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Business Law For Consultants

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Transcript

  • 1. Business Law for Consultants Jeffrey C. O’Brien
  • 2. Topics to Be Covered Today
    • Entity Formation
    • Drafting Your Consulting Agreement
    • Enlisting Your Team of Advisors
  • 3. Entity Formation
    • Subchapter S Corporation (“S Corp”)
      • Must make an election with the IRS
      • Restrictions on who can own shares of an S Corp
      • All shareholders have the same rights
      • Possible SE Tax Minimization
  • 4. Entity Formation, Pt. 2
    • Limited Liability Company (LLC)
      • Flexible structure
      • Ability to vary allocation of governance rights and financial rights
      • Single member LLC “disregarded” for federal income tax purposes; sole proprietorship income
      • Drawback: full SE tax (FICA applies to all income whether salary or profits)
  • 5. S Corp vs. LLC
    • FICA Tax Minimization – S Corp
    • Flexibility – LLC
    • BUT: DON’T WORRY: Minnesota’s corporation and LLC statutes provide for a mechanism to convert an LLC to a corporation and a corporation to an LLC
  • 6. Standard Documents S Corporation LLC
    • Articles of Incorporation
    • Bylaws
    • Initial Written Actions of Shareholders/Directors
    • Shareholder Control Agreement (w/ Buy-Sell Provisions)
    • Form SS-4
    • Form 2553 (S Election)
    • Articles of Organization
    • Operating Agreement/Bylaws
    • Initial Written Actions of Members/Governors
    • Member Control Agreement (w/ Buy-Sell Provisions)
    • Form SS-4
  • 7. Top Mistakes Made in Entity Formation that an Attorney Can Help You Avoid
    • Use of state-provided Articles of Incorporation or Articles of Organization (you miss the default provisions!)
    • Incomplete Documents (no Bylaws or Control Agreement with Buy-Sell Provisions)
    • Failure to timely file S Election
  • 8. Basic Consulting Agreement
    • Independent Contractor Agreement; Required IRS language re control of consultant’s work and withholding tax issues
    • Specify what services you are providing and the fees associated with such services
    • Specify how payment for services is to be made (i.e., invoice sent, paid within 30 days, late charges if past due, etc., etc.)
  • 9. Basic Consulting Agreement, Part II
    • Reimbursement of Expenses: Make sure to specify whether your expenses are to be reimbursed and how
    • Term and Termination Provisions - the law doesn’t like open ended/never ending agreements; consider “for cause” termination
    • Remedies for Breach: MAKE SURE TO INCLUDE A CLAUSE ENTITLING YOU TO ATTORNEY FEES!!!!!
  • 10. Basic Consulting Agreement, Part III
    • If you are working with confidential information, be sure to cover in your consulting agreement the parties’ rights with respect to the handling of that information (either yours or theirs)
    • Specify the parties’ intellectual property rights
  • 11. Your Attorney’s Role in Building Your Advisory Team
    • Use your attorney as a resource; we know people!
    • The essential advisors to any business:
      • Business attorney
      • Estate planning attorney (can be the same person as the business attorney)
      • CPA
      • Financial Advisor
      • Banker
      • Insurance Agent
  • 12. INCubation Center FAQ
    • Established in February 2007
    • Comprehensive Program Designed to Provide Essential Legal and Non-Legal Services to New and Emerging Businesses in their Formative Years
    • Combines cost effective basic legal services, referrals to “strategic partners” and periodic education/networking programs
    • Objective is to encourage new business owners to utilize professional advisors, including attorneys
    • We attempt to replicate our existing clients’ successes with new businesses
  • 13. Thoughts to Remember From Today…
    • You are an expert in what you do (i.e., the industry you consult in)
    • Do not try to be in expert in areas where there are other experts to assist you (legal, accounting, insurance, payroll, human resources, etc.)
    • Hiring other experts for these areas will save you money in the long run!!
  • 14. Questions?
    • Jeffrey C. O’Brien
    • Mansfield Tanick & Cohen, P.A.
    • 1700 U.S. Bank Plaza South
    • 220 South Sixth Street
    • Minneapolis, MN 55402
    • 612-341-1263
    • [email_address]