Accidental assumption of liability, 56–57
Adequate capitalization, 18–19
Adequately capitalized limited liability companies, 32
Agent for service of process, 28, 43
Agents of the corporation, 40
Alter ego, 58
Annual board and shareholder meetings, 50
Arbitrary marks, 67
Arbitration, 9
Articles of incorporation, 41–44
Articles of organization. See Certificate of organization
Assets, 17
Assignment of contract, 54
Authorized shares, 38
of corporation, 42
Availability, of business names, 64
Bankruptcy, 10–11
Binding arbitration, 9
Blue sky laws, 46
Board of directors, 39
resolutions, 45
Branding, 63
Business bankruptcy, 10
Business entities, income tax treatment of
pass-through entities, 75–76
tax-regarded entities, 76–78
Business judgment rule, 101
Business licenses, 16
Business name, registering as trademark, 69
Business partnerships, 99–101
Business risk
best business form to manage, 94
evaluation of, 93–94
Businesses with multiple owners
business partnerships, 99–101
general partnerships, 101–103
limited liability company and corporations, 103–104
limited partnerships, 105
C corporation, 36–37
tax-regarded entities, 80
vs. S corporation, 51
Capital account, 20
Capital obligations, 103
Capitalization, 18–19
Certificate of formation. See Certificate of organization
Certificate of incorporation. See Articles of incorporation
Certificate of organization, 26–29
Chief financial officer (CFO), 39–40
Class of stock, 38
Clients, contracts with, 88–91
Close corporations, 51–52
Contract law, 56
Contracts, 85
with clients, 88–91
legal entity, binding
formal agreements, 86–87
informal agreements, 87–88
with owner, 91
Corporate personhood, 13
Corporate separateness
adequate capitalization, 18–19
assets, 17
compliance, 18
financial records, 17
money matters, 16–17
recordkeeping, 18
visibility, 19
Corporate stock, 38–39
Corporate veil, piercing, 58
Corporations, 95
authorized shares of, 42
C corporation, 36–37
close, 51–52
corporate stock terminology, 38–39
formation of
articles of incorporation, 41–44
board of directors organizing resolutions, 45
incorporator’s resolution, 44
postformation compliance, 45–47
shareholder’s resolution, 45
idea of, 35
limited liability, 40–41
limited liability companies and, 36, 39
management of
bylaws, 47–48
formal business records, 50–51
with multiple owners, 103–104
name of, 42
ownership and management, 38–40
pros and cons of, 35
S corporation, 36–37
taxes for, 51
Debt, 19–20
Declaration of partnership, 105
Descriptive marks, 66
Distinctiveness, spectrum of, 66, 67
Dividends, 77
Documenting approvals, for legal entity, 15
Duty of care, 101
Duty of loyalty, 100
Elections, tax treatment, 81–83
Employer identification number (EIN), 73
Employment taxes, 74–75
Entities
formation, obligations assumed before, 54–55
pass-through, 75–76
tax-regarded, 76–78
Entity Classification Election, 82
Equity, 20–21
Famous trademarks, 67
Fanciful marks, 67
Federal tax ID number, obtaining, 73–74
Fictitious business name statement, 3
Fiduciary duties, 100–101
Financial records, 17
Form LLC-12, 29
Form SS-4, 73
Form W-9, 73
Form 1099-MISC, 74
Form 2553, 82
Form 8832, 82
Formal agreements, 86–87
Formal business records
for corporations, 50–51
for limited liability companies, 33–34
Formal guarantees, 55–56
Formal separateness, maintaining, 58–59
General partner, 105
General partnerships, 101–103
Generic terms, as trademarks, 66
Governance, formalities of, 15
Impromptu searches, for name vetting process, 69
Income taxes, 33
treatment of business entities
pass-through entities, 75–76
tax-regarded entities, 76–78
Income taxpayer, 24
Incorporator, 42
information, 44
resolution, 44
Informal agreements, 87–88
Insurance, for risk management, 6–7
Internal Revenue Service (IRS), 17, 24, 73
Issued shares, 38–39
Jointly and severally liable for business’s debts, 102
Judgment lien, 9
Legal entity
in any state, 14–15
comparison, 95
contracts
formal agreements, 86–87
informal agreements, 87–88
corporate separateness
adequate capitalization, 18–19
assets, 17
compliance, 18
financial records, 17
money matters, 16–17
recordkeeping, 18
visibility, 19
financing and ownership
debt, 19–20
