Starting a business requires thorough planning. Our firm assists business owners in the formation of legally sound business entities and helps entrepreneurs devise business strategies that help them achieve their goals. We advise on the business startup and formation process as well as issues related to selection of entity type and jurisdiction, including:
- Subchapter C-corporation formation
- Subchapter S-corporation formation
- Limited liability company (LLC) formation
- Partnership formation (including LLP)
- Stock purchases
- Asset purchases
- Joint ventures
We also advise on and draft shareholder agreements, membership agreements or partnership agreements as part of the entity formation process.
Our firm can guide business owners in the multi-stage process of buying or selling a business, including:
- Advising on the structure of the transaction
- Negotiation of terms and drafting of the deal memorandum
- Advising sellers on legal strategies to address issues raised during the due diligence process
- Advising buyers on conducting legal due diligence
- Drafting, reviewing and negotiating the extensive documentation involved in a business transaction, such as asset purchase agreements, stock purchase agreements and security agreements
In consultation with business owners, we review, draft and negotiate contracts related to various business activities, including:
- Buy-sell agreements
- Service contracts
- Releases and waivers
- Property agreements
- Shareholder agreements
- Operating agreements
- Lease agreements
Purchase or sale of a business is a complicated process for which experienced legal counsel is essential. When representing clients in such transactions, our attorneys start the process by learning as much as possible about the buyers’ objectives in the transaction in order to advise him on a comprehensive set of issues ranging from business matters and financial risks to legal hurdles. Our goal is to identify possible challenges and put safeguards in place to prevent issues that may arise in the future, from negotiations and the due diligence phase to the final closing.
There are two primary methods of transferring ownership of a business, either by sale of the businesses’ assets or by the transfer of ownership
of the entity itself:
This is a form of a business sale where instead of purchasing the stock of the company, the buyer purchases specific assets of the company and assumes specific liabilities. There are a number of issues that can arise in such transactions such as inventory, accounts receivable and payable, condition of assets, and lease of premises that must be addressed in the agreement.
In a share sale of a business, the purchaser is buying the shares from the
shareholders of the company. Purchasers generally prefer not to buy shares in
order to minimize both tax and legal liability issues.
Purchasers will often require a provision in the Agreement which prohibits the sellers from competing with the business after the sale. The duration and geographic limitation of such provisions are negotiated by the parties. Courts will require such provisions to be reasonable so to not impinge on commerce and trade.
In addition to negotiating, drafting and reviewing business sale offer letters and agreements, we advise and assist business owners and investors with a wide range of issues including:
- Advising on practical business and financing issues related to the transaction
- Assisting with the selection of the right business entity, such as partnership, Limited Liability Company, S-Corporation or C-Corporation to secure the most desirable tax benefits and liability protection
- Advising on employment matters attendant to business transactions including contingency on the continued employment of employees and relocation issues
- Advising on discovering and managing liens and other corporate liability issues
- Negotiating terms and structure of earn-outs as part of compensation for sellers
- Advising on the laws of local jurisdictions affecting the business as well as any applicable licenses and permits required for legal operation of the business
- Other important matters to consider include assignment of the business trade name, transfer of customer lists, training of new owners and staff, and introduction of new owners to important business contacts.
Given the complexity and scale of the issues involved in the sale of a business, it’s critical for both purchasers and sellers to retain an attorney with knowledge and expertise in such matters to guide them through the process and safeguard their interests.
We provide a comprehensive range of legal services in support of businesses operating throughout New Jersey and beyond. With substantial expertise in business entity formation and reorganization, healthcare, tax matters and real estate, among others, our lawyers are able to provide strategic counseling and transaction-specific assistance for almost any legal issue a client may encounter.View All Practice Areas
Business law encompasses the many rules, statutes, codes, and regulations that are established which govern commercial relationships and provide a legal framework within which businesses may be conducted and managed. Business law is highly diverse and includes areas such as:
business formation and organization
transactional business law (contracts)
mergers and acquisition
Although there are many important things to think about when choosing a business form, some of the main considerations include your preference of tax treatment, how you intend to capitalize the business, whether you plan to issue stock and trade it publicly, how you intend to structure the management of your business and issues surrounding the liability of the business owners, among other things. It is very important to plan your business and to work closely with someone who can help you choose the business form that will meet your needs.
The Internal Revenue Code allows for two different levels of corporate tax treatment. Subchapters C and S of the code define the rules for applying corporate taxes.
