Maser Law PLLC

Basic Concepts

Corporate Entity
Sole Proprietorship
Partnership
Limited Partnership
Limited Liability Company
Close Corp
S Corp
Corporation
Articles of Incorporation
Operating Agreement
Employee Manual
Stock Vesting Agreement
Registered Agent

Corporate Entity: In starting a business one needs to designate the type of busienss structure best suited for the venture. Just a few of the factors that affect this decision are the anticipated size of the business, whether you prefer pass through income i.e., your entity is disregarded for taxation purposes, and if you need liability protection in the course of runnig your business.

Sole Proprietorship: A sole proprietorship is the simplest and most common structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the business and that individual, the owner. As the sole owner you are entitled to all profits, responsible for all business’s debts, losses, and liabilities.

Partnership: A partnership is an association of two or more people acting as co-owners of a for-profit business. Individuals may create a partnership by oral or written agreement. Partners share personal liability for all claims against the partnership, as well as share all profits and losses. Profits are taxed as personal income for each individual partner.

Limited Partnership: is an entity with one or more general partners, who manage the business and assumed legal debts and obligations. meanwhile, the limited partners liability is limited due to the general partners assuming such.

Limited Liability Company: Combines the advantages of partnerships with a corporation. An LLC is not required to maintain the formal protocols necessitated of a corporation, e.g. annual meetings, minutes, votes, or corporate filings, yet an LLC has the liability protections of a corporation for its members, just as shareholders in a corporation are afforded. If the LLC is a single member entity, that member just files taxes once a year as a normal individual would, reporting the LLC's income, as it passes through to this member, on their 1040 tax form (specifically schedule C). An LLC with multiple members, would utilize a Form 1065 partnership tax return. The primary drawbacks to an LLC are all the entity's income becomes subject to self employment tax (15%) when it passes through to the members personal tax returns.

Close Corp: A close corporation is a corporation that is exempt from a number of the formal rules usually governing corporations, because of the small number of shareholders it has. In Montana a close corp has a maximum of 25 shareholders and is governed by the provisions of Montana's Close Corporation Act.

S Corp: is a unique IRS designation for a corporation that still allows pass through treatment for income to the shareholders' personal tax returns. But, shareholders who are employees are required to pay themselves "reasonable compensation." S Corps unlike LLC's (with members) designate officers and directors and are subject to the formalities of a traditional corporation: annual meetings, reporting minutes, voting formalities, and more complex tax filings, etc.. A critical advantage of an S Corp, is one -- asssuming their business makes enough money to first pay themselves a reasonable salary -- can thereafter provide themselves semi-annual or annual distributions of profits not subject to self-employment taxes.

Corporation: a corporation is an independent legal entity typically owned by a large number ofshareholders. Consequently the corporation itself, not the shareholders, is held legally responsible for the actions and debts the business incurs. Corporations are more complex than other business structures because they have costly administrative fees and complex tax and legal requirements. Because of these issues, corporations are generally best for established, large companies with numerous employees.

Articles of Incorporation: are the primary rules governing the management of a corporation, and are filed with a State or other regulatory agency. In Montana articles are filed with the Secretary of State, and are done so for limited liability corporations or professional limited liability corporations. Meanwhile, Montana requires articles of incorporation for companies, while certificates are filed for limited partnerships and limited liability partnerships file registrations.

Operating Agreement: an operating agreement establishes the procedures by which an LLC will be run. The agreement sets forth financial arrangements and rights as well as managerial rights and duties relative to the operation of the LLC. The operating agreement is thus similar to a partnership agreement or corporate by-laws in these respective entities.

Employee Manual: an employee manual covers expectations of your employees, what they can expect from your company, plus legal obligations as an employer, and your employees' rights.

Stock Vesting Agreement: startups commonly issue stock to founders as well as employees. To ensure equitable and sensible distribution of stock, a well thought out vesting agreement is critical. Three key factors should be considered: vesting period; a “cliff” that prevents vesting for pre-termination; and "acceleration" upon certain events.