equity, 20–21
formation of, 14–15
meaning of, 13
organizing
business licenses and local tax registrations, 16
documenting approvals, 15
ownership, documentation of, 16
Legal fictions, 13
maintaining, 16
Liability, accidental assumption of, 56–57
Licensing and registrations, local business, 33
Limited liability, 4, 24–26, 40–41
losing through litigation, 58–61
voluntarily accepting personal responsibility, 53
liability, accidental assumption of, 56–57
obligations assumed before entity’s formation, 54–55
personal guarantees and waivers of limited liability, 55–56
waivers of, 55–56
Limited liability companies (LLC), 4, 23–24, 95
formal business records, 33–34
formation of
agent for service of process, 28
effective date of filing, 28–29
mailing address of company, 28
management, 28
name of business, 26
purpose of business, 26–27
limited liability, 24–26
membership interests as security, 47
with multiple owners, 103–104
operating agreement of, 29–31
organization structure for, 24
ownership and member contributions of, 31–32
pros and cons of, 23
statutory filings and other maintenance formalities, 32–33
Limited liability company agreement. See Operating agreement
Limited Offering Exemption Notice, 46
Limited partners, 105
Limited partnerships, 105
agreement, 105
Litigation
losing limited liability through, 58–61
risk, 7–9
strategy, 58
Local tax registrations, 16
Manager managed limited liability companies, 28
Membership interests, 24
certificate, 32
as security, 47
Merger clause, protecting with, 56
Minute book, 18
Model Business Corporation Act, 42, 48
Money matters, separate existence of, 16–17
Name vetting process, 69–71
Naming business
state requirements for, 63–64
trademark law, pitfalls of, 64–69
way to approach name vetting process, 69–71
Negligence, 59
No Tax Due Report, 74
Officers, corporate, 39, 40–41
Online payment service, 17
Operating agreement, 29–31
Operating as sole proprietorship, 94–96
advantages of, 2–3
disadvantage of, 4
Outstanding shares, 39
Owner, contracts with, 91
Ownership documentation, of legal entity, 16
Partnerships. See specific partnerships
Pass-through entities, 75–76
S corporation, 80
Patent and Trademark Office (PTO), 68
Periodic reporting, of limited liability companies, 32–33
Personal guarantees, 55–56
Personal names, as trademarks, 67
Personal responsibility, voluntarily accepting, 53
liability, accidental assumption of, 56–57
obligations assumed before entity’s formation, 54–55
personal guarantees and waivers of limited liability, 55–56
Preamble, 86
President, corporate, 39
Property and liability (P&L) policy, 6
“Reasonable cause”, 83
Recordkeeping, 18
Risk management
bankruptcy, case scenario, 10–11
limited liability, 4
litigation risk, 7–9
risk assessment, 5–7
sole proprietorships, 1–4
S corporation, 36–37
pass-through entities, 80
vs. C corporation, 51
Sale, restrictions on, 104
Secretary, corporate, 39
Secretary of State, 28, 32, 41
Securities, 46
membership interests as, 47
Separate existence, of legal entity, 13. See also Corporate separateness
Service of process, 8
Settlement agreement, 9
agreement, 52
meetings, 50
resolution, 45
Single-member limited liability companies, 24
assumption of, 54
Spectrum of distinctiveness, 66, 67
State franchise taxes, 74
State requirements, for naming business, 63–64
State securities laws, 46
Statutory filings, 32–33
Stock
class of, 38
corporate, 38–39
Stockholders. See Shareholders
Subchapter S election, 51, 82, 83
Suggestive marks, 66
Sweat equity, 20
Tax-regarded entities, 76
benefits of, 76–78
C corporation, 80
example of, 78–81
cost and, 96–97
employment, 74–75
federal tax ID number, obtaining, 73–74
income tax treatment of business entities
pass-through entities, 75–76
tax-regarded entities, 76–78
state franchise, 74
treatment elections, mechanics of, 81–83
Technical searches, for name vetting process, 69
Trademark analysis, conducting, 70–71
Trademark law, pitfalls of, 64–69
Trademark lawyer, 68
Trademark screening service, 68
Uniform Electronic Transactions Act, 87
“Use in commerce”, 65
Voting rights, 104
Waivers of limited liability, 55–56
Written consents, 15
“Wrongful” actions, avoiding, 59