Bhatta Law & Associates helps clients achieve targets by effectively fulfilling both routine corporate matters and groundbreaking transactions that require single-mindedness, legal savvy and innovation. Our team blends a myriad of legal and business cultures that bring the best results possible in business transactions.
Where the business landscape has become more challenging, we offer a diversity of corporate practice services. Our team offers in-depth understanding of legal and policy frameworks and heightened responsiveness to clients’ immediate needs.
A corporation is organized for a profit-making venture. It is a useful channel for running a business since it provides a variety of methods for raising operating funds while limiting the owner’s ordinary liability for the debts incurred by the business. A corporation could sell its stock to investors to raise revenues. It is owned by its shareholders and managed by its board of directors and officers. During its existence, a corporation may choose to pay some of its profits to its owners in the form of “dividends.”
The two basic types are “C corporations” and “S corporations.” The more common type is the C corporation. It is simple to set up and run and the income earned is subject to two tax levels—entity or corporate level and owner level tax on any income distribution to the shareholders. Whereas the main benefit of establishing a more complicated S corporation is that in most cases, its income will not be subject to a corporate level tax.
A corporation can be created by one or more persons called incorporators, who can run the business or hire someone to do so. It has both directors who are elected by shareholders and officers who manage the corporation’s day-to-day affairs. A New York corporation requires at least one director (who must be at least 18 years of age). The directors can also serve as the corporation’s officers. The incorporator(s) will have to file a Certificate of Incorporation with the New York secretary of state. The by-laws establishing the general rules for the corporation’s operation and functions must also be created.
A general partnership is an association of two or more co-owners called “general partners” that agree to manage the partnership as a profit-making endeavor. The partners can be people or other entities. Here, the general partners share management including the partnership’s profits and losses.
In New York, formation of a general partnership is done by filing a Certificate of Doing Business as Partners as required by Section 130 of New York’s General Business Law, with the office of the clerk of each county in which the partnership does business. Oral or unintentional formation of such partnership is possible if “partners” conduct themselves in certain ways.
Though not mandatory, it is a common practice to enter into an agreement that governs the functioning of the business endeavor. This agreement is called a Partnership Agreement. It details management obligations of each partner and allocates the profits and losses among the partners. A general partnership technically does not survive the departure or death of one of the partners. Thus, a partner can essentially dissolve the partnership by withdrawing from it.The continuing partners can elect to maintain the partnership by appropriate filings.
A general partnership is best for those who want entrepreneurial ventures with limited active investors. And the investors want to be part of the actual management of the partnership. There is only one level of income tax. The disadvantage of a general partnership is mainly the exposure of the partners to liability.
A limited partnership is a partnership that has one or more “general partners” and one or more “limited partners.” The general partners control and run the business and are liable for all debts and obligations of the business. The limited partners are not liable for debts and obligations of the partnership to third persons unless they exert some control of the business.Both share in the partnership’s profits and losses.
A Certificate of Limited Partnership must be filed with the New York Department of State and the general partners must sign a Partnership Agreement that controls the affairs of the limited partnership. A limited partnership does not survive the withdrawal or death of one of the general partners unless there is at least one other general partner and the Partnership Agreement allows for its continuance. This means that a majority of remaining partners can elect to continue the partnership and appoint a new general partner unless there is a prohibition contained in the Partnership Agreement.
LIMITED LIABILITY COMPANY
A limited liability company is an unincorporated association of one or more persons who have limited liability for debts and obligations of the company. The owners are called “members.” Members can run the company themselves or delegate the management to one or more other persons called “managers.” The managers may or may not be members.
The establishment of a limited liability company requires an organizer who is not necessarily a member to file the company’s Articles of Organization with the New York Department of State.Others prefer to file a Certificate of Formation in Delaware primarily because of the flexibility of Delaware law. Members must adopt a Written Operating Agreement (New York) or a Limited Liability Company Agreement (Delaware) that details the conduct of its affairs.
