BUSINESS LAW
Meenan & Associates, LLC, LLC provides an array of legal services to individuals and businesses, particularly managers and executives, entrepreneurs, start-ups and small business owners. We understand the need to provide our clients with affordable and cost-effective legal counsel while delivering quality legal services that can be trusted.
Meenan & Associates, LLC provides the following business-related legal services:
- Incorporation and Business Formation
- Buying and Selling Agreements
- Employment Agreements
- Executive Compensation Agreements
Incorporation and Business Formation
At Meenan & Associates, LLC our goal is to work with you to ensure your success. We understand how stressful it can be to start a new venture or change an existing one; we also understand that most successful business owners are great at working in their business but may not possess the necessary legal knowledge to guide the business. Understanding how you can legally structure your business to maximize your ownership interests and tax responsibilities requires the right legal counsel. Meenan & Associates, LLC will work with you to ensure that you understand the options available to you and the range of business structures available. We will guide you to select a structure tailored to your objectives regarding ownership, control, compensation, and liability. Our goal is to foster a relationship with each business owner so as to be a trusted resource to assist in your business development.
Two Types of Business Structures
“Incorporation” is the process by which your business will file for legal recognition within the State of New York. When deciding which entity structure is most appropriate for your business, you must understand how the profits earned by your business will be taxed. You must also understand how this taxation will affect your personal tax liability.
There are several ways to “incorporate” your business, each with different tax considerations, as follows:
1.The Standard “C” Corporation
Small business owners often view the potential double taxation of profits associated with C corporations as the primary disadvantage to forming a standard “C” corporation. With C corporations, the profits are taxed first at the corporate level, then taxed again at the individual level if they are distributed to shareholders owners) in the form of dividends. Shareholders must report dividends as personal income and pay taxes on that income.
Double taxation can be eliminated by completing the S corporation election with the Internal Revenue Service (IRS). S corporations are corporations that have elected a special tax status with the IRS. S corporations are taxed as pass-through taxation entities, similar to general partnerships and most limited liability companies. While the profits of an S corporation are reported at the corporate level, taxes are not paid at the corporate level. Instead, the profits are passed- through to the individual tax returns of the shareholders and are taxed at the individual rate. If the S corporation reports a loss, the amount of the loss is also passed-through and reported on tax returns of the shareholders.
Keep in mind, not all C corporations can make the S corporation election with the IRS, as the IRS has placed restrictions on S corporations. Current restrictions include:
- Shareholders must number fewer than 75, and all shareholders must consent in writing to the S corporation election.
- Shareholders must be individuals, estates, or certain qualified trusts.
- Shareholders cannot be non-resident aliens.
S corporations can have only one class of stock (disregarding voting rights).
To be classified as an S corporation, a corporation must make a timely filing of Form 2553 with the IRS. IRS instructions indicate that the form must be completed and filed:
- At any time before the 16 day of the 3 month of the tax year if filed during the tax year the election is to take effect, or
- At any time during the preceding tax year. An election made no later than 2 months and 15 days after the beginning of a tax year that is less than 2 ½ months long is treated as timely made for that tax year.
An election made after the 15 day of the 3 month but before the end of the tax year is effective for the next year. For example, if a calendar tax year corporation makes the election in April 2019, it is effective for the corporation’s 2019 calendar tax year.
2.Limited Liability Company (LLC)
One of the most popular corporate structures is the LLC because the governing law provides a lot of flexibility to a business owner or owners in determining how the LLC will be managed, controlled and taxed. An LLC may be classified for federal income tax purposes as a partnership, corporation, or an entity disregarded as separate from its owner for tax purposes. The LLC’s classification is determined by the entity’s written and detailed operating agreement. Within this document, the entity sets forth the specifications regarding its organization structure, including how the owner or owners (known as “members”) will control and manage the entity.
The LLC business structure offers a number of ways the business can be treated for tax purposes as follows:
An LLC with a single member (owner) will be classified as a “C” corporation and can elect to have the entity disregarded from its owner for federal income tax purposes by filing Form 2553 with the IRS. An entity disregarded as separate from its owner will still be required to pay employment taxes for any employees and other taxes, as appropriate, however, the entities’ income, deductions, gains, losses, and credits are reported on the owner’s personal tax return.
Likewise, an LLC with at least two members can elect to be classified as a “C” corporation by filing Form 8832 with the IRS. If this election is not made, the IRS by default will classify the LLC as a partnership for federal income tax purposes. Or an LLC with more than one member can elect to be classified as a partnership and is subject to the same filing and reporting requirements as partnerships formed under state law. The entities’ income, deductions, gains, losses and credits are reported on the owner’s personal tax return. The entity will be required to pay employment taxes for any employees of the business which are separate and distinct from the owners.
In New York, every Limited Liability Company must announce its formation by placing notices in two publications for six weeks, at a cost of up to two thousand dollars. Failure to properly publish can result in a penalty which includes a suspension of a noncompliant LLC’s right “to carry on, conduct or transact any business” in New York. Initially it was difficult to discern what this actually meant, because the law would enacted did not explicitly impair the LLC’s right to contract, or the right of other parties to sue the LLC. Furthermore, the statute states that suspension will not “result in any member, manager, or agent of such limited liability company becoming liable for the contractual obligations or other liabilities of the limited liability company.”
Other Business Transactions
Buying and Selling Agreements
Whether you are looking to purchase or sell a business or a company, you can be assured that Meenan & Associates will provide attention to every detail and every concern. We provide extensive due diligence to make sure the deal is viable and your terms and conditions are met and honored. We pride ourselves on careful and detailed document drafting to capture the important terms of the deal and protect your interests going forward.
Employment Agreements
Our experienced employment law team at Meenan & Associates, LLC will draft employment agreements that will protect your company from liabilities while providing your company with structure needed for success. These contracts will ensure that your company is complying with local, state and federal laws. Our team of attorneys will work with your company to capture all necessary terms in these legal documents. The contracts will include terms such as non-compete clauses, equity agreements, compensation, benefits, confidentiality and dispute resolution.
Executive Compensation Agreements
Whether you are a seasoned executive or seeking counsel for the first time to assist with your first compensation agreement, Meenan & Associates, LLC can guide you through the detailed analysis required in assessing the terms of your executive compensation. We understand how valuable this matter is to you and we provide the personalized attention required to ensure you are properly compensated with salary, bonus, stock options, incentives and other benefits, as appropriate.