Subchapter C corporations include most large, publicly-held businesses. These corporations face double taxation on their profits if they pay dividends: C corporations file their own tax returns and pay taxes on profits before paying dividends to shareholders, which are subsequently taxed on the shareholders' individual returns.
Subchapter S corporations meet certain requirements that allow the business to insulate shareholders from corporate debts but avoid the double taxation imposed by subchapter C. In order to qualify for subchapter S treatment, corporations must meet the following criteria:
Must be domestic
Must not be affiliated with a larger corporate group
Must have no more than one hundred shareholders
Must have only one class of stock
Must not have any corporate or partnership shareholders
Must not have any nonresident alien shareholders.
Additionally, after a business is incorporated, all shareholders must agree to subchapter S treatment prior to electing that option with the Internal Revenue Service.
Sometimes, courts will allow plaintiffs and creditors to receive compensation from corporate officers, directors, or shareholders for damages rather than limiting recovery to corporate assets. This procedure bypasses the usual corporate immunity for organizational wrongdoing, and may be imposed in a variety of situations. The specific criteria for piercing the corporate veil vary somewhat from state to state and may include the following:
Courts may not allow owners to benefit from a corporation’s limited liability if the underlying business is indistinguishable from its owners.
If a corporation is formed for fraudulent purposes.
Courts may impose liability on the individuals controlling the business if a business fails to follow certain corporate formalities in areas such as record-keeping.
Joint ventures and partnerships share certain characteristics. A joint venture is a sort of partnership where two or more entities join together for a particular "short term" purpose. In both partnerships and joint ventures, each partner has equal ability to legally bind the entire entity. A partner can represent the entire organization in the normal course of business and his or her legal actions on behalf of the joint venture or partnership create legal obligations.
Though the powers of individual partners in a partnership or joint venture can be limited by agreement, such agreements do not bind third parties. Because business contacts outside of the partnership may have no knowledge of the limitations, they may be entitled to rely on the apparent authority of an individual partner as determined by the usual course of dealing or customs in the trade.
A non-profit corporation is a corporation formed to carry out a charitable, educational, religious, literary, or scientific purpose. A nonprofit corporation doesn't pay federal or state income taxes on profits it makes from activities in which it engages to carry out its objectives. This is because the IRS and state tax agencies believe that the benefits the public derives from these organizations' activities entitle them to a special tax-exempt status.
The most common federal tax exemption for nonprofits comes from Section 501(c)(3) of the Internal Revenue Code, which is why nonprofits are sometimes called 501(c)(3) corporations.
Any time a corporation undertakes a major change or transaction, it should be reflected in its minutes. In addition, meetings of shareholders and directors should take place at least annually if for no other reason than to elect new officers and directors. Failure to adhere to the formality of regular meetings can jeopardize the corporation's ability to shield its officers, directors and shareholders from personal liability for the corporation's actions.
Corporations with more than one shareholder should seriously consider a buy-sell agreement. A shareholder's death, divorce, disability or termination of employment can create serious problems for a corporation and its other shareholders. A buy-sell agreement can help minimize these problems by providing for an orderly succession in such plans. Similar provisions are recommended for partnership.
Like most corporate law, mergers are regulated at the state level. While these laws vary by jurisdiction, many aspects of the merger process are the same across the nation. Generally, the board of directors for each entity must initially approve a resolution adopting a plan of merger that specifies the names of the entities involved, the name of the proposed merged company, the manner of converting shares of both entities, and any other legal provisions to which the corporations agree. Each entity notifies all of its shareholders that a meeting will be held to approve the merger. If the proper number of shareholders approves the plan, the directors sign the papers and file them with the state. The secretary of state issues a certificate of merger to authorize the new corporation.
Each state has its own corporate statutes that govern the procedure for mergers. Furthermore, state or federal agencies may wish to investigate the potential anticompetitive effects of a proposed merger. Because of the requirements and variables involved in merging, a corporation considering a merger should consult a lawyer who is experienced in mergers and acquisitions law.
The duration of stay with the H-1B Visa is three years, however, in many cases it may be extended for an additional three years. After the maximum period of six years has passed, the foreign national must leave and remain out of the United States for a full year before a petition for a second H-1B Visa may be approved.
Personal liability arising from business obligations can devastate the accumulated wealth of a lifetime of work. Personal liability may extend to business losses, but other obligations may also reach individuals, including:
Damage awards in lawsuits
Back wages and benefit payments
Limited liability offered by corporations and other business entities shelters business owners from personal liability. Nonetheless, if an owner or director performs certain personal acts, behaves illegally, or fails to uphold statutory requirements for corporate status, he or she may face personal liability despite the corporate shelter.
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