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Colorado business law update provided by the Law Office of E.C. Lewis, P.C. to SCORE March 25, 2010.

Colorado business law update provided by the Law Office of E.C. Lewis, P.C. to SCORE March 25, 2010.

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  • 1. Business Law Update Elizabeth Lewis, Esq. Law Office of E.C. Lewis, P.C. 720-530-3405 www.eclewis.com [email_address]
  • 2. Outline of Today’s Topics
    • Business Entities
    • Tax Entities
    • Legislative and Judicial Updates
      • Contracts
      • Employment
      • Taxes
      • Bankruptcy
    • Secretary of State changes
    • Trends
  • 3. Business Entities
    • State level
      • Sole Proprietorship
      • Partnership (P, LP, LLP, LLLP)
      • Corporation (for-profit, professional corporation, non-profit)
      • LLC
    • State level
      • How company is treated under the law (lawsuits, contracts, employment, etc)
  • 4. Business Entities
    • IRS/CDOR level
      • Sole proprietorship/Disregarded Entity
      • Partnership
      • C-corporation
      • S-corporation
    • IRS/CDOR level
      • How the company is taxed and, in some cases, unemployment insurance
  • 5. State entity selection
    • State selection depends on many factors including:
      • Who owns company?
      • What does the company sell?
      • How much will it make?
      • What type of liability does it have?
      • Who will operate company and make day-to-day decisions?
      • What is the exit strategy?
  • 6. Sole Proprietorship
    • Ownership: one person
    • Liability: no limited liability
    • Control: owner
    • Documents: no company documents needed
    • Taxation: passed-through
    • Default entity if only one person
  • 7. Partnership
    • Ownership: at least two individuals
    • Liability: typically no limited liability
    • Management: typically the partners
    • Documents: partnership agreement
    • Taxation: typically pass-through entity
    • Default if more than one person and nothing else chosen
    • Can be decided that partnership exists if in best interest of public even if no agreement!
  • 8. Corporation
    • Ownership: one or more individuals
    • Liability: limited liability
    • Management: Board of Directors
    • Documents: by-laws
    • Taxation: double taxation or s-corporation
    • Must follow corporate formalities
  • 9. LLC
    • Ownership: one or more individuals
    • Liability: limited liability
    • Management: managers or members
    • Documents: operating agreement
    • Taxation: default is pass-through
    • Fewer formalities than corporation
  • 10. IRS/CDOR entity types
    • Default rules for entity types
    • Can sometimes be changed by “check the box” rules
    • Choice depends on many factors
      • Who owns company?
      • How much does company make?
      • What is the exit strategy?
  • 11. IRS Basics
    • Two types of structures
      • Pass-through entity
        • Sole Proprietorship/Disregarded Entity
        • Partnership
        • S-corporation
      • Double taxation entity
        • C-corporation
  • 12. Sole Proprietors/Disregarded Entity
    • Sole Proprietors:
      • Files Schedule C with 1040
      • All income reported by individual
      • Files estimated tax payments
      • Default for sole proprietors on state level
    • Single Member LLC
      • Same as Sole Proprietorship except called Disregarded Entity
      • New rules regarding employment taxes
  • 13. Partnerships
    • Two or more individuals
    • Files 1065
    • All income reported by individuals
    • Files estimated tax payments
    • Default for partnerships and multi-member LLCs
  • 14. S-Corporations
    • Limitations
      • One to one hundred owners
      • Must be US residents/citizens
      • One class of stock
    • Files 1120S
    • Owners take income and dividends
    • Files 941/940s for individual owner’s income
    • Files unemployment taxes
    • Must do a Form 2553 to elect status
  • 15. C-corporations
    • One or more individuals
    • Double taxation
    • Files 1120
    • Owners take income and dividends
    • Files 941/940s for individual owner’s income
    • Files unemployment taxes
    • Default for corporations
  • 16. Recent issues with Business Entities
    • Beneficial Ownership
      • Push to make companies identify each person with control of a company
      • Would require person setting up company to confirm identity of each owner
      • Questionable outcome since criminals and terrorists probably aren’t going to adhere to this law anymore than any others
      • Cost would increase for formation
  • 17. Operating Agreements
    • LLC operating agreements must be carefully drafted
      • Handling of deadlock votes
      • Unanimity of votes
      • Oral agreements may be void
  • 18. Legislative and Judicial Updates
    • Contractual Issues
    • Employment Issues
    • Taxes
    • Bankruptcy
  • 19. Contractual Issues
    • Notice issue: If you receive notice, even if not given in the contractually stated way, you have to honor that notice.
