unit in
connection with real estate transfers,
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Obtaining Releases of Liens & Waivers from the Estate & Gift Tax Unit in
connection with decedents’ estates in certain circumstances
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Obtaining tax exempt status by drafting, processing, and completing 501 (C)
(3) applications for submission to the IRS in connection with Not-For-Profit
corporations,
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Obtaining & expediting various real estate applications for licenses through
the Division of Licensing Services of the Secretary of State’s Office,
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Handling of various matters, applications and documents through NYS agencies
and departments,
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Obtaining judicial approval in connection with Orders To Show Cause,
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Drafting and filing orders to show cause to reverse, cancel, and negate
mergers, dissolutions, and certain other corporate filings.
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Processing, filing & handling calendar and motion practice & related matters
in all local Courts, including acting as co-counsel in minor matters &
proceedings and
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Document retrieval in local courts, departments and agencies.
Securities: representation of public and private
companies including start-up companies; public offerings; partnerships, limited
liability companies and joint ventures; private placement offerings and
syndications; compliance with Securities Exchange Act of 1934; legal audits.
Conventional Financing: including representing
institutional lenders and borrowers in connection with short and long term
financing for business enterprises; mortgage financing.
Venture Capital Financing: including representing
public and private companies as well as venture capital entities in connection
with debt and equity offerings, warrants, and structuring joint ventures both
domestically and abroad.
Privately-Held Corporations: develop and execute
stock purchase agreements, shareholder agreements, employment agreements and
contracts.
Business Combinations/Reorganizations: including
structuring and executing acquisitions, stock or asset purchase agreements,
merger or consolidation agreements, recapitalizations, other business
reorganizations and leveraged buyouts.
C-Corporation
The label, "C-Corporation" merely refers to a standard, general-for-profit,
state-formed corporation. Characteristics of the "C-Corporation" include the
following:
Separate Legal and Tax Life. A corporation which is properly formed and operated
as a corporation assumes a separate legal and tax life distinct from its
shareholders. A corporation pays taxes at its own corporate income tax rates and
files its own corporate tax forms each year IRS Form 1120.
Management and Control. Normally, a corporation's management and control is
vested in its board of directors who are elected by the shareholders of the
corporation. Directors generally make policy and major decisions regarding the
corporation but do not individually represent the corporation in dealing with
third persons.
Thus, transactions with third persons and day-to-day activities are conducted
through officers and employees of the corporation to whom authority is delegated
by the directors of the corporation.
Shareholders. Shareholders are the owners of a corporation. Although
shareholders have no power over the corporation's daily activities, shareholders
possess the ultimate power in that they can appoint or remove Directors of the
corporation.
Directors. The Board of Directors is responsible for the long-term management
and policy decisions of the corporation. While the Directors are considered to
have the highest level of DIRECT control over the corporation, there are,
however, a few instances when the shareholders are required to approve Actions
of the Board of Directors (e.g. amendment to the Articles of Incorporation, sale
of substantially all of the corporate assets, the merger or dissolution of the
corporation, etc...).
Corporate Officers. Corporate officers are elected by the Board of Directors and
are responsible for conducting the day-to-day operational activities of the
corporation. Corporate officers usually consist of the following: (President,
Vice-President, Secretary, Treasurer).
Management & Staff. Management and Staff are DIRECTLY responsible for the daily
activities of the corporation.
One Person Required. In most states, one or more persons may form and operate a
corporation. Some states, however, require that the number of persons required
to manage a corporation be at least equal to the number of owners. For example,
if there are only two shareholders, there must also be a minimum of two
directors serving on the board.
Fringe Benefits. Corporations may often offer their employees unique fringe
benefits. For example, owner-employees may often deduct health insurance
premiums paid by the corporation from corporate income. In addition,
Corporate-defined benefit plans often afford better retirement options and
benefits than those offered by non-corporate plans.
Corporate Formalities. To retain the corporate existence and thus the benefits
of limited liability and special tax treatment, those who run the corporation
must observe corporate formalities. Thus, even a one-person corporation must
wear different hats depending on the occasion.
For example, one person may be responsible for being the sole shareholder,
Director, and Officer of the corporation; however, depending on the action
taken, that person must observe certain formalities: Annual meetings must be
held, corporate minutes of the meetings must be taken, Officers must be
appointed, and shares must be issued to shareholders.
