Corporate law encompasses a broad range of issues pertaining to the operation of a business. A corporate attorney can help you choose the right type of business entity for your needs, draft governing documents, ensure you comply with corporate formalities, litigate disputes, and dissolve an entity.
Choice of Entity:
A key initial determination is the type of business entity. The following are several of the most common forms of business entity:
An individually owned and operated business where there is no distinction between the owner and the business. The owner receives all profits, but is also entirely responsible for all debts. The owner will also report any income from the business on his/her personal tax return.
Legally, a general partnership is made up of two or more people who act as co-owners of the business. Co-owners share profit and losses equally, unless otherwise predetermined in a partnership agreement. Co-owners also share legal responsibility and liability.
Limited Liability Company (LLC):
An LLC is a separate legal entity from its owners. Members of an LLC have limited personal liability for debts of the LLC, and are only liable to the extent of their contribution to the LLC. An LLC is a pass-through entity for taxation purposes, meaning that the individual members report their shares of the LLC’s profits or losses on their individual tax returns.
A corporation, or incorporated entity, is a business entity that is separate from its shareholders and has a distinct organizational and management structure. The shareholders have limited liability, and are responsible only for the amount they have invested in the corporation.
A C corporation is the most common type of corporation, and is sometimes referred to as a “general” or “regular” corporation. Typically, C corporations are not publicly traded on the stock market and are considered privately held. Shareholders are both directors and officers, and owners are taxed separately from the corporation.
To qualify as an S corporation, the entity must be in the United States, have a maximum of 100 shareholders, and only one class of stock. Unlike a C corporation, an S corporation is taxed like a partnership, and shareholders report the corporation’s income as part of their personal income taxes.
Once you have decided on what type of entity to form, a corporate attorney can file the appropriate paperwork to bring your company into legal existence.
Businesses generally need a governing agreement between the owners to dictate how decisions are made and disputes are resolved.
To avoid jeopardizing the entity’s legal status, it must comply with corporate formalities such as by keeping corporate minutes, documenting decisions and transactions, and by filing annual reports with the Secretary of State.
In the event that disputes arise, either internally between owners of the entity, or externally between the entity and other parties, a corporate attorney can represent a particular party’s interests.
Mergers and Acquisitions:
Throughout an entity’s existence, there may be times in which the entity wishes to acquire another business or merge its interests with those of another entity. In the process of merging or acquiring another entity, it is important to have an experienced corporate attorney who can perform critical due diligence, advise the proper course of action, and draft requisite documents such as asset purchase or stock purchase agreements.
If an entity experiences economic distress, a corporate attorney can guide an entity through dissolution, helping to resolve matters with creditors and wind up the business interests.
Hiring a corporate lawyer:
Consulting or retaining a business attorney is an essential element to making sure your business runs efficiently and within legal parameters. While hiring a business lawyer during a time of legal hardship makes sense to most business-owners, consulting an attorney for day-to-day business activities, such as contracts, is equally important to the functionality and financial success of your business.