Business Law For Consultants

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The basics on choice of entity, what to include in your consulting agreement, and using your attorney to help build your team of advisors

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Business Law For Consultants

  1. 1. Business Law for Consultants Jeffrey C. O’Brien
  2. 2. Topics to Be Covered Today  Entity Formation  Drafting Your Consulting Agreement  Enlisting Your Team of Advisors
  3. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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 jobrien@mansfieldtanick.com

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