Asian Women In Business Starting Your Business 101 Legal Structures: Sole Proprietorship, LLC, S-Corp, C-Corp, Limited Partnership, General Partnership The Appropriate Structure for Your Business Julia Cheng, Esq. Di Santo LLP 15 Maiden Lane, Suite 1208 New York, NY 10038 T: 1.212.766.2468; F: 1.866.395.5856 [email protected]www.disantolaw.com
Choosing the appropriate legal entity for your business and what is involved in the incorporation process.
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Asian Women In BusinessStarting Your Business 101
Legal Structures:
Sole Proprietorship, LLC, S-Corp, C-Corp, Limited Partnership, General Partnership
The Appropriate Structure for Your BusinessJulia Cheng, Esq.
Di Santo LLP15 Maiden Lane, Suite 1208
New York, NY 10038T: 1.212.766.2468; F: 1.866.395.5856
The information and materials presented here is not intended to be legal advice, but merely, conveys general information related to legal issues commonly encountered. If you have specific questions related to the information or materials presented here, please consult an attorney who can advise you on the particular circumstances of your situation.
• requires 1 general partner who will be personally liable for all debts and obligations of the venture. Therefore, general partner usually a corporate entity itself. General partner will manage the business. Rest will be limited partners with limited control over the business
• pass-through taxation
• great for entrepreneurs to raise capital for a venture while retaining complete control of the business as a general partner, such as: oil and gas drilling, real estate syndications, and motion picture productions
• convenient vehicle to raise capital from the masses due to established corporate and securities case law regarding corporations—Delaware corporations
• double taxation, but see S-corp
• double taxation, good for profitable businesses that reinvest as shareholders only get taxed if company pays out the dividends. Unlike pass-through entities, where owners get taxed on entire net profit regardless of whether such profit is actually distributed out.
S-corp • a form of corporation, can elect to be S-corp by filing Form
2253 with IRS upon incorporation
• pass-through taxation like LLC
• no more than 100 shareholders
• shareholder eligibility: no foreigners, only individuals, estates, certain exempt organizations and certain trusts
• only 1 class of stock (identical rights to distribution and liquidation proceeds)
• hybrid of C-corp and LLC suitable for early stage companies seeking to raise capital while at the same time wishing to enjoy pass-through taxation. Can later switch to C-corp if necessary.
• consult regarding the number of shares company authorized to issue, par value;
• issue more than 1 class of shares;• issue share options;• give directors a “blank check” to decide terms of
preferred shares;• have right to repurchase shares;• set terms regarding voting rights of shareholders;• use managers, rather than members, to manage LLC…
– above provisions, along with other rights, will need to be reflected in incorporation documents to be valid.
a. Visit www.dos.state.ny.us/corp/filing.html to file online or if file by fax, download appropriate incorporation document and credit card authorization document form
b. Remember to order certified copy of incorporation document! Need certified copy to open bank account.
c. If file by fax, complete both incorporation document and credit card authorization forms, along with cover sheet and fax to 518-474-1418, Division of Corporations
1 Company incorporated?• check via www.dos.state.ny.us, “Corporate/Business Entity Database”
to see if company is incorporated
2 Apply for EIN online (Form SS-4), via www.irs.gov
3 Prepare internal corporate documents
4 Upon receipt of IRS EIN Confirmation Letter and certified copy of the incorporation document, bring both documents to bank to open corporate bank account.
5 If LLC or LP, need to fulfill publication requirement.• Service companies: www.vcorpservices.com
6 Need corporate seal, stock certificates, binder, etc..?
2 Bylaws • duties and rights of directors, shareholders• meetings, notices (traditional paper notice vs email)• director/shareholder decision making—action by written consent. For
shareholders, default rule requires 100% shareholder to sign. However, can provide clause in Certificate of Incorporation to reduce 100% shareholder consent to majority-in-interest.
3 Initial resolutions or minutes• approving by-laws, election of initial officers, directors, opening bank
account, issuing shares, etc.
1 Shareholder Agreement
2 All future major decisions need to be documented via resolutions
• “doing business as,” name used to advertise business under, obtained by filing:
– for sole proprietorships and partnerships-- “Certificate of Assumed Name” or “Business Certificate” in NY county where business conducted, visit: nyc.gov/html/sbs/nycbiz/downloads/pdf/registering.pdf
– for corporations and other entities--“Certificate of Assumed Name” with New York State Department of State, forms downloadable at www.dos.state.ny.us
• filing a dba certificate DOES NOT confer trademark ownership
Trademark--ABCSame as dba, name used to advertise business under, obtained through use, but if seeking protection at federal level (only 1 ABC can exist in entire US), need to file for federal registration.
Independent Contractor vs EmployeeIRS’s 20-Factor Analysis
• Worker running separate business?• Does worker do outside work?• Is worker supervised like an employee?• Is the work very important to the company?• Is worker hired by the company continually?• Does worker need help from the company to provide