    • Defaults: More defaults on agreements so need to make sure everything is in writing.
  • 20. Employment Issues
    • Independent contractor misclassification
      • CDLE pursuing misclassified individuals
      • HB 1310 has fines of 5000/25000 for misclassification
    • Misuse of company info
      • Cannot use company secrets to setup new company (Harris Group, Inc. v. Robinson)
    • Non-competes
      • Non-competes not enforceable if signed after employment begins with no additional compensation (Lucht’s Concrete Pumping v. Horner)
  • 21. Taxes - Federal
    • American Recovery and Reinvestment Act of 2009
      • Work Opportunity Tax Credit – credit for hiring unemployed veterans and disconnected youths
      • Cancellation of Debt – may defer COD income from reacquisition of business debt for 2009 and 2010
      • S-corps that converted from C-corp status have new rules for disposition of appreciated assets
      • Exclusion on Gain of Sale of Some small business stock
    • Single Member LLCs that have employment tax requirement must file under EIN of company (can no longer file under SSN of owner)
  • 22. Taxes - State
    • Direct Mailings
    • Candy and soft drinks
    • Standardized computer software
    • Online sales tax
  • 23. Bankruptcy
    • Prior to filing, important to talk to bankruptcy attorney to figure out what type of bankruptcy is best.
    • New debt limits go into affect April 1 st
      • May affect whether someone file chapter 13 or chapter 11
        • Chapter 7 – discharge of all debt (may not be preferred for businesses)
        • Chapter 13 – repayment plan (typically works for smaller businesses)
        • Chapter 11 – business reorganization (typically for larger businesses or high net worth individuals)
  • 24. Secretary of State
    • Mandatory Filings starting May 1st
      • Annual Reports
      • Statement Curing Delinquency
      • Articles of Reinstatement
      • Restated Constituent Filed Document
      • Statement of Reservation of Name
      • Statement of Renewal of Reservation of Name
      • Transfer of Reserved Name
      • Most Articles of Amendment
      • Most Dissolution documents
  • 25. Trends
    • Sale of businesses
    • Home based businesses
    • Online marketing
    • Funding of companies
  • 26. Sale of Businesses
    • Prior to finalizing contract, need to go over following details
      • Seller – Are there going to be capital gains issues?
      • Both – What property is being conveyed?
      • Both – What percentage of sell is for good will verses property?
      • Buyer – Can contracts be transferred?
  • 27. Home based businesses
    • Insurance issues
      • Need to notify insurance business operating in home
      • Need to determine where to meet clients (higher insurance if meeting them at home)
      • Security issues if storing personal information
    • Tax issues
      • Keep good tax records to differentiate between business and personal expenses
      • Maintain separate area just for business
  • 28. Online marketing
    • More companies leveraging web to advertise
      • Truth in advertising
      • FTC rules
        • Must disclose if paid for advertisement/endorsement
      • Privacy
        • Can-spam
  • 29. Funding of Companies
    • Underfunding of companies
      • Possibly piercing of corporate veil issues
    • SEC issues
      • Are owners selling securities?
      • Are any filings required?
  • 30. More Information
    • Elizabeth Lewis, Esq.
    • Law Office of E.C. Lewis, P.C.
    • www.eclewis.com
    • Phone: 720-530-3405
    • Blog: www.eclewis.com/wordpress
    • Facebook: www.facebook.com/legalsolutions
    • Email: Elizabeth.Lewis@eclewis.com