Business Entities and Trusts

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Business Entities and Trusts

  1. 1. Complex Commercial / Business Court Cases BUSINESS ENTITIES AND TRUSTS Rew R. Goodenow Saturday, March 9, 2013 National Judicial College, Reno, Nevada parsonsbehle.com
  2. 2. Sole proprietorship  Mom, but not Pop, starts a business  No formal filing with any governmental agency to initiate the business?  Business licenses  Tax identification numbers  Payroll  Fictitious firm name 2
  3. 3. Add Pop     No formal filing Partnership? Who has control? (authority to bind) Who has ownership? (distribution on dissolution)  Who is liable for the debts?  Community property (revisit for all other entities), dissolution of marriage 3
  4. 4. Add a secret ingredient        Intellectual property Trademark, tradename Trade secret Patent Copyright State v. federal law, formal filing v. none Contracts 4
  5. 5. Home cooking  Legal Zoom  Secretary of State online filing  Digital operation agreement (trouble following the recipe?)  The handshake (whose recipe?)  Formal organization, informal operation as a partnership (No turmeric, just add . . .)  Loss of the chief cook and bottle washer 5
  6. 6. Probate and bankruptcy  A new cook (the PR or trustee)  The head chef (trustee), the sous-chef  Change the menu (different duties and goals for the business)  We liked Dad’s cooking better (a restructuring may not be welcome) 6
  7. 7. Showing up for dinner  Absentee owners and their problems and complaints v. active participants  I never write down the recipe. (providing adequate information to avoid later claims) 7
  8. 8. Potluck  I assumed you would bring the deviled eggs! (Incorrect assumptions about what the other participants are doing or not doing often leads to problems later.)  Just desserts (lack of formal, coordinated structure often leads to failed functions) 8
  9. 9. Joint venture  A Partnership  Also a contract  May not have clear guidelines as to who is in control  May not receive contributions  Often has an objective that is not achieved  No formal filing  Earn-in 9
  10. 10. Corporations  Formal filing with the Secretary of State, corporations commission  Formality is a key, but is often lacking (structure, documentation, operations)  Bylaws  Annual lists, public display of the officers and directors  Stockholders’ agreement (buy-sell) 10
  11. 11. Stock  Shareholders ledger, defines who the shareholders are  Share certificates or un-certificated shares  Preferred stock, blank check preferred  Approvals are often imperfect, resolutions lacking or defective  Control Shares Act violations  Derivative claims, Rule 23.1 11
  12. 12. Limited liability company       Formal filing Articles of organization Operating agreement Member managed Manager managed Titles of participants (some entities use corporate titles for positions in the company) 12
  13. 13. Limited liability and other myths  An operating agreement is a contract between the parties  A lease is a contract with a different party  Fiduciary duties and their waiver  Charging order  Bankruptcy remote entity  Personal guaranty 13
  14. 14. Tax  The second primary driver of choice of entity  Default based upon corporate form  S Corp. (limitations)  Complexity added by additional distribution of salary and employment filings  Partnership taxation 14
  15. 15. Limited partnership       Formal filing Articles of limited partnership Limited partnership agreement General partner Corporate general Limited partners 15
  16. 16. Professional entities     PLLC PC Restrictions on ownership Often have quirky or different methods for distributing revenue 16
  17. 17. BusinessTrusts  Formal filing  No formal filing 17
  18. 18. Business trust formation  Created by agreement of the parties, without formal statutory sanction or filing  Some states recognize by statute, some do not  Shares several corporate characteristics: limited liability, centralization of management, transferability of ownership, and continuity of existence 18
  19. 19. Business Combinations     Merger Conversion Domestication Share exchange 19
  20. 20. Business sales     Sale of stock, or other interest Asset sale Mere continuation doctrine Bellingham case 20

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