Operating a business generates its own challenges, so you shouldn’t have to worry about complex legal issues that can jeopardize success. As an attorney, Certified Public Accountant (CPA) and Certified Financial Planner (CFP), Fran Hampton offers extensive experience in every facet of business law. Whether you’re starting a business, selling or expanding your enterprise, or contemplating a succession plan, the firm can provide all services needed, from counsel and representation to documents and transactions.

When starting a business, it’s important to form the type of entity that will satisfy your needs and objectives. Several factors help determine if a business should be organized as a corporation, small business corporation (S Corp), partnership, or a limited liability company.

  • Number of owners. A single owner/member, or a married couple, may prefer that the entity be disregarded and included on the individual tax return as though it were a sole proprietorship by selecting formation as a single member limited liability company
  • How payroll taxes and excise taxes will be handled
  • Flexibility to vary timing of owner distributions or investment contributions. For example, limited liability companies and partnerships have flexibility to vary distributions and admit new partners after initial formation generally without income tax consequences, whereas a corporation or S Corp faces different tax consequences
  • Type of business operation and assets. For example, it’s advantageous for a limited liability company to hold real estate in order to avoid the tax consequences that may affect a corporation
  • Business size. Small business corporations, for example, must file an Election with the Internal Revenue Service to be recognized as a Sub-S corporation

The amount of paperwork and documentation required to operate a business actually takes time away from running the business itself. So trusting a seasoned attorney to handle required paperwork and disclosures can be a sound investment.

Organization Documents
Depending on the type of business entity, organization documents consist of either Articles of Incorporation or Articles or Organization, both filed with the State Corporation Commission.

Bylaws / Operating Agreements
Bylaws provide the governing structure for a corporation, whereas the Operating/Partnership Agreement used for a limited liability company or partnership is broader and incorporates restrictions between the members/partners.

Shareholder Agreements
Corporations rely on shareholder agreements to specify non-compete provisions, succession plans, buy-sell provisions, and dispute settlement provisions.

Like documentation, business transactions can be detailed and demand that you have someone looking out for your best interest and your company. Typical transactions include:

  • Structure of the acquisition or sale of a business enterprise or significant assets is vital in terms of tax consequences. The desired form depends on whether the client is a buyer or seller.
  • Covenants and restrictions to protect the buyer and seller, including but not limited to non-compete agreements.
  • Business mergers, split-offs and spin-offs which can be tax-free if stringent requirements are met.

A closely held family business requires an incisive succession plan to keep a business in the family and avoid excessive taxation or penalties. For example, many family businesses choose a Shareholder/Buy-Sell Agreement that restricts ownership to family descendants. If a family member wants to sell his or her interest outside the family, descendants have first right-of-refusal. Here are a few additional factors to consider in succession planning.

  • Identify descendants’ management responsibilities prior to transfer of controlling ownership for assured stability and a smooth transition
  • Determine how the founding owner will transfer ownership and how liquidity will be provided for his or her estate
  • Incorporate marital agreements, including pre-marital agreements, into the Shareholder/Buy-Sell Agreement to avoid business disruptions in case of divorce
  • Consider tax-free split-off of separate business operations and interests where more than one descendent is active in the enterprise