BUSINESS LAW
Advice and assistance to businesses of all sizes
Starting a new business, buying an existing business, or need legal counsel for your existing business, Pamela A. Popwell, PLLC has the knowledge and experience to help you.
Business Formation
We work with clients to help them choose the right legal entity for their business. We work closely with our clients to get a good sense of their business priorities and goals. From there, we can advise them of the most appropriate entity for their new business. We have assisted clients in forming all types of legal entities, including:
Corporations
LLCs (Limited Liability Companies)
Partnerships
Non-Profit Organizations
Business Sales, Acquisitions, and Mergers
The law firm has a great deal of experience representing purchasers and sellers of businesses including asset, stock or LLC membership transfers, as well as mergers, spin-offs and corporate reorganizations.
Our firm will guide business owners in the multi-stage process of buying or selling a business including:
• Advising on the structure of the transaction
• Negotiation of terms and drafting of the deal memorandum
• Advising sellers on legal strategies to address issues raised during the due diligence process
• Advising buyers on conducting legal due diligence
• Drafting, reviewing and negotiating the extensive documentation involved in a business transaction, such as asset purchase agreements, stock purchase agreements and security agreements
Preparation and Review of Business Contracts
Our firm consults with business owners to draft, review, and negotiate contracts related to various business activities, including:
• Contract Review and Preparation
• Non-Compete Agreements
• Buy-sell agreements
• Lease agreements
• Service contracts
• Releases and waivers
• Property agreements
• Shareholder agreements
• Operating agreements
Pamela A. Popwell, PLLC does not litigate or represent clients that have a business dispute with a customer or business owner
Business FAQ
What factors should be considered in choosing the type of business form for my business?
Although there are many important things to think about when choosing a business form, some of the main considerations include your preference of tax treatment, how you intend to capitalize the business, whether you plan to issue stock and trade it publicly, how you intend to structure the management of your business and issues surrounding the liability of the business owners, among other things. It is very important to plan your business and to work closely with someone who can help you choose the business form that will meet your needs.
What is a non-profit corporation?
A non-profit corporation is a corporation formed to carry out a charitable, educational, religious, literary, or scientific purpose. A nonprofit corporation doesn't pay federal or state income taxes on profits it makes from activities in which it engages to carry out its objectives. This is because the IRS and state tax agencies believe that the benefits the public derives from these organizations' activities entitle them to a special tax-exempt status.
The most common federal tax exemption for nonprofits comes from Section 501(c)(3) of the Internal Revenue Code, which is why nonprofits are sometimes called 501(c)(3) corporations.
Is it a good idea to have a Buy-Sell Agreement?
Corporations with more than one shareholder should seriously consider a buy-sell agreement. A shareholder's death, divorce, disability or termination of employment can create serious problems for a corporation and its other shareholders. A buy-sell agreement can help minimize these problems by providing for an orderly succession in such plans. Similar provisions are recommended for partnership.
What is involved in a corporate merger?
Like most corporate law, mergers are regulated at the state level. While these laws vary by jurisdiction, many aspects of the merger process are the same across the nation. Generally, the board of directors for each entity must initially approve a resolution adopting a plan of merger that specifies the names of the entities involved, the name of the proposed merged company, the manner of converting shares of both entities, and any other legal provisions to which the corporations agree. Each entity notifies all of its shareholders that a meeting will be held to approve the merger. If the proper number of shareholders approves the plan, the directors sign the papers and file them with the state. The secretary of state issues a certificate of merger to authorize the new corporation.
Each state has its own corporate statutes that govern the procedure for mergers. Furthermore, state or federal agencies may wish to investigate the potential anticompetitive effects of a proposed merger. Because of the requirements and variables involved in merging, a corporation considering a merger should consult a lawyer who is experienced in mergers and acquisitions law.
What is business law?
Business law encompasses the many rules, statutes, codes, and regulations that are established which govern commercial relationships and provide a legal framework within which businesses may be conducted and managed. Business law is highly diverse and includes areas such as:
Business formation and organization
Transactional business law (contracts)
Business planning
Business negotiations
Mergers and acquisition
divestitures
What is the difference between a subchapter C and S corporation?
The Internal Revenue Code allows for two different levels of corporate tax treatment. Subchapters C and S of the code define the rules for applying corporate taxes.
Subchapter C corporations include most large, publicly-held businesses. These corporations face double taxation on their profits if they pay dividends: C corporations file their own tax returns and pay taxes on profits before paying dividends to shareholders, which are subsequently taxed on the shareholders' individual returns.
Subchapter S corporations meet certain requirements that allow the business to insulate shareholders from corporate debts but avoid the double taxation imposed by subchapter C. In order to qualify for subchapter S treatment, corporations must meet the following criteria:
Must be domestic
Must not be affiliated with a larger corporate group
Must have no more than one hundred shareholders
Must have only one class of stock
Must not have any corporate or partnership shareholders
Must not have any nonresident alien shareholders.
Additionally, after a business is incorporated, all shareholders must agree to subchapter S treatment prior to electing that option with the Internal Revenue Service.
What does it mean to “pierce the corporate veil?”
Sometimes, courts will allow plaintiffs and creditors to receive compensation from corporate officers, directors, or shareholders for damages rather than limiting recovery to corporate assets. This procedure bypasses the usual corporate immunity for organizational wrongdoing, and may be imposed in a variety of situations. The specific criteria for piercing the corporate veil vary somewhat from state to state and may include the following:
Courts may not allow owners to benefit from a corporation’s limited liability if the underlying business is indistinguishable from its owners.
If a corporation is formed for fraudulent purposes.
