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Category: small business

Comparison of Subchapter K v. Subchapter S

Posted on July 25, 2022December 18, 2023 by g83js92js91
Categories: business, internal revenue code, IRS, Life and the Law, limited liability company, llc, small business, starting a business, subchapter K, subchapter S, tax, tax attorney, Tax Issues, Tax Law
Depositphotos 7352892 s

Both Subchapter K and S of the Internal Revenue Code (IRC) are pass-through tax structures in which the members of the entity are taxed for the entity’s income, gains, losses, and expenses on their individual tax returns. That is where the similarities end.

There are several differences discussed below that make Subchapter K seem more taxpayer friendly than Subchapter S. Much of the popularity of the LLC is attributable to the fact that LLCs offer limited liability to all investors combined with the more flexible partnership tax regime. In some situations, however, the goals of the business owners may be better achieved with an S corporation.

Subchapter S places very strict restrictions on the ownership and capital structure for S corporations.  S corporations are limited to 100 shareholders (although members of a “family,” broadly defined, are counted as one shareholder), and they may not have more than one class of stock.  Additionally, all shareholders much be individual U.S. citizens or residents and other corporations or partnerships cannot be shareholders of the company.  Anyone can be a member or partner of an entity taxed under Subchapter K.

Partnerships and LLCs taxed under Subchapter K may make special allocations of income and deduction items, while shareholders of an S corporation must include corporate income and loss on a pro rata share basis.  Thus, partners/members may agree to share certain income or deductions disproportionately, and the agreement will be respected for tax purposes if it reflects their economic business deal.  Additionally, in most cases, partnerships and LLCs taxed under Subchapter K, can distribute appreciated property in kind without immediate recognition of taxable gain.

In a business with only a few owners, an S corporation may be the entity of choice because the flexibility of Subchapter K is not needed.  S corporations are often used by owners that prefer to conduct their business as a state law corporation instead of a partnership or limited liability company because they are more comfortable with the corporate governance structure.  S corporations are also often used by service providers to minimize their exposure to employment taxes.  S corporations are not viable options in many situations – a business with foreign investors would not be able to make the S corporation election because foreign investors are not permissible S corporation shareholders.  Additionally, many institutional investors (e.g., tax-exempt pension funds and charitable organizations) are discouraged by the tax system from investing in any type of active business that is operated as a pass-through entity.  Venture capital funds, which provide a large source of capital for start-up companies, appear to be more comfortable using the familiar C corporation capitalized with several classes of stock, a structure not available in an S corporation.

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For a complete analysis of the tax implications of C Corporations, Partnerships, and S Corporations click here for the Joint Committee on Taxation’s publication entitled “Choice of Business Entity: Present Law and Data Relating to C Corporations, Partnerships, and S Corporations.”

Contact us regarding your business law matter. Click here

Posted in business, internal revenue code, IRS, Life and the Law, limited liability company, llc, small business, starting a business, subchapter K, subchapter S, tax, tax attorney, Tax Issues, Tax Law

How Do You Expand Your Company Into North Carolina From Another State?

Posted on April 22, 2022May 5, 2022 by g83js92js91
Categories: business law, Business Law & Contracts, Charlotte, Jason A McGrath, Jason McGrath News / Media, North Carolina, small business
As a business law attorney, one of the most frequent questions I am asked is some variation of “How do I transfer or expand my out-of-state company to North Carolina?” I’ll address the most common scenarios and the reasonable options available. I’m using South Carolina as the “other” state for example purposes, since we also practice in SC. However, the same general process is true regardless of which state your company originated in.Scenario B: “I live in South Carolina, which is where my company is and will be based, but I want to expand my region of operations to include North Carolina. What should I do and how do I do it?”

Option 1: keep your South Carolina LLC open and register it with the State of North Carolina as a foreign business authorized to transact in North Carolina. You’d obtain a “Certificate of Good Standing” or similar from Florida. You then provide that to the Secretary of State for North Carolina as part of your North Carolina Application for Certificate of Authority (to conduct business in North Carolina). Assuming you are approved by NC, you’re now good to go to conduct business in both states, or either state, and you can have your principal place of business in either state. You will likely be required to pay annual fees to each state and file taxes in each state, which are important factors to consider.

