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Are You Commingling Multiple Businesses?

By Business Contracts, Business Lawyer

If you own multiple limited liability companies or corporations are you commingling the businesses?

If so, you expose these ventures to unnecessary legal dangers.

For example, a court might decide one company is the alter ego of the other and hold both of them liable in a lawsuit. Instead walls of protection, you’ve let down the drawbridge and invited in plaintiffs to raid all of your companies.

So, how do you avoid this commingling danger?

Treat them as separate companies.

For instance, don’t raid the bank account of Company A to pay Company B’s expenses simply because the latter is short on cash.

And when the entities do business with each other, use written contracts that explain the rights and duties of each entity under the agreements.

For example, if Company A wants to advertise on Company B’s website, there should be an advertising agreement in place where B gets compensated somehow by A for running the ads. No freebies from one company to the other simply because you own both.

What about intellectual property? If one company owns the IP, but you want both companies to use it, chances are you’ll need some type of licensing agreement between one entity as owner (licensor) and the second entity as licensee.

An experience business lawyer can help you put the right documents in place to protect your multiple businesses from improperly commingling. And if you’ve already been commingling, he can help you fix the situation to minimize the legal risks.

What Does Your Business Entity Own?

By Business Contracts, Business Lawyer

If you set up a limited liability company (LLC) or corporation for your existing business, what does the new entity own?

Too often, the answer is nothing.

How does that happen?

Your sole proprietorship or partnership never gets around to actually transferring the business assets to the new entity.

So, you’re really still running the business as before while pretending there’s a corporate liability shield in place to protect you as the owner.

Unfortunately, a hollow entity (without assets) isn’t going to protect you personally.

Naturally this means you’ll want to transfer the assets to the entity so that it can operate as intended for tax and liability purposes.

An experienced business lawyer can help you use the right contracts and assets transfer paperwork in a way that makes sense for your business model. Because if you’re going to set up a corporation or LLC, you might as well take advantage of it.

Corporations – Should You Form One?

By Internet Lawyer

A corporation is a type of business entity that exists under law as a separate “person” from the shareholders who own it. Most corporations exist indefinitely. There are many reasons to operate a business as a corporation. Factors include tax savings, asset protection, the ability to raise funds by selling corporate shares, etc.

For tax purposes, you will commonly hear about C corporations and S corporations. At the federal (and usually state) level, C corporation income is double-taxed. First, income is taxed at the corporate level. Shareholder distributions are then taxed as personal income. In contrast, S corporation income is usually passed directly to the shareholders and taxed at that level instead of double taxation.

C corporations tend to be large publicly traded companies while S corporations are more common for privately held businesses. Although entrepreneurs favor S corporations to C corporations, there is a growing trend to operate enterprises as limited liability companies (LLC) instead where the tax advantages of a limited liability company are similar to an S corporation and the formalities for operating a business are less burdensome.

Limited Liability Companies Offer Asset Protection And Tax Benefits

By Internet Lawyer

Operating your business as a limited liability company (LLC) provides you with some of the best asset protection features of a corporation combined with operational and taxation features of a partnership (or a sole proprietorship if there is just one member). Like Subchapter S corporations, limited liability companies can be subject to single income taxation (in contrast with a C corporation’s double taxation at both the corporate and shareholder level). Day-to-day operation and ownership of a LLC, however, tends to be easier because the formalities are less strict than those governing S corporations.

Of course, you should consult with your attorney and your accountant to discuss legal and tax issues before forming limited liability companies or changing the current legal form of your business.