USA Corporate Law

Us Corporate Law - an Overview

Corporate law refers to either the practice of corporate law or the theory of corporations. It relates to contract law and business law. Corporate law is the body of guidelines that governs the establishment and administration of any corporation. Legal entities that conduct business are governed by this body of law.

Irrespective of the company's size and stage of development, our team of expert corporate lawyers offer a broad range of corporate law services. In many instances, we offer incorporation services and then act as general counsel, offering guidance on any operational issues the company may face. Creating business entities, adhering to regulations, keeping track of corporate records, structuring business acquisitions, managing employee immigration issues, offering employment-related advice, complex corporate mergers, and general counsel advisory are some of the services we offer to our clients.

Business Entity Formation – Types of Business Legal Structures

The creation of a business entity is an important first step. The legal structure of your company will affect a number of crucial aspects, including the founders' personal liability, taxation, and other financial obligations. Some of the most famous types of organisations incorporated in the US are discussed below.

S corporation also called as S corps is a type of company that distributes all of its profits directly to the shareholders. The output comprises both gains, losses, tax credits and deductions. The S Corporations are taxed in the form of partnerships and the corporate benefits explored after passing all the funds directly to the shareholders.

This specifically means that profits and losses belong to the shareholders. The S corp pays specific corporate taxes that only apply to gains and passive income that are not retained by the shareholders. As a result, S corps are able to avoid the double taxation that frequently affects C corps.

An S corp passes its profits directly to its shareholders, who are then in charge of paying the associated taxes. All the profits from the business are taxed personally with the shareholders. The shareholders have to report them on their income tax returns. An s corporation will help you avoid paying corporate tax.

This type of company can be a partnership corporation or a limited liability company . C corp also enjoys a number of tax advantages, chief among which is the fact that the company's profits are taxed separately from the owners' profits.

A C-corporation is a distinct legal entity that exists independently from the owners of the business. The corporation is governed by shareholders (the owners), a board of directors, and officers, though one person can play all of these roles in a C-corp, making it possible for you to form a corporation in which you are the sole shareholder.

A C corporation is a fantastic way to safeguard your personal assets. It acts as a distinct legal entity and is the best option if you're planning to eventually sell the business after it expands.

C corps have excellent growth potential as well because they can have many shareholders, including those from other corporations. Just keep in mind that hiring advisors will probably cost you money, particularly around tax time.

Owners of C-corporations pay less in self-employment taxes. You have the option to grant stock options, which could assist you in future capital raising. Compared to partnerships and sole proprietorships, it is costly to establish.

The company pays taxes on the corporate tax return, and then shareholders pay taxes on dividends on their personal tax returns. Owners cannot deduct business losses on their personal tax return. There are a lot of formalities that corporations have to meet, such as holding board meetings and shareholder meetings, keeping meeting minutes, and creating bylaws.

The sole proprietorship is the most simple form of business entity. There is no formal procedure to form a sole proprietorship and there are few formal accounting requirements. There are no separate tax forms; you file taxes on your own personal income tax return. You can easily exchange personal and business assets. This is how most bloggers and freelancers operate. Owner is personally liable for all of the business’s debts and liabilities—someone who wins a lawsuit against your business can take the owner's personal assets. There’s no real separation between owner and the business, so it’s more difficult to get a business loan and raise money (lenders and investors prefer LLCs or corps).

Partnerships share a lot of similarities with sole proprietorships—the key difference is that the business has two or more owners. There are two kinds of partnerships: general partnerships (GPs) and limited partnerships (LPs). In a general partnership, all partners actively manage the business and share in the profits and losses. Unlike a general partnership, a limited partnership is a registered business entity. To form an LP, you must file paperwork with the state. In an LP, there are two kinds of partners: those who own, operate, and assume liability for the business (general partners), and those who act only as investors (limited partners, sometimes called ‘silent partners’ ). Limited partners don’t have control over business operations and have fewer liabilities. They typically act as investors in the business and also pay fewer taxes because they have a more tangential role in the company.

A limited liability company takes positive features from each of the other business entity types. Like corporations, LLCs offer limited liability protections. They have very less paperwork and ongoing requirements, and in that sense, they are more like sole proprietorships and partnerships. Another big benefit is that you can choose how you want the IRS to tax your LLC. You can elect to have the IRS treat you as a corporation or as a pass-through entity on your taxes. Owners don’t have personal liability for the business’s debts. You can choose whether you want your LLC to be taxed as a partnership or as a corporation. It’s more expensive to create an LLC than a sole proprietorship or partnership firm (requires company registration with the state).

A Nonprofit Corporation is an incorporated entity designed to perform activities and enter transactions without the traditional intent of generating profits. A non-profit corporation provides better protection for its shareholders when compared to other forms of liabilities that a traditional corporation provides. Contrary to its title, a Non-Profit Corporation can in fact generate profits, but that must not be its primary intent, and all profits must be used in furtherance of the non-business goals of the non-profit corporation. There are no capital distributions or dividends paid to shareholders in a non-profit corporation.

Mergers & Acquisitions (M&A)

Mergers and acquisitions (M&A) are defined as consolidation of companies. Differentiating the two terms, Mergers is the combination of two companies to form one, while Acquisitions is one company taken over by the other. M&A allows buyers to achieve strategic goals. It gives sellers an opportunity to cash out or to share in the risk and reward of a newly formed business.

We have professionals with knowledge and experience with Merger & Acquisition transactions for companies from a wide range of industries. Our practice areas include structuring the acquisition, international and domestic tax planning, securities and corporate Law issues, legal due diligence, reviewing and drafting of term-sheet, definitive agreement, escrow agreement, stock swap agreement, etc.

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