Advising on Forming Business Entities
Problem: An entrepreneur or businessperson needs to figure out what form of entity (C corporation, S corporation, limited liability company (“LLC”), limited partnership, business trust, sole proprietorship or joint venture) should be used for his or her business; How many shares or membership interest units (or what percentages of ownership) should be issued initially to the company’s founders, and how many shares or membership interest units (or what percentage of ownership) should be reserved for investors and/or employees and consultants.
Solution: Identify the Form of Entity that Addresses the Client’s Needs and Objectives
At Cooper Law LLC, we consult with clients in order to gain an understanding of the type of businesses they are doing (or plan to do), their business goals, how many owners there are (or will be), what percentages the respective owners have (or expect to have) and whether equity interests will be used to raise capital or secure top employees and consultants.
We also help our clients decide what form of entity (C corporation, S corporation, LLC, limited partnership, business trust, sole proprietorship or joint venture) makes the most sense for their businesses or for the transaction(s) our clients are contemplating).
We help our clients understand the ramifications of various ownership proportions with other founders or strategic partners. We also ask our clients to consider whether it makes sense to form their companies in New York, Connecticut, Delaware or in another jurisdiction. This decision may depend on our client’s ultimate goals or where critical operations will be based. After these decisions have been made, we will draft the formative documents for our client’s entity.
For a corporation, this would include drafting incorporator’s resolutions and the certificate of incorporation (both to be signed by Cooper Law LLC), initial resolutions of the corporation’s initial director(s), and its bylaws.
For an S corporation, we would add in the IRS Form 2553 Election by a Small Business Corporation (electing S corporation tax treatment).
For a limited liability company (LLC), this would include drafting the organizer’s resolutions and the Articles of Organization (in Delaware, this is called the Certificate of Formation) (both to be signed by Cooper Law LLC), the initial manager(s) resolutions; and an Operating Agreement (in Delaware, this is called the Limited Liability Company Agreement).
For all companies, we obtain an employer identification number from the IRS and, when appropriate, a Connecticut (or another state) taxpayer identification number (or work with the client or their accountant to make sure these identification numbers are obtained).
We also make sure that the name each client wants to use for their company is available in the chosen jurisdiction, and that there is no trademark registration of the intended name (or anything similar to the intended name) at the United States Patent and Trademark Office. We want to ensure that the naming of our client’s business will not be an invitation for a trademark infringement lawsuit from another company using that name or a trademark like that name.