Courts may impose liability on the individuals controlling the business if a business fails to follow certain corporate formalities in areas such as record-keeping.
What is the difference between a joint venture and a partnership?
Joint ventures and partnerships share certain characteristics. A joint venture is a sort of partnership where two or more entities join together for a particular "short term" purpose. In both partnerships and joint ventures, each partner has equal ability to legally bind the entire entity. A partner can represent the entire organization in the normal course of business and his or her legal actions on behalf of the joint venture or partnership create legal obligations.
Though the powers of individual partners in a partnership or joint venture can be limited by agreement, such agreements do not bind third parties. Because business contacts outside of the partnership may have no knowledge of the limitations, they may be entitled to rely on the apparent authority of an individual partner as determined by the usual course of dealing or customs in the trade.
How can a properly established business entity such as a corporation shield me from personal liability for business debts and obligations?
Personal liability arising from business obligations can devastate the accumulated wealth of a lifetime of work. Personal liability may extend to business losses, but other obligations may also reach individuals, including:
Damage awards in lawsuits
Tax penalties
Back wages and benefit payments
Limited liability offered by corporations and other business entities shelters business owners from personal liability. Nonetheless, if an owner or director performs certain personal acts, behaves illegally, or fails to uphold statutory requirements for corporate status, he or she may face personal liability despite the corporate shelter.
What steps should I take to start a business?
When starting a new business, several key decisions must be made regarding the organization, financing, management, and operation of the business. First, you should do your homework – research your business idea and prepare a business plan. Once you’ve decided to go ahead with your idea, you will need to determine the legal structure of your business (whether a sole proprietorship, partnership, LLC, corporation, non-profit, or a cooperative) and obtain financing for the start-up costs. After your business is formed, it must be registered with your state or local government – typically through filing a fictitious business name, or “Doing Business As,” statement – and obtain any permits and licenses required by your city or county. Certain industries require additional permits, such as a seller’s permit, or a license to sell alcohol. Finally, businesses must register for state and local taxes, typically including obtaining a tax identification number from the IRS. Upon formation of the business, then it is usually recommended the business establish policies and procedures for employment, operations, record keeping, and other important matters.
Do I need a license / permit to open my business?
That depends on what type of business you own. Many businesses do not need any special licenses or permits in order to operate their businesses. However, some businesses that engage in certain trades or professions may need special licenses. For example, certain professionals such as doctors, lawyers, teachers and accountants need special licenses, issued by appropriate state agencies, in order to engage in the practice of their profession. Also, some businesses that engage in certain types of commerce such as alcohol or firearms may need special licenses in order to operate.
What steps are required to form an LLC?
To form a limited liability company, the following simple steps are required:
1. Select a name in accordance with the state’s rules regarding limited liability company names. Certain words may be restricted from being used in an LLC name per your state’s laws.
2. Prepare and file the required paperwork with the Secretary of State in the state where the LLC is to be formed. Typically, Articles of Organization must be filed, but in some states the wording is slightly different. In some states, additional paperwork may need to be filed.
3. Pay the required filing fee.
4. Prepare an LLC Operating Agreement. This is the document that sets forth the rights and responsibilities of the LLC members. LLC’s can be “member-managed” or “manager-managed,” which is typically set forth in the Operating Agreement.
5. Hold the first meeting of the members to authorize the members (or a manager, if the LLC is manager-managed) to take actions necessary to start-up the business. Typically, the first orders of business include setting up bank accounts, setting up a record-keeping system, obtaining licenses and permits from local government offices, obtaining appropriate insurance for the business, leasing or purchasing offices and equipment, hiring employees, etc.
As time goes on, it is important that the LLC conduct business in accordance with the Operating Agreement and state law requirements. Meetings should be held and important business documented. While an LLC does not typically need to follow as many formalities as a corporation, it is important that the members/managers conduct business with sufficient formality so as not to jeopardize the integrity of the entity’s limited liability status.
What steps are required to form a corporation?
A corporation is a legal entity with a corporate charter from a state. To form a corporation, the following simple steps are required:
1. Select a name for your business. State laws restrict certain words or phrases that can be used in your business name - so make sure you check your state’s rules, which are typically available on the Secretary of State website.
2. Prepare and file the required paperwork with the Secretary of State in the state of incorporation. Typically, Articles of Incorporation must be filed, but in some states the wording is slightly different.
3. Pay the required filing fees.
4. Establish the corporate governance by choosing a board of directors and adopt corporate bylaws.
5. Hold the first meeting of the board of directors and authorize the directors and officers to conduct business. Typically, the first orders of business include issuing stock to the owners, setting up bank accounts, setting up a record-keeping system, obtaining licenses and permits from local government offices, obtaining appropriate insurance for the business, leasing or purchasing offices and equipment, hiring employees, etc.
As time goes on, it is important the board of directors, and officers, conduct business in accordance with corporate governance requirements. Meetings must be held at least annually, and usually more regularly, to document that the corporation is conducting business in accordance with state laws
What are the advantages of a limited liability partnership (LLP)?
A Limited Liability Partnership (LLP) has many of the same characteristics as a general partnership. However, there is one important advantage to the LLP business model. If a partnership is formed as an LLP then each partner is only personally liable for his or her own negligence or for the negligence of an employee under that partner’s direct supervision. So, if for example, the partners formed an accounting firm and one of the accountants is found guilty of malpractice then only the accountant who committed the malpractice would be personally liable for the damages that incurred as a result of his actions. It is important to note, however, that this limited liability does not extend to business debts which all partners would share in equally regardless of which partner was responsible for incurring the debt.