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Frequently Asked Questions
Business & Corporate Law
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Buy-sell agreements are contracts between business owners to address various situations under which one or more owners have the option or the obligation to sell their ownership interest, and other owners (or the company) have the option or obligation to purchase that interest. Common triggers of these buy and sell rights include an owner’s death, disability, termination of employment, and receipt of a third party offer to purchase the interest. These are put in place to protect a company’s stability and longevity should a triggering event occur, and to limit disputes that can arise in those circumstances. The agreement would usually address price determination, payment terms, and timing, along with other matters. If one of the business partners dies and there is a buy-sell agreement in place, oftentimes life insurance policies are used to fund the buyout. Buy-sell agreements safeguard the company, stakeholders in the company, employees, and even clients and customers.
This is the most common and straight forward business structure where one person is the owner. This business is not incorporated, which means less government involvement but also less government protection. Generally speaking, the owner pays personal income tax and self-employment tax on the business profits earned. The owner is solely financially liable for the business. Which also means that if the business needs to settle a debt or a legal claim, your personal assets may be at risk. This type of business structure offers simplicity and more control for the individual owner.
An LLC is structured in a way that offers owners the chance to limit their personal liability which protects their personal assets. It offers flexibility like a partnership does, but it provides protection of assets like a corporation does. LLCs are common in Michigan. They are inexpensive to start and easy to set up. You are required to file original articles of organization which should contain all the information required to form your LLC. They offer flexible management structures and do not put a limit on the number of members or owners the business may have. Typically, LLCs pay lower taxes than corporations. The profits that an LLC makes are treated as the business owners’ personal income, they are not subject to corporate taxation.
This business structure is also called a benefit corporation. They are a for-profit corporation, but they are also mission driven. They must receive a certification that shows they are socially and environmentally responsible and transparent. This type of corporation is taxed in the same way as a C Corporation, so they do not receive any tax breaks. Companies that focus on the planet and people as well as making a profit should be structured as B Corporations. B Lab (the company that performs the certification assessment) says that “Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. B Corps are accelerating a global culture shift to redefine success in business and build a more inclusive and sustainable economy.” Examples of B Corporations would be TOMS, Ben and Jerry’s, Thrive Market, and Seventh Generation, among many others. B Corporations build trust with their consumers and have the advantage of attracting investors because of their business mission.
Businesses structured as C Corporations are independent of their shareholders. They are the most prevalent type of corporation as they provide defined tax and ownership structures.They are for profit companies that pay tax on the profits.Funds distributed out to the shareholders as dividends can also be taxed.They can be expensive to start and require extensive record keeping.They have strong personal liability protection for their shareholders.They have no limit on the number of shareholders they can have and can also offer stock options.
Generally speaking, an S Corporation business structure passes taxable income, credits and deductions, and losses to its shareholders. They have a special tax status with the IRS which provides them with some tax advantages.A business must meet certain IRS requirements to become and remain an S Corporation.An S Corporation does not pay corporate taxes, because the profits and losses are passed through the business and reported to the shareholders personal tax returns.Like all corporations, they must file articles of incorporation.Typically, S Corporations are smaller businesses since they cannot exceed 100 shareholders and they must hold shareholder and director meetings.
The names of all parties involved in the contract.A description of the confidential information that the employer wants the employee to keep private. It is important to be as specific as possible.The owner of the confidential information.The reason the information is confidential so the employee understands why they are required to sign the contract.The length of time that the information should be kept confidential.The remedies in the event the NDA were breached or suspected of being breached.
Non-disclosure agreements (NDAs), also referred to as Confidentiality Agreements, are legally binding contracts in which one or more parties enter into a confidential relationship because of sensitive information.NDAs are used to help keep valuable business information secret.NDAs are not just for large businesses.NDAs can protect a company from an employee leaving and using the information they were taught to start their own competing business.If NDAs are breached, the parties involved could be subject to lawsuits.The confidential information protected by a non-disclosure agreement is typically the information that makes a business successful and unique.
This type of business structure may be ideal for businesses owned by multiple people. It is also the simplest way for more than one person to own and operate a business where all the owners share in the profits and share in the liabilities. A partnership business structure:Does not pay taxes on income.It passes profits and losses to the partners.Has two different types: general and limited partnerships.
The names of all parties involved in the contract.A description of the confidential information that the employer wants the employee to keep private. It is important to be as specific as possible.The owner of the confidential information.The reason the information is confidential so the employee understands why they are required to sign the contract.The length of time that the information should be kept confidential.The remedies in the event the NDA were breached or suspected of being breached.
Nonprofit business structures are mission driven. The type of mission typically benefits education, art, charitable causes, or religious purposes.Nonprofits may or may not be tax-exempt. To form a nonprofit organization that is tax-exempt, you would need to apply for and receive a federal 501(c)(3) tax exemption. With this tax exemption, nonprofits are not required to pay taxes on the profits, but most of the profits are used to fund the nonprofit’s mission.
The Pregnant Workers Fairness Act is a law that mandates federal requirements for employers to provide “reasonable accommodations” in the workplace to an employee with limitations due to pregnancy and childbirth, or other related medical conditions, unless the implementation imposes “undue hardship” for the employer.