Most importantly, however, the corporation should issue stock to its
shareholders and keep adequate capitalization on hand to cover any "foreseeable"
business debts.
Shareholder Liability for Corporate Debts. Where corporate formalities are not
observed, shareholders may be held personally liable for corporate debts. thus,
if a thinly capitalized corporation is created, funds are commingled with
employees and officers, stock is never issued, meetings are never held, or other
corporate formalities required by your state of incorporation are not followed,
a court or the IRS may "pierce the corporate veil" and hold the shareholders
personally liable for corporate debts.
Avoiding Double Taxation. Generally, the corporation is taxed for its own
profits; then, any profits paid out in the form of dividends are taxed again to
the recipient as dividend income and the individual shareholder's tax rate.
However, most small corporations rarely pay dividends. Rather, owner-employees
are paid salaries and fringe benefits that are deductible to the corporation.
The result is that only the employee-owners end up paying any income taxes on
this business income and double taxation rarely occurs.
NOTE: See "The S-Corporation" below as a popular taxing alternative for
corporations.
Duration of a Corporation. As a separate legal entity, a corporation is capable
of continuing indefinitely. Its existence is not affected by death or incapacity
of its shareholders, officers, or directors or by transfer of its shares from
one person to another.
S-Corporation
An S Corporation begins its existence as a "C-Corporation" (discussed above) --
(i.e. as a general, for-profit corporation upon filing the Articles of
Incorporation with the appropriate STATE office. However, after the corporation
has been formed, it may elect "S Corporation Status" by submitting IRS form 2553
to the Internal Revenue Service (in some cases a state filing is required as
well).
Once this filing is complete, the corporation is taxed like a partnership or
sole proprietorship rather than as a separate entity. Thus, the income is
"passed-through" to the shareholders for purposes of computing tax liability.
Therefore, a shareholder's individual tax returns will report the income or loss
generated by an S corporation.
Qualifying for S Corporation Status. To qualify as an S corporation, a
corporation must timely file IRS Form 2553 with the IRS. This election must be
made by March 15 of the current year if the corporation is a calendar-year
taxpayer in order for the election to take effect for the current tax year.
However, a "New" corporation may make the filing at anytime during its tax year
so long as the filing is made no later than 75 days after the corporation has
began conducting business as a corporation, acquired assets, or has issued stock
to shareholders (whichever is earlier).
To qualify for S corporation status, the corporation must:
Be filed in one of the 50 United States.
Maintain only one class of stock.
Maintain a maximum of 75 shareholders.
Be comprised SOLELY of shareholders who are individuals, estates or certain
qualified trusts, who consent in writing to the S corporation election.
NOT have a shareholder who is a non-resident alien.
Losing S-Corporation Status. Failure to observe ANY of the above requirements
could revoke S-Corporation status at any time. An S-Corporation that loses its
status as such may not re-elect S-Corporation status for a minimum of five
years.
Corporate Formalities. An S-Corporation follows the same state formalities as
does a C-corporation (i.e. filing Articles of Incorporation and paying state
fees).
IRS Filings. The S-Corporation must complete and file IRS Form 1120s to report
its annual income to the IRS each year.
General Shareholder Requirements. ALL shareholders of the corporation must be
U.S. Citizens or have U.S. Residency Status. If, for any reason, shares are
somehow sold or transferred (even if by will, divorce, or other means) to a
shareholder who is a foreign national, the corporation will lose its
S-Corporation status and be treated as a C-Corporation.
Who Should Elect S-Corporation Status? Owners who want the limited liability of
a corporation and the "pass-through" tax-treatment of a partnership will often
make the S-Corporation election. In most cases, corporations that would benefit
from S-Corporation status are those who plan on distributing the majority of
earnings to its shareholders in the year those earnings are realized.
Corporations who plan on retaining earnings for future investments in future tax
years often choose the C-Corporation because, under the S-Corporation, earnings
will be taxed as if they were distributed to shareholders regardless of whether
a distribution actually occurred or whether the corporation retained the
earnings for future investment.
Limited Liability Company (L.L.C.)