Option 2: start an affiliated company or subsidiary in North Carolina. In certain specific instances, you may keep your South Carolina LLC open, and instead of registering it with North Carolina, you’d prefer to create and register a separate but related business entity in North Carolina. This is typically referred to as a “subsidiary” or an “affiliated company”. You will likely be required to pay annual fees to each state and file taxes in each state, which are important factors to consider.

Additional notes. Under any of the above options, you’ll have to have a registered agent with a “continuous presence” in NC. Many law firms (like mine) agree to provide that service for a small annual fee, but your company’s “RA” doesn’t have to be a business lawyer or law firm. Of course, we also provide the very services needed to transfer your business overall.

These actions can be accomplished without an attorney, but you should at least consider consulting with an attorney any time you make a significant change to your business entity. Good luck!

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Posted in business law, Business Law & Contracts, Charlotte, Jason A McGrath, Jason McGrath News / Media, North Carolina, small business

Arbitration Fees – How Much do Arbitrators Cost?

Posted on August 26, 2021April 25, 2022 by g83js92js91
Categories: arbitration, arbitration'contracts, Business Law & Contracts, Continuing Series, contract law, contracts, Jason A McGrath, NC Rules of Civil Procedure, North Carolina, series, small business

Business law Attorney Jason McGrath shares some information about how much you should expect to pay in fees to an Arbitrator in this short video.

https://youtu.be/_mJseLaXzM0

Here are some of the key points contained in this informational video:

  • Arbitrators typically charge fees similar to what lawyers charge.
  • Does the Arbitrator require a minimum amount when the arbitration is scheduled? This may be called a cancellation fee or a retainer fee. The arbitrator may require this to offset a loss if the arbitration cancels.
  • Arbitrators can sometimes be bargained with to lower fees but normally these are set fees.
  • Arbitration fees (which are mostly made up of the Arbitrator’s fees) are often split evenly between the parties, but this can be altered by contract, law, or court order.

You should get advice from an attorney to assist in handling litigation issues like arbitration.

This is part of a continuing series of video blogs on contract law and arbitration – you can find the first part of this series on our blog or on our YouTube Channel.

If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio, or Tennessee we invite you to fill out our confidential client form for possible legal assistance.

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Posted in arbitration, arbitration'contracts, Business Law & Contracts, Continuing Series, contract law, contracts, Jason A McGrath, NC Rules of Civil Procedure, North Carolina, series, small business

Arbitration: How Do You Choose The Arbitrator?

Posted on July 26, 2021May 2, 2022 by g83js92js91
Categories: arbitration, attorney, business contracts, business disputes, Business Law & Contracts, Business Law Disputes, contract law, contracts, Jason A McGrath, lawsuit, Litigation, small business
Attorney Jason McGrathexplains some things to consider when choosing the arbitrator during a lawsuit in this short video.

Click here to watch this video on YouTube.

Here are some of the key points contained in the video:

  • If using a panel of 3 arbitrators: each party picks an arbitrator and then those two arbitrators pick the third one.
  • If using only 1 arbitrator: one side presents a list of possible arbitrators to the other side and the other side picks from the list.
  • You go back and forth and negotiate between the parties until a decision is made.
  • You may wish to avoid attempting private conversations with potential arbitrators in order to avoid the appearance of impropriety.
  • Consider all the information available to you to make an informed decision about your arbitrator.
  • Arbitrators may also be appointed by the court.

If you need legal services in North Carolina,
South Carolina,
Georgia,
Florida,
Ohio,
or Tennessee we invite you to fill out our confidential client formfor possible legal assistance.

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Posted in arbitration, attorney, business contracts, business disputes, Business Law & Contracts, Business Law Disputes, contract law, contracts, Jason A McGrath, lawsuit, Litigation, small business

Interrogatories – How They Generally Work

Posted on August 28, 2019April 20, 2022 by g83js92js91
Categories: attorney, business, business law, Business Law & Contracts, Business Law Disputes, interrogatories, Jason A McGrath, lawsuit, lawyer, Litigation, NC Rules of Civil Procedure, small business

Attorney Jason McGrath explains “Interrogatories” during litigation and how they generally work in a lawsuit in this short video.

