Business FormationFormation of a business is both an exciting and daunting task. Once entrepreneurs have their business plan in place, they typically recognize the numerous logistical steps which need to be completed before a business opens its doors to the public. HSLC routinely counsels clients in the business formation process by reviewing contracts, highlighting important business decisions, negotiating contracts and buyouts, and assisting our clients through a sometimes overwhelming list of legal formalities.
Our attorneys regularly perform the following tasks when assisting clients through the business formation process: filing legal documents with the North Carolina Secretary of State, draft bylaws, operating agreements and other foundational documents; counseling clients on the process of obtaining tax identification numbers, opening bank accounts, and making the necessary tax elections; guiding our clients through the process of purchasing the assets of an existing business; reviewing corporate lease agreements and personal guarantees; formulating compensation arrangements among business owners and key personnel; and educating clients on the importance of well maintained corporate documentation.
By following sound business practices throughout the formation process, HSLC clients avoid expensive and time consuming issues which could otherwise arise once their business becomes operational.
Frequently Asked Questions
What is a LLC?
A limited liability company (LLC) is an unincorporated entity that is a cross between a corporation and a partnership with certain advantages of each of them. The owners are referred to as “members” and the company can have from one to an unlimited number of members. Members can be natural persons, sole proprietorships, corporations or any other form of entity whether for profit or nonprofit. An LLC can also be defined by comparing it to other business entities. An LLC is similar to a general partnership with limited liability; a limited partnership where all owners can participate in management and still retain their limited liability protections; an S corporation without the ownership, distribution, voting and tax restrictions; a sole proprietorship with owner’s liability protection. There are more LLCs formed than any other entity, as they are regularly used for estate and gift planning, real estate development and holding, asset protection, joint ventures, family businesses, among many other purposes.
How many people are required to form a limited partnership?
Two or more (1 limited partner and 1 general partner).
Can I change my Articles of Organization after they have been filed?
Yes, the Articles of Organization can be amended by simply filing a form with the NC Secretary of State’s Office. The Articles of Amendment must be signed by a company official, or if there are no company officials, by an organizer of the company. Only one signature is required and we do not require a company seal or notarization on Articles of Amendment. There is a $50.00 fee for filing Articles of Amendment.
Who are the key parties to a corporation?
Corporations are comprised of shareholders, directors, and officers. Shareholders own the company. Directors guide the company by making long-term strategic decisions. And officers make certain that the day-to-day work of a corporation is properly completed.
Who are the key parties to a limited liability partnership?
Partners, those business owners who share in company profits and losses.
Does a limited liability company pay income tax?
Generally, no. A limited liability is classified as a pass through entity by default. Unless the owners elect otherwise, the LLC itself will not pay tax. Instead, the profits and/or losses of the company are “passed through” the company to the owner’s individual tax returns.
Am I personally liable as a business owner for the debts of a registered corporation?
Generally, no. The largest benefit of filing a business entity, such as a corporation, exists in the protection from personal liability for business owners from company debt. This concept is called the corporate veil. Business owners should be careful to arrange business dealings under their business entity and be cognizant of personal guarantees which bypass the corporate veil.
Does the corporate veil provide a business owner absolute protection from corporate debts?
No. If a business owner operates his or her company improperly, a claim for piercing the corporate veil may exist. To pierce the corporate veil, North Carolina case law establishes that a business creditor may recover against a business owner by establishing three elements: (1) Control, not mere majority or complete stock control, but complete domination, not only of finances, but of policy and business practice in respect to the transaction attacked so that the corporate entity has no separate mind, will or existence of its own; (2) The control is used by the defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or a dishonest and unjust act in contravention of plaintiff’s legal rights; and (3) The control and breach of duty is the proximate cause of the plaintiff’s injury or unjust loss.
If you have a legal issue which may require the assistance of an attorney, please contact the lawyers at Hannah Sheridan Loughridge & Cochran, LLP at 919-859-6840.