Business law is the area of law that regulates the relationship among shareholders, partners, or co-owners of a corporation, company, or business venture, as well as the company’s relationship with third parties. This area of law also includes contracts and the internal governance of corporations, companies, and business ventures.
Led by Abraham Benhayoun, our business law department provides legal services to businesses in the United States.
Our legal services include advice on legal matters as well as the drafting, review, and negotiation of legal documents.
Our services include, among others, things such as:
- Helping our clients elect the proper entity for their business activities (for example: LLC, C-corporation, S-corporation, trusts, and partnerships)
- Helping our clients select the best jurisdiction for their companies (for example: Florida, Delaware, Nevada, or offshore)
- Creating new companies for our clients
- Amending, updating, and fixing the internal records of our clients’ companies (including resolutions, annual reports, filings, and increases/decreases of capital)
- Negotiating, drafting, reviewing, and amending shareholder agreements
- Corporate restructuring (such as mergers and tax-free reorganizations), including corporate structures that are entirely located in the United States as well as transnational companies
- Drafting and reviewing promissory notes, both secured (such as mortgages and loans with pledge agreements) and non-secured
- Negotiating clauses to resolve possible future gridlocks and conflict among the owners.
Some practical examples in which we help our clients:
For example, every company should have internal documents (generally bylaws or an operating agreement), which determine how the company should be managed internally, as well as the owners’ duties and rights. These documents should also include procedures for the company to be able to continue moving forward in case the owners disagree at some point in the future. They also should determine how to handle situations in which the company requires more capital (for example, giving the owners the right of first refusal on additional shares), or if an owner wishes to sell his or her shares. Additionally, the right type of company should be selected. The most common types are corporation, limited liability company, limited partnership, and limited liability limited partnership.
They each have their advantages and disadvantages, and they are each used in different situations. The place of formation of the company should be considered and determined as well. Lastly, the entity’s classification for tax purposes must be decided. Will the company be taxed as a disregarded entity, a partnership, a C-corporation, or an S-corporation? The relationship between this decision and the choice of entity described above is often misunderstood. Many people believe, for example, that an LLC is always taxed as a partnership. In reality, however, that is only the default tax classification for an LLC with multiple members. This is something that can be changed by filing an election with the IRS.
For example, before choosing a type of entity, a person forming a business in the United States should consider:
- i) whether the business has multiple partners,
- ii) the expected return on investment,
- iii) the personal income of each partner,
- iv) the income the company may generate down the road,
- v) whether the gains will be reinvested, and
- vi) the nature of the business.
In the case of foreign investors, often, part of the immigration process may involve the creation of a business in the United States, which may be used when submitting an application for an L-1 visa or an E-2 visa. We have reviewed several cases where an immigration attorney recommended that a client’s company, which was originally located in his country of origin, create a branch in the United States so that the client could apply for a visa.
This business structure is routinely implemented by immigration lawyers across the country. However, in some cases, it is not the optimal business structure from a tax perspective. It is common for these structures to have an effective tax rate of 44.7%. It is possible to create different business structures that will enable the client to comply with the immigration law requirements and at the same time save a lot of money by having a substantially lower tax rate.
This risk is increased immensely if the borrower passes away or becomes incapacitated, because in most cases the heirs do not know about the deceased/incapacitated person’s outstanding loans; without a document evidencing the loan, they will be unwilling to pay, and a court unlikely to enforce. Documenting loans is generally done through promissory notes. They can be secured, or unsecured, and recourse, or non-recourse. Promissory notes are also often used as tax planning tools, as ways to lower your business taxable income.