Rules governing the Limited Liability Company (L.L.C.) are usually distinct from
the rules and laws governing corporations. In general, however, the L.L.C. is a
state-created entity intended to provide it's members / owners with the limited
liability afforded to corporate shareholders while minimizing many of the
formalities corporations are required to observe.
If you are considering forming an L.L.C., you should be aware of the following
facts:
IRS Treatment of the Two-Member LLC. If your LLC has two or more owners, The IRS
will tax the LLC owners as if the owners were members of a partnership. A
partnership files Form 1065 (U.S. Partnership Return of Income).
IRS Treatment of the One-Member LLC. An LLC with only one member / owner is
taxed by the IRS as a sole proprietorship is taxed. Thus, the sole member of an
LLC will file (Form 1040), (U.S. Individual Income Tax Return) and will include
(Form 1040, SCHEDULE C) (Profit or Loss from Business) with his/her tax returns.
"Tax My LLC as a Corporation!" Regardless of how many members the LLC has, the
LLC may file an Election to be Treated as a Corporation for Purposes of Taxation
(IRS Form 8832). If an election is made to be treated as a corporation, the LLC
must file Form 1120 (U.S. Corporation Income Tax Return). IRS Form 1120, Form
1120 Instructions
Minimum Members Required by State Law. Traditionally, most states have required
that an LLC consist of two or more members (owners). Recently, however, the
majority of states are allowing single-member LLCs.
Separate Legal Entity Status. Similar to the corporation, an LLC is recognized
as a separate legal entity from its "members." Thus, an LLC can own property,
commit itself to contractual obligations, and even commit crimes.
Limited Liability for Members (owners). In most cases, only the LLC is
responsible for the company's debts thus shielding its members from personal
liability. However, there are some exceptions where individual members may be
held liable:
1. Guarantor Liability. Where an LLC member has personally guaranteed the
obligations of the LLC, he or she will be liable. For example, where an LLC is
relatively new and has no credit history, a prospective landlord about to lease
office space to the LLC will most likely require a personal guarantee from the
LLC members before executing such a lease.
2. Alter Ego Liability. Where an LLC member has personally guaranteed the
obligations of the LLC, he or she will be liable. For example, where an LLC is
relatively new and has no credit history, a prospective landlord about to lease
office space to the LLC will most likely require a personal guarantee from the
LLC members before executing such a lease.
Fewer Formalities than the Corporation. Although a corporation's failure to hold
shareholder or director meetings may subject the corporation to alter ego
liability, this is not the case for LLCs in most states. An LLC's failure to
hold meetings of members or managers is not usually considered grounds for
imposing the alter ego doctrine where the LLC's Articles of Organization or
Operating Agreement do not expressly require such meetings.
Shared Management and Control. Management and control of an LLC is vested with
its members unless the articles of organization provide otherwise.
Voting Interest According to Ownership. Ordinarily, voting interest directly
corresponds to interest in profits which directly corresponds to share of
ownership unless the articles of organization or operating agreement provide
otherwise.
Transfer Requires Majority Consent. No one can become a member of an LLC (either
by transfer of an existing membership or the issuance of a new one) without the
consent of members having a majority in interest (excluding the person acquiring
the membership interest) unless the articles of organization provide otherwise.
Perpetual Duration. Traditionally, most states did not allow an LLC to have a
perpetual existence; LLCs were traditionally required to specify the date on
which the LLC's existence would terminate. Today, however, most states allow a
perpetual duration for an LLC if stated in its articles of organization.
Dissolution Upon Certain Events. Unless otherwise provided in the articles of
organization or a written operating agreement, an LLC is dissolved at the death,
withdrawal, resignation, expulsion, or bankruptcy of a member (unless within 90
days a majority in both the profits and capital interests vote to continue the
LLC).
Operating Agreement Required. To validly complete the formation of the LLC,
members must enter into an Operating Agreement. This Operating Agreement may
come into existence either before or after the filing of the Articles of
Organization and depending on your particular state's laws, may be either oral
or in writing.
Different Laws in Different States. While laws governing corporations have grown
to be quite uniform amongst the different states over time, LLC statutes can
vary quite drastically from state to state. This is most likely due to the fact
that the LLC is a VERY new form of business structure only recently recognized
by most governments (e.g. Hawaii only recently began recognizing the LLC as a
legitimate form of business in 1997.
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