Click here to watch on YouTube  – https://youtu.be/s923VxHdLyE

Here are some of the key points contained in the video:

  1. Interrogatories are a list of written questions.
  2. The receiving party is to respond, typically within 30 days, to the questions or file an objection or series of objections.
  3. There is a rule limiting the number of questions that may be asked.
  4. The responses should be evaluated by the party that initiated the Interrogatories for accuracy and completeness and these issues can be questioned within the court system.

If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio, or Tennessee we invite you to fill out our confidential client contact form for possible legal assistance.

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Posted in attorney, business, business law, Business Law & Contracts, Business Law Disputes, interrogatories, Jason A McGrath, lawsuit, lawyer, Litigation, NC Rules of Civil Procedure, small business

Letter of Good Standing and Certificate of Existence

Posted on July 24, 2019April 20, 2022 by g83js92js91
Categories: attorney, business, Business Law & Contracts, Certificate of Existence, corporation, Jason A McGrath, Letter of Good Standing, llc, McGrath amp; Spielberger, North Carolina, small business

This video contains helpful information for those going into business within the state of North Carolina including:

  • Certificate of Existence from the N.C. Secretary of State
  • Letter of Good Standing from the N.C. of Revenue

Business law attorney Jason McGrath discusses Letters of Good Standing and Certificates of Existence for North Carolina businesses in this informational video.

Click here to view on YouTube – https://youtu.be/EFhxSwkVy2E

If you are in need of legal assistance for your business in North Carolina, South Carolina, Tennessee, Georgia, Florida or Ohio, please fill out our confidential client intake form.

Posted in attorney, business, Business Law & Contracts, Certificate of Existence, corporation, Jason A McGrath, Letter of Good Standing, llc, McGrath amp; Spielberger, North Carolina, small business

Choosing a Business Lawyer for NC Corporations and Other Small Business

Posted on December 19, 2018April 20, 2022 by g83js92js91
Categories: business, business attorney, Business Law & Contracts, business lawyer, Jason A McGrath, nc corporations, North Carolina, PLLC, searching for business lawyer, small business

In this video, business attorney Jason McGrath of McGrath & Spielberger PLLC discusses key points that should be considered when hiring a business lawyer for NC Corporations and other small business.

Business Law Attorney Jason A. McGrath provides the following three tips to selecting the best business law attorney in Charlotte NC.

Tip #1

Do they have a great reputation with their clients and their peers?

Tip #2

Are they willing to provide the level of service you want and need?

Tip #3

Is the attorney personable? Do you feel comfortable? Your comfort is important!

 

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McGrath & Spielberger, PLLC Business Law Attorney focuses on General Business Law matters such as starting a business, expanding a business, analyzing contracts, resolving disputes, NC Corporations and much, much more! We encourage you to visit our website to learn more about our practice and lawyers serving Florida, Georgia, South Carolina, North Carolina, Tennessee, and Ohio.

 

 

Posted in business, business attorney, Business Law & Contracts, business lawyer, Jason A McGrath, nc corporations, North Carolina, PLLC, searching for business lawyer, small business

How Do You “Transfer” Your Company Into North Carolina From Another State?

Posted on November 3, 2016April 25, 2022 by g83js92js91
Categories: attorney, business, business law, Business Law & Contracts, contracts, florida, Jason A McGrath, llc, North Carolina, small business
Transferring Your Company Into North Carolina From Another State, moving

As a business attorney, one of the most frequent questions I am asked is some variation of “How do I transfer my out-of-state company to North Carolina?” I’ll address the most common scenarios and the reasonable options available. I’m using Florida as the other state just for example purposes (I also practice in FL), but the same general process is true regardless of which state your company originated in or currently exists in.

Scenario A: “I live in Florida, where my company was formed, but I’m moving to North Carolina and going forward I will be doing business out of North Carolina instead of Florida. What should I do and how do I do it?”

Option 1: convert your Florida company into a North Carolina company.  NC allows a company formed in another state to convert to become a NC LLC. The company would need to follow the law of the state it is coming from as far as winding down any business and otherwise wrapping up affairs in that state, and would typically need to have passed a resolution or similar approving the conversion to a NC company. The LLC can then file its Articles of Organization/Conversion with the NC Secretary of State.