Registered Agent: is a business or individual designated to receive service of process when a business entity is a party in a legal action such as a lawsuit or summons.

Services

Corporate Entity Selection
Registered Agent
Articles of Incorporation
Operating Agreements
Employee Manuals
Stock Vesting Agreements
Annual Filings
Business Litigation

Corporate Entity Selection: a multitude of corporate entity options exist and Maser Lasw can help you decide which classification works best for your needs. Primarily we focus on assisting small businesses; thus, we usually assist clients in creating liability limiting LLC’s with S Corp status. The LLC configuration protects members of the small business’ personal assets, while an S Corp election enables the option of receiving distributions from your entity that are not subject to Social Security and Medicare (FICA) taxes. Other corporate entity options are traditional incorporation, best suited for an entity you imagine will be or is already is quite large – particularly if stock is to be sold to a diverse group of investors; limited liability partnerships, an option should you prefer not to incorporate; or a doing business as (DBA) which merely provides a commercial name you can use in the course of business.

Registered Agent: Maser Law can serve as your registered agent, the designated individual who receives official or legal notices on behalf of your corporate entity. By having a local registered agent, and more importantly one who is a licensed Montana attorney, your business will be in good hands if service of process (SOP) is effected on your business due to a legal action such as a lawsuit or summons. Maser Law is familiar with all the necessary steps to properly respond to such legal actions and can advise you accordingly.

Articles of Incorporation: Maser Law can file your articles of incorporation, either as a basic document covering the fundamentals required by the Montana Secretary of State, or a customized articles with more detailed information. Customized artcles can list the amount and type of stock to be issued, limitations on directors’ liability, actions by stockholders without a meeting, and authority to call special meetings of stockholders.

Operating Agreements:Maser Law can custom draft an operating agreement unique to your LLC. Typical topics covered in an operating agreements, to name a few, include establishment of capital accounts, membership interests, provisions for profit distribution and allocated tax responsibility, managerial responsibilities, voting protocols, the term of existance as well as winding up procedures should the entity cease to do business. Your operating should anticipate protocols for all the common events that occur in the course of corpoate governance, and Maser Law will work closely with you to ensure your agreement effectively meets your needs.

Employee Manuals: Maser Law can customize an employee manual for your business that covers expectations of your employees, what they can expect from your company, plus legal obligations as an employer, and your employees' rights. Common and important topics to consider including are an overview of your business, employment eligibility, job classifications, employee referrals, employee records, job postings, probationary periods, termination and resignation procedures, work schedules, standards of conduct, compensation, employee benefits, anti-discrimination policy, as well as safety and security. If your business relies upon proprietary information or processes, you may also want to incorporate a non-disclosure or conflict of interest statement at the end of your employee manual that employees sign, memorializing these commitments, as well as confirming they read the employee manual.

Stock Vesting Agreements: Maser Law can assist your startup with the issuance of stock to founders as well as employees. To ensure equitable and sensible distribution of stock, a well thought out vesting agreement is critical. Three critical factors are integrated into all our agreements: vesting period – often four years; a “cliff” which is essentially a probationary period during which if an employee or founder quits they retain none of their stock grant (often a year); and then "acceleration" which allows full vesting at the occurrence of some event e.g., sale of the company, an IPO, etc. Other options for vesting can include “triggers” whereby achieved sales quotas or product delivery milestones result in vesting.

Annual Filings: Each year the Montana Secretary of State requires an annual filing for your corporate entity to remain in good standing with the State. Maser Law can perform this filing, update your corporate information with the State, and make sure your business is in compliance with State requirements.

Business Litigation: litigation or the threat of such is an inevitable part of doing business. Maser Law has significant experience in handling business disputes, whether it be business transactions gone wrong, defects and problems arising from property development, violations of lease provisions, or disputes over inadequate professional services.

© 2023 Maser Law PLLC. Information obtained at this site is not, nor is it intended to be, legal advice. Consult an attorney for advice regarding your individual situation. Further, merely contacting Maser Law PLLC does not create an attorney-client relationship.