International Business Transactions
We practice in the area of business and corporate law, and we help our clients make informed decisions. We draft, review and negotiate agreement for businesses and individuals and we assist them in establishing their operations in the U.S. including:
- Local Licensing and Registration
- Tax Registration
- Buy-Sell Agreement
- International Transactions
It is created through Articles of Incorporation filed before the state where the company will be registered and it is a separate legal entity from its owners, who are called shareholders.
There is no limit as to the number of owners that can participate in the company and owners can be individuals or a separate corporation and it has not limitations as to the capital structure or investment. A stockholder’s personal liability is usually limited to the amount of investment in the corporation.
The corporation gets taxes at a corporate level and the allocation of income and deductions is not permitted, except through a multiple equity structure.
Limited Liability Corporation
It is created through Articles of Organization Incorporation filed before the state where the company will be registered and it is a separate legal entity from its owners, who are called members. There is no limit to the number of owners that can participate in the company. Owners can be individuals or a separate corporation and it has not limitations as to the capital structure or investment.
A member’s personal liability is usually limited to the amount of the member’s capital contribution.
The corporation gets taxes at a member level or it may elect to be taxed at the corporate level. Allocations and income deductions are permitted if there is a substantial economic effect.
Limited liability companies overlook a critical element of their operating agreement that can save them both money and angst: buy-sell provisions.
A buy-sell agreement serves two important purposes: it limits transfers of an owner’s interest in the business and provides a systematic orderly transition from an owner’s retirement, death, or disability or significant event such as the desire to sell an interest in the business.
Please note that tax considerations are important in structuring a buy-sell agreement. A thorough review of these issues is highly recommended.
Reasons for Adopting Buy-Sell Agreements
- Protect the integrity of closely-held companies
- Keep ownership among those active in the business
- Preserve relationships of “founding” shareholders or owners
- Prevent equity interests from being transferred to competitors
- Bring in new investment
- Upon the acquisition of the assets or stock of an entity by the purchasing group
- Prevent spouses of owners from obtaining equity interests in the event of divorce
- Limit the ability of disgruntled minority shareholders/members to hamper business planning and opportunities
- Provide a mechanism for orderly succession and transfer of control
- Prevent a majority shareholder from selling control to a third party, leaving minority behind
- Allow a majority of shareholders to enter into an agreement to sell a company, and bind the minority
- Provide a market for an interest in a closely-held business, which might otherwise be illiquid and establish a price for the interest
- Facilitate estate planning goals
- Establish a value for estate tax purposes
- Convert an illiquid asset into cash for heirs
- Provide owner’s estate with funds to pay estate taxes
- Eliminate the need to negotiate with owner’s spouse or estate over value of the interest following death
- Integrate the disposition of the business with the owners’ overall estate plan.
- Make equity available for sale to persons who will take the place of the deceased or disabled owner in the business
When to Consider a Buy-Sell Agreement
- Formation of every business entity
- Change in entity structure; business refinancing
- When estate planning considerations arise