Business, Corporate & Bankruptcy
Business, Corporate & Bankruptcy
In addition to representing individuals, Ross & Ross, Attorneys at Law, LLC represents Corporate and Business clients such as, Mortgage Companies, Condominium Associations, Title Insurance Companies, Commercial and Residential Landlords, Real Estate Brokerages, Realtors® and Realtor® Organizations, such as the Board of Realtors®. This practice involves the purchase and sale of businesses including complex acquisitions. We represent parties in drafting of Partnership and Joint Venture Agreements, as well as, representing both landlords and tenants in drafting and negotiation of complex leasing transactions.
A petition is filed in Federal Court in the jurisdiction where the debtor lives or the business is located. The petition list all assets and liabilities of the debtor as well as the debtor’s budget of expenses. The Chapter 7 results in a liquidation of the debtor’s property to payoff creditors and discharge the debtor from other debts. There are a great number of rules, which restrict who may file and how the bankruptcy will proceed. Each debtor’s situation is different and requires specialized attention. There has been a lot of discussion regarding the ‘new rules’, which are no longer that new. Despite what you may have heard it is still possible to file a bankruptcy. We utilize the latest software and Steven P. Ross is certified by the bankruptcy court as an electronic filer. This provides 24 hr access to the court system.
CHAPTER 11 BUSINESS REORGANIZATION
When a business becomes aware that it will not be able to pay it debts, it can petition for reorganization. The business is usually permitted to operate as usual under Court supervision, until a plan of reorganization is approved by two-thirds of the creditors. If no agreement can be reached, the Court will supervise liquidation proceedings.
A wage earner can file a plan with the Court that provides the debtor with additional time to pay creditors a determined percentage of the outstanding debt. The plan must specify that future earnings will be subject to the control of a trustee until all debts are paid in accordance with the approved plan.
The sale or purchase of a business also involves many areas of law. Many times there will be concerns regarding financing and personal guarantees. Businesses are most often held in separate entities other than a sole proprietorship. Usually the individual, business owner, or group of business owners will hold stock in a corporation or membership certificates in a limited liability company. When purchasing or selling a business, it is important to know whether or not the conveyance will be in the form of a transfer of corporate stock or membership certificates, or if the transfer will merely be a business asset conveyance. The two have very different taxation and liability components. The taxation structure of the deal can greatly affect the general cost to one party or another.
Depending on the type of business being purchased or sold, and depending whether or not we represent the buyer or seller, there are countless questions to be answered and countless evaluations to be made. For example, will real estate be conveyed with the business? Can the new entity obtain insurance? How will the buyer hold the assets, i.e. LLC, limited partnership etc.? Are there other environmental concerns? Will there be a covenant not to compete? Is there any pending litigation? Will trade secrets be conveyed? What will happen to employees? Are there any patents, copyrights or trademarks?
Each business is different and has its own unique set of circumstances. The lists of possible considerations are countless and the necessity for expert advice cannot be downplayed. No buyer or seller wants to be surprised by something they did not know after it’s too late to address the issue.
There are a wide variety of contracts, which are necessary for all types of business and real estate transactions. We routinely prepare and negotiate contracts for our clients in the areas of real estate and business. These include real estate contracts and riders, business purchase agreement and riders, joint venture agreements, construction contracts, maintenance agreements, Notes and mortgages, limited liability company operating agreements, corporation shareholder agreements, company policies, employee agreements, etc. Not all parties live up to the obligations under the terms of their contracts and not all parties agree on the interpretation of the language in contacts they have signed. In this event it may be necessary to compel a party to live up his or her contractual obligations in order to protect the interests of our clients. In that case we vigorusly peruse the rights of our clients.
CORPORATIONS C-CORPORATIONS AND S-CORPORATIONS
A corporation is an entity created and governed by Statute which was designed to provide limited liability for its shareholders (owners). The S-Election allows corporations to pass profits directly to shareholders without experiencing double taxation.
In order for the shareholders to enjoy the limited liability of a corporation, the entity must be properly drafted, filed, operated and maintained. Many people improperly believe that the mere filing of a Certificate of Incorporation will protect the shareholders from liability. If the corporation documents are not completed correctly or are incomplete, this may be grounds to “pierce the corporate veil”, thus leaving the shareholder, exposed to liability.
A Corporation has Shareholders, Directors and Officers who must be designated. The Directors are generally elected annually by the Shareholders and the Officers are then appointed by the Directors.
The entity must designate a registered agent and registered address. The registered agent is the person to whom all official notices are delivered, such as service of process.
If the corporation has more than one shareholder it is extremely important that the parties have a shareholder agreement, which sets forth the duties and responsibilities of the parties. The agreement should, among other things, outline the procedure in the event one shareholder dies or wishes to sell his or her interest.
IMPORTANT NOTE: An entity should sign all contracts, letters, and corporate resolutions in the proper corporate capacity. Example,
JOHN DOE, President
A limited liability company is an entity organized under State law of the State in which it is filed. A limited liability company is similar in many ways to a corporation but the differences are significant and should be discussed with your attorney. The use of one entity or another should be determined on a case by case basis after considering all factors.
However, one important difference of an LLC is the ability of a single member LLC to be treated as a disregarded entity for IRS purposes. This gives the member the ability to avoid filing an additional tax return. The taxes for the LLC may be contained on the individual’s schedule C of the IRS 1040.
In order for the Members of the Company to enjoy the limited liability of the entity, it must be properly drafted, filed, operated and maintained. Many people improperly believe that the mere filing of a Certificate of Formation will protect the Member from liability.
A Limited Liability Company is governed by its Operating Agreement.
The LLC must designate a registered agent and registered address. The registered agent is the person to whom all official notices are delivered, such as service of process.
Like a corporation, it is extremely important that the Members of an LLC have a clear Operating Agreement, which sets forth the duties and responsibilities of the parties. The agreement should, among other things, outline how profits and losses are will be shared.
IMPORTANT NOTE: An entity, including an LLC, should sign all contracts, letters, and resolutions in the proper Company capacity. Example,
JOHN DOE, Managing Member