An LLC, however, works a bit differently. There are no shares. Instead a person buys a percentage interest. Instead of being called a shareholder, the person is called a “member.” Members own an LLC and shareholders own a corporation.Creating the business entity is another area where terminology is often abused. To create a corporation, one [...]
Transfer SharesAccording to “experts”, using a corporation has one bid advantage over other entities. The advantage is the ability to freely transfer shares without impacting the business or viability of the corporate structure. Consider the following example.If I own a 60 percent interest in a general partnership, I can’t just sell it to someone else. [...]
In most states, however, a corporation is only required to have only one annual meeting and keep the minutes of that meeting in the corporate book.Corporate minutes are never filed with any government entity. The corporate minutes are an internal corporate matter and only come to light if there is a shareholder dispute or a [...]
For the purpose of this article, I am considering both corporation and limited liability company documents as “corporate records.” Although the records of each entity have different names, they serve the same purpose. For instance, articles of incorporation for a corporation serve the same purpose as Articles of Organization. The following list applies to corporations, [...]
When it comes to business entities, there are many forms a business can choose from. For certain professions, however, states restrict the choices because of a public policy. This policy boils down to the idea that professionals should not be able to escape personal liability if they fail to perform properly. For instance, a doctor [...]
Specifically, there is a cap on the number of people that can have an ownership stake, to wit, the number of shareholders. This number varies from state to state, so you will have to look it up. The secretary of state often has a website and provides such information.There are many advantages to a close [...]
Whether you decide to pimp your business plan to anyone breathing or beg your step-mother for funds, here are some issues to consider.Investors are looking for the best deal, to wit, the most stock possible in an entity. If you are asking them for cash, they have the leverage. Don’t be so desperate that you [...]
The corporation is the oldest formal business entity we have. How old? Well, do you really care? It is old. The reason it has been with us for so long is it provides a unique protection for business owners. Simply put, individual owners are not responsible for the debts of the corporation. If a pharmaceutical [...]
This understandable attitude can lead to problems.When you form a corporation and take on investors, you must be ready to let your baby go. The corporate entity is now the owner of the idea, which means all shareholders have a say in how things are run. The fact that you were the one that came [...]
If it is sued, its shareholders cannot be named as defendants. This “corporate shield” from personal liability is the big benefit of incorporating.To gain the protection of a corporation, the business must be run in a particular way. This is known loosely as corporate compliance. If the entity is in compliance, the corporate shield protects [...]
ProvisionsTypically, the bylaws will be the biggest document in your corporate book. If you are a single shareholder entity, they tend to be fairly straightforward since there isn’t really any dispute possibility unless you have a split personality. If there are two or more shareholders, however, the document is going to be a key item [...]
Regardless, how are you going to raise money so you can carry out your business plans?The first step most people take to raise money is to give away equity. In the case of a corporation, this means selling shares to potential investors in exchange for cash. While this is a logical step, it is not [...]