*The birth of a child and to care for the child within the first year.*The placement of an adopted child or fostered child with the employee to care for them within the first year.*If the employee has a “serious medical condition” and is unable to perform their essential job duties because of it.*To care for an immediate family member that has a “serious health condition.” Immediate family member means spouse, child, or parent of the employee. It does not include the employees in laws or grandparents. Child can include someone in an “in loco parentis” relationship with the employee.* For qualifying needs due to the employee’s spouse, child, or parent being on active duty as a Member of the National Guard, the Reserves, or the regular Armed Forces.
The Fair Labor Standards Act is a United States Federal Labor Law enacted in 1938 that protects employees’ rights by establishing:Minimum WageOvertime Pay EligibilityRecord KeepingChild Labor Rules
This affects full-time and part-time employees in the private sector and in the federal, state, and local governments.
A company can have multiple beneficial owners. A Beneficial Owner, according to FinCEN, “includes any individual who, directly or indirectly, either:exercises substantial control over a reporting company, orowns or controls at least 25 percent of the ownership interests of a reporting company.”
An individual has substantial control over a reporting company if they meet any of the following criteria:The individual is a senior officer.The individual has authority to appoint or remove officers.The individual is a decision maker of important matters.The individual has some other substantial control over the business.
A Non-Disclosure Agreement may contain the following confidential information:Trade Secrets such as test data, customer lists, new products or new developments, and expansion plans, among others;Business plans, processes, and procedures;Intellectual Property such as copyright, trademarks, patents, etc.;Research and Development;Client information;Sales and marketing plans; andCompany financials and passwords.
*Keep sensitive and confidential information about your business a secret.*Inexpensive way to help keep business information secret.*Builds trust between the parties signing the NDA.*Limits the likelihood of information being leaked or information being stolen by competitors.*Helps attract investors which in turn would help businesses gain the capital they need.Non-Disclosure agreements are not only used by businesses with their employees, but they can also be used with independent contractors, potential investors, vendors, and other business associates.
Contracts are a part of most commercial transactions so it is important that they are constructed with all the necessary information to make sure they are legally valid. While they very in terms and complexity, the formation of a valid contract must include specific essential elements. These specific elements are:OfferAcceptanceMeeting of the MindsConsiderationCapacityLegality
General Partnership: In a general partnership, the owners all share full operational control of the business as well as unlimited liability.Limited Partnership: In a limited partnership, the owners are not always involved in the day-to-day operations. They are more like silent partners in a business. An industry example for limited partnerships would be film making or real estate.
Contracts are legally binding agreements between two or more parties that consist of a mutual exchange of promises with terms and conditions that are understood by both parties.While contracts very in terms and complexity, the formation of a valid contract must include specific essential elements. These specific elements are:OfferAcceptanceMeeting of the MindsConsiderationCapacityLegality
Buy-sell agreements are typically constructed in a way that best suits the individual business needs. They must also be constructed to adhere to specific state statutes.Generally, a buy-sell agreement will include:*A list of owners/partners of the business and percentages of ownership.*A methodology for determining the value of the departing owners share of the business, and the date the valuation is determined.*A list of events that could trigger the buyout.*The determination of which parties will purchase the interest, terms of purchase, security for payment, etc.*Addressing certain tax and estate planning considerations for each of the owners and the business.
Contracts are legally binding agreements between two or more parties that consist of a mutual exchange of promises with terms and conditions that are understood by both parties. It is important that contracts are constructed with all the necessary information to make sure they are legally valid. While contracts very in terms and complexity, the formation of a valid contract must include specific essential elements:OfferAcceptanceMeeting of the MindsConsiderationCapacityLegality
This is the simplest form of a buy-sell agreement and is best suited for businesses with just a few owners. In this type of agreement, upon the occurrence of a triggering event, the other partners/owners of the business purchase the interest of the departing owner at an agreed upon price. This is sometimes funded by life insurance.
The Fair Labor Standards Act is a United States Federal Labor Law enacted in 1938 that protects employees' rights by establishing minimum wage, overtime pay eligibility, record keeping, and child labor rules. This affects full-time and part-time employees in the private sector and in the federal, state, and local governments.
Valuation methods are an important part of buy-sell agreements as they determine the price at which business interests are valued. This important component helps avoid potential conflicts should the parties fail to agree on value. Some of the most common types of valuation methods are:Asset Based Approach: This type of method focuses on the net asset value of the company's assets.Income Based Approach: This is a valuation approach that uses the income generated by the business to determine value.Market-Based Approach: This type of method compares financial metrics of similar assets to determine value.Stipulated Value: Where the owners agree in advance of the value of an interest for buy-out purposes.
Ideally, it should be created when the business is formed, but can also be implemented at any stage.A buy-sell agreement outlines what happens if an owner retires, becomes disabled, passes away, or wants to sell their interest.Having a plan in place can:Prevent conflictProtect the businessProvide peace of mind for everyone involvedBuild your business with your future in mind!
This is a request to a judge to issue a ruling on a specific legal matter. Motions provide clarity on specific issues in the case and can be used to dismiss a case, compel a party to take specific action, or to prevent the need for a trial by providing summary judgment.Motions are usually filed together with a Brief in Support of the Motion that provides much of the relevant facts and applicable law for the judge to use in deciding the motion. There can be numerous types of motions. Including:Pre-Trial MotionsPost-Trial MotionsMotion for Summary Judgement/DispositionMotion in LimineMotion for Change of Venue
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