The advantages of a limited liability corporation are limited liability and tax treatment. The owners are not normally liable for debts or other liabilities of the company. It does not pay
federal or state income taxes and instead, members pay taxes on income based on the pro rate portion. There is also the advantage of flexibility. The economic configuration and governance of a limited liability company does not need to be as structured as a corporation, they can be whatever the members desire. However, there are “default provisions” set up for most issues that would be contained in the Operating Agreement if the members do not want to create their own.
Evidently, one disadvantage of this business form is the payment by members of income taxes on the pro rata share of the earnings of the company even if the company cannot distribute cash to them to make payments. The exception to such is when the company nominates to be treated as a corporation for federal and state income purposes where the earnings will be taxed at entity level then if distribution occurs at the owner level as well. This is ideal for sole proprietorships, entrepreneurial ventures with limited active investors and family businesses.
This entity is established for a purpose apart from accumulating capital. A non-profit does not have shareholders and the public fundamentally owns its assets. It is created by one or more persons at least 18 years of age called “incorporators.” The incorporators can be the people who will manage the non-profit or the lawyers forming the non-profit. A board of directors, which must have at least three directors, manages it. A Certificate of Incorporation must be filed with the New York Department of State. There are 22 purposes, which has pre-requisite approvals from other state agencies or organizations. It is also required to have by-laws or internal rules adopted for the operations and management of the non-profit.
A non-profit corporation can be tax-exempt if such corporation files an application with the IRS in accordance with Section 501 (c) (3) and is approved. In order to qualify for the exemption, a
not for profit corporation should include qualifying language on the Certificate of Incorporation. A donor donating money and/or property to such corporation can deduct the contributed amount during filing his/her personal tax.
When buying a business as an asset purchase, a stock purchase, or a merger, it is a pre-requisite to conduct due diligence on the company. Due diligence involves a comprehensive investigation and analysis of the business concern. Our team will review numerous documents and will have a thorough understanding of the deal. The determination of specific risks and liabilities will allow the future business owner to map out boundaries and define parameters. He may be advised to incorporate certain seller obligations in the term sheet of the deal such as clearing any liens on business assets or obtaining third-party consents. Ultimately, he will be able to make a well-informed decision as to whether the assessed purchase price is fair under the circumstances or as to whether the deal will materialize.
DOCUMENTS TO REVIEW
- Corporate Documents (or LLC Documents)
Major Contracts: Major distributor, supplier and customer agreements, confidentiality and non-compete agreements, intellectual property agreements (licenses into and out of the company), and equipment leases.
Real Estate: Real estate leases entered into by the target company (whether as a tenant or a landlord), purchase agreements, surveys (if a long term lease or fee owned), title insurance policies (if fee owned); ascertain whether any consents are needed for the contemplated business sale (or merger) transaction, how much the rent liabilities are, whether there are sufficient term(s) remaining on the lease(s), among others.
Insurance Policies: Have the risk advisor or insurance agent review all insurance policies carried by the target business to determine if the present coverage is adequate for the business as it is conducted (or plans to be conducted).
- Licenses and Permits
- List of Assets and Liabilities
- UCC Liens
- Customer Problems or any negative press
Bhatta Law & Associates will help you navigate the tedious process of contract negotiations. We will ensure that your needs and requirements are met. We will facilitate the drafting of your contracts and explain to you your duties and responsibilities under the same. Our team will make certain you understand all the risks involved and advise you as to whether the contract is in your best interests.
MERGERS AND ACQUISITIONS
Mergers and Acquisitions are common domestic and international corporate strategies among private and public business entities that involve buying, selling, acquiring or merging different companies to grow rapidly and generate more revenue. M&A occurs among small local entities to successful multi-national public corporations to achieve certain results.
Our lawyers at the Bhatta Law & Associates understand the significance of M&A and have the experience and the skills necessary to facilitate such process. We closely work with foreign attorneys and domestic experts, if necessary, to maintain a commercial focus optimizing efficiency and effective execution. Our practice under this area includes hostile takeover defenses, cross-border transactions, acquiring assets, privatizing corporations, management buyouts, subsidiaries and sister-corporations.