Transcript Corporate Law Employment & Logistics - B

Entrepreneurial Forum
Presenters
Timothy K. Cutler, Esq.
Connie C. Dai, Esq.
CUTLER P.C.
10 Milk Street, Suite 720
Boston, MA 02108
Kenneth Der, CPA, CFP
Richard SooHoo, CPA
FAS Corporation
1661 Worcester Road, Suite 104
Framingham, MA 01701
The Business Partner to
Businesses and Individuals
Timothy K. Cutler, Esq.
[email protected]
• Practicing 24 Years
• 10 Years in Los Angeles & 14 Years in Boston
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Founded CUTLER P.C. in 2004
Served as a Mediator
Completed Over 30 Trials in 4 States
Overseen Legal Matters in 8 States
Represented Start-ups and Emerging Companies in the Areas of Software,
Internet, Retail, Engineering and Marketing
• Represented Chinese Companies
• Creates Legal Entities
• Drafts:
• Licensing Agreements, Contracts and Employment Agreements
• Handles:
• Employment Matters, Disputes Between Shareholders, Unfair Business Practices
and Contract Disputes
• Handles:
• Purchase and Sale of Businesses
Connie C. Dai, Esq. MBA
[email protected]
• Practicing business, immigration and real estate
• Experience in cross border transactions, contract review and
drafting, judicial internship, work and business visa,
naturalization, green card petition
• Business and financial consulting in Canada
• Anti-trademark infringement management, joint venture
negotiation, and IP training in Coca-Cola China
• Volunteer – unemployment Insurance appeals
• NECINA Engagement Officer
• J.D., Suffolk, MBA, University of Calgary, B.A., Shanghai
• Native Mandarin speaker
Kenneth Der, CPA, CFP
• Individual, corporate, trust tax returns and financial planning
• Founder and President of FAS Corp for 10 years
• Financial operations, risk management, controllership,
operational analysis, internal controls, and corporate strategy
• Cisco Systems, Digital Equipment Corporation, and Price
Waterhouse Coopers
• Adjunct at Babson College for 4 years
• MBA, UC Berkley
• BA, Tufts
• MST, Bentley
• Board member of AACA
Richard Soo Hoo, CPA
• Partner, FAS Corp
• Tax planning-business, individual, corporate, LLC,
partnerships, non profits, estates, trusts, international,
accounting services, retirement plans, audits
• Financial executive with extensive experience in financial
operations, risk management, controllership, operational
analysis, internal controls, and corporate strategy
• Dassault, National Grid, Getronics/Wang, Millipore/Waters,
Texas Instruments, and Price Waterhouse Coopers
• MBA, Stanford
• BA, Harvard
Corporate & Business Law
Setting Up a New Entity
Why is it Important to Have a Legal Entity?
•Liability
•Credibility
•Holding Intellectual Property
•Allows for Multiple Owners
•Disadvantages of Partnerships
What Type of Entity
is Best For Your Business?
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“C” Corporation
“S” Corporation
Limited Liability Company or “LLC”
Sole Proprietorship
Partnership or Limited Partnership
Delaware Entity
Management Issues
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Who Is The General?
Fiduciary Duties
Exit Strategies
Bringing in Partners
Tax Planning for Entrepreneurs
FAS Corporation
Tax Treatment of Start-Up Cost
Incorporating a Business
• Tax considerations
• Funding the corporation with asset transfers
• Cost of incorporation
• Organization costs
• Start up costs
• Corporate filing and on going taxes at both federal and state levels
• Administration and structure
• Board of Directors
• Director Fees
• Directors and Officers Insurance
• Meeting minutes
• Formality
• Recording of minutes
Tax Consideration When
Forming a Corporation
• Contributed capital
• Cash for stock
• Transfer of assets for Stock under section §351
• A nontaxable transaction to contributor as long as
no cash or debt is received by the contributor
• Basis of the stock is the basis of the asset that is
transferred
• Under section §267, related party rule:
• a loss is on a sale to the business is prohibited
• If the asset has declined in value consider other
alternatives to contributing capital so as not to lose
the loss for tax purposes
Tax Free Incorporation
Conditions
• Non recognition of gain or loss on the transfer of assets and
liabilities to a newly form Corporation ( C or S Corp) is mandatory
when all the following are met:
• One or more persons transfer property to the new corporation
• The transfer is solely for stock( no debt, warrants or preferred
stock)
• Other assets received is deemed “boot” and gain is
recognized
• Control
• The persons making the transfer, taken as a group, must own
at least 80% of the corporation immediately following the
exchange( Voting powers and shares outstanding)
Corporation - Considerations
• IRS may not recognize the Corporation
• Was the Corporation under capitalized
• Cash flow issues
• Tax issues
• Was the Corporation used for personal reasons
• Co-mingling of personal and corporate assets
• Were transactions at “Arms Length”
• Was the purpose to convert personal expenses to
business
• Must ensure that the Corporation has a legitimate business
purpose and can pass the scrutiny of a true business vs. a hobby
Comparison of Single Owner Business
Sole
Proprietor
C Corp
S Corp
Single –
Member LLC
Admin Simplicity
Yes
No
No
Fair
Ability to transfer
ownership
No- Can transfer
business assets
Yes
Yes
Yes- Becomes a
multimember LLC
Ability to raise
capital
Limited to owners
capital and ability
Very Good: Can
have unlimited
shareholders
Good: Can have
up to 100
Shareholders
Very Good: Can
add unlimited
members
Ability to shelter
Income from
Income tax
Poor: all income is
taxed at the
owners marginal
tax rate
Fair: Marginal
rates compressed
compared to
individuals
Poor: all income is
taxed at the
owners marginal
rate
Poor: all income is
taxed at the
owners marginal
rate
Ability to shield
owner from
Liability
None
Limited to
capital invested
Limited to
capital invested
Limited to
capital invested
Ability to
shelter income
from SE/Payroll
tax
Poor
Good
Fair: IRS can
reclassify
distributions as
wages
Poor: all income
is subject to SE
tax