Option 2: shut your Florida company down and start a new one in North Carolina. You would “wind up” your Florida LLC and dissolve it, such that it no longer exists. While the timing of the steps in North Carolina may vary to some extent, you’d go ahead and create a North Carolina LLC. The name would not have to be the same, but there are advantages to using the same name, if possible (this article does not attempt to address those issues).

Option 3: keep your Florida company open and register it with the State of North Carolina as a foreign business authorized to transact in North Carolina. You’d obtain a “Certificate of Good Standing” or similar from Florida. You then provide that to the NC Secretary of State as part of your North Carolina Application for Certificate of Authority (to conduct business in North Carolina). Assuming you are approved by NC, you’re now good to go to conduct business in both states, or either state, and you can have your principal place of business in either state. You will likely be required to pay annual fees to each state and file taxes in each state, which are important factors to consider.

Option 4: start an affiliated company or subsidiary in North Carolina. In certain specific instances, you may keep your Florida LLC open, and instead of registering it with North Carolina, you’d prefer to create and register a separate but related business entity in North Carolina. This is typically referred to as a “subsidiary” or an “affiliated company”. You will likely be required to pay annual fees to each state and file taxes in each state, which are important factors to consider.

Additional notes. Under any of the above options, you’ll have to have a registered agent with a “continuous presence” in NC. Many law firms (like mine) agree to provide that service for a small annual fee, but your company’s “RA” doesn’t have to be a lawyer or law firm. Of course, we also provide the very services needed to transfer your business overall.

These actions can be accomplished without an attorney, but you should at least consider consulting with an attorney any time you make a significant change to your business entity. Good luck!

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Posted in attorney, business, business law, Business Law & Contracts, contracts, florida, Jason A McGrath, llc, North Carolina, small business

Requests for Production Under NC Rules of Civil Procedure

Posted on August 30, 2016May 2, 2022 by g83js92js91
Categories: Business Law & Contracts, Business Law Disputes, discovery, interrogatories, Jason A McGrath, Litigation, McGrath amp; Spielberger, small business
In this video litigation attorney Jason McGrath explains Requests for Production of documents (and other items) under the North Carolina Rules of Civil Procedure.

https://youtu.be/GsyzuLaxDf0

If you are facing a lawsuit in North Carolina please fill out our confidential client intake form for legal assistance.

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Posted in Business Law & Contracts, Business Law Disputes, discovery, interrogatories, Jason A McGrath, Litigation, McGrath amp; Spielberger, small business

Why does your Corporation or Company Need a Registered Agent?

Posted on August 26, 2016December 18, 2023 by g83js92js91
Categories: attorney, business, business law, Business Law & Contracts, corporation, Jason A McGrath, Life and the Law, limited liability company, llc, McGrath amp; Spielberger, North Carolina, registered agent, small business
In this video, business law attorney Jason McGrath explains what a registered agent is, what it does, and why it’s legally required.

This discussion focuses on registered agents in North Carolina, but most of this information will *generally* apply to other states – but you need to study the specifics for your state, of course.

https://youtu.be/WuBeC-UVHew

If you are in need of legal assistance for your business in North Carolina, South Carolina, Tennessee, Georgia or Florida please fill out our confidential client intake form.

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Posted in attorney, business, business law, Business Law & Contracts, corporation, Jason A McGrath, Life and the Law, limited liability company, llc, McGrath amp; Spielberger, North Carolina, registered agent, small business

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  • Business Ownership Deals (Part 6 of Series): How Many Different Attorneys Need To Be Involved?
  • Business Ownership Deals: Buying And Selling (Transferring) Membership Interests In LLCs – Part 5, Filings With The Secretary Of State
  • Business Ownership Deals: Buying And Selling (Transferring) Membership Interests In LLCs – Part 4, Operating Agreement (“OA”) Changes
  • Business Ownership Deals: Buying And Selling (Transferring) Membership Interests In LLCs – Part 3, The Company Resolution
  • Business Ownership Deals: Buying And Selling (Transferring) Membership Interests In LLCs (Part 2)

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