At Keating Law, PLC our primary concern is helping you plan for business success. Throughout the Metropolitan Detroit area and beyond, we have assisted individuals and families in achieving prosperity and maintaining security. We help you deal with all of the issues that pertain to your business, all of which rest on the foundations of business law.
For 25 years, we have dealt with all aspects of business law, including:
We are also adept at handling business disputes involving arbitration and litigation.
- Buy/Sell agreements
- Family succession plans
- Key man buyouts
- Operating agreements
- Partnership agreements
- Corporate resolutions
- Non-compete and proprietary agreements
- Non-disclosure agreements
The Complexities of Business Law
Having evolved over centuries of increasingly complicated business activities, the laws governing business are full of rules, statutes, codes and regulations. This is why it is essential to have an astute business attorney to guide and advise you as you navigate business dealings. At Keating Law we are fully prepared to help you from start to finish with:
- Business planning
- Business formation and organization
- Contracts (transactional business law)
- Business negotiations
We can help you with all aspects of establishing and running your business. First, of course, you have to choose the appropriate type of business formation for your needs. This will depend, among other things, on how you intend to capitalize your business, your preferred tax treatment, whether you plan to issue and trade stock, how you plan to structure management, and how you foresee dealing with issues of owner liability.
How Corporations Protect Owners from Business Debts and Liability
It is well known that a failing business can decimate the accumulated wealth of the owner if he or she remains personally liable for business obligations and debts. This is one of the most important reasons for incorporation. Even in a thriving business, other actions, such as damage awards in lawsuits, tax penalties, or back wages and benefit payments, may quickly drain a lifetime of hard-earned assets.
The advantage of creating a corporation or other business entity is that the umbrella organization shelters business owners from personal liability. Even so, if an owner or director breaks the law or fails to uphold statutory requirements for corporate status, he or she may face personal liability.
In forming a business, there are many possible pathways to take. Having a skilled business attorney at your side will help you make informed decisions about the following categories:
Subchapter C and S Corporations
According to the Internal Revenue Code, there are two different levels of corporate tax treatment, defined as subchapters C and S. These subchapters have different rules for the application of corporate taxes.
For the most part, Subchapter C corporations are large and publicly held. They face double taxation in that, if they pay dividends to their shareholders, they file their own tax returns, paying taxes on profits before paying out dividends. The shareholders’ individual returns will be subsequently taxed again on the basis of their individual returns.
Subchapter S corporations, on the other hand, are permitted to protect their shareholders and avoid double taxation. In order to do this, however, they must meet the following prerequisites:
- Be domestic
- Not be affiliated with a larger corporate group
- Have no more than 100 shareholders
- Have only one class of stock
- Have no corporate or partnership shareholders
- Have no nonresident alien shareholders
Also, once a business is incorporated, all its shareholders must agree to subchapter S treatment before selecting that option with the Internal Revenue Service.
Joint Venture or Partnership
In both joint ventures and partnerships, each partner is equal in his or her ability to represent the entire organization in pursuing normal business and meeting legal obligations. In a joint venture, however, two or more companies join together in business for a particular short-term purpose, whereas in a partnership individuals join together for a combined venture from the outset. In a partnership, the two parties agree to share loss as well as profits.
A nonprofit corporation is established for a charitable, educational, religious, literary, or scientific purpose. Because the IRS and state tax agencies recognize the benefits the public derives from such organizations, it allows them a tax-exempt status. Most often, nonprofits receive their federal tax exemption from Section 501(c)(3) of the Internal Revenue Code which explains why nonprofits are sometimes called 501(c)(3) corporations.
Other Aspects to Consider
Once you have formed your corporation in the most suitable way possible, it is necessary not only to manage it efficiently, but to make changes to keep it cutting-edge, competitive, and profitable.
The Importance of Board Meetings
Business owners have to make important decisions relative to how the business is managed on a day-to-day basis. They also have to decide how frequently major meetings of directors and shareholders (if there are any) should take place.
Certainly meetings of shareholders and directors should take place at least annually when new officers and directors are elected. This is important not only for oversight and morale but because failure to hold regular meetings can endanger the corporation's ability to shield its officers, directors and shareholders from personal liability for the corporation's actions. Minutes should always be recorded.
In addition to annual meetings, a board meeting is necessary whenever a corporation undergoes a major transition or transaction, not only to inform interested parties, but to make sure significant changes are recorded as they occur.
If you have established a corporation with more than one shareholder, you should consider a buy-sell agreement. Such an agreement will protect you in the event of a shareholder’s divorce, disability, termination of employment, or death. Without the buy-sell agreement, serious problems may arise for the other shareholders and for the corporation as a whole. The buy-sell agreement provides for a smooth succession. Buy-sell agreements are recommended for partnerships for the same reason.
Whether you are contemplating starting a new business, managing an existing one, or involved in the process of incorporation, partnership, merger, or succession, having a knowledgeable, competent business attorney onboard can help you to make choices that are profitable and secure. Thomas Keating, Esq. is a highly skilled business lawyer who has spent the past 25 years helping businesses in the greater metropolitan Detroit area and adjacent counties succeed and thrive. He can be contacted by filling out a contact form on his website or by calling 586.501.8399