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Entries tagged “Incorporation”

Rimon names Private Equity and Corporate Finance attorney Jennifer Dasari a Partner in firm’s Minneapolis office

News May 13, 2014
Represents entrepreneurs and companies in seeking private equity, venture and angel financing; also handles mergers & acquisitions Minneapolis (May 13, 2014) Increasing its strong team of corporate finance partners working to help start-ups and entrepreneurs gain financing for their growth, Rimon, P.C. has named Jennifer Dasari as a partner

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Trading on the Secondary Market

Insight June 29, 2011

In recent years, the secondary market for stocks – a platform through which investors can buy and trade shares of private companies – has grown exponentially in size and use.  This year,    transactions on the online platforms of SharesPost and SecondMarket alone have totaled over $ 4.6 billion, and are projected to exceed $ 6.9 billion next year. This does not include the much larger volume of trading by traditional broker-dealers and financial advisers, or other online platforms. 

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Interpreting the Startup Visa Act

Insight June 22, 2011

On March 14, 2011, Senators John Kerry and Richard Lugar introduced a bill titled the Startup Visa Act of 2011, which is an updated version of a 2010 bill.  If passed, the act would provide temporary work visas to various kinds of foreign workers if certain financial benchmarks are met.

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An LLC Can be Treated as an S-Corporation for Tax Purposes

Insight Michael Moradzadeh Michael Moradzadeh · February 02, 2010

An LLC can be treated as an S-Corporation for tax purposes if it makes an S-Corporation election as long as the entity meets the IRS criteria to be taxed as an S-Corp, files an S-Corp election and gets approved by the IRS to be taxed as an S-Corporation. Without an S-Corporation election, single member LLCs default to be taxed as sole proprietors and a multi-member LLCs defaults to be taxes as partnership since they are considered “disregarded entities”. However, if a single or multiple member LLC agreement meets the IRS criteria to be classified as a small business corporation, the S-corporation election is filed and gets approved by the IRS, then for tax purposes, not legal purposes the entity is an S Corp not a LLC.

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The tax benefits of making an S-Corporation Election?

Insight Michael Moradzadeh Michael Moradzadeh · January 31, 2010

Many small business owners incorporate their businesses not only for legal protection, but also to reduce owners’ payroll taxes through S-Corp tax election with the IRS. One advantage of an S-Corp is that it gives business owners the ability to reduce their self-employment taxes. Any small business owner who has not made an S-Corp election and uses Schedule C for their personal tax return for 2010 is subject to both employer and employee FICA and Medicare payroll taxes at 15.3% up to $106,800, 2.9% Medicare for Schedule C net income greater than $106,800, and California SDI for 1.1% up to 93,316. If a business owner pays himself/herself a “reasonable salary”, the rest of the net income is not subject to these payroll taxes.

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What is an S-Corporartion?

Insight Michael Moradzadeh Michael Moradzadeh · August 19, 2009

S-Corporations are corporations that elect to be treated as pass-through entities by the IRS. In order to qualify for S-Corporation status a corporation needs to satisfy several conditions, including the following: 1) all shareholders must be residents of the United States; 2) the corporation may only have one class of shareholders and may not have more than 75 shareholders; and 3) the company’s shareholders must be any of the following: individuals, estates, certain trusts, certain partnerships, tax-exempt charitable organizations, and other S corporations (but only if the other S corporation is the sole shareholder). This means S-Corporations may not be owned by other C-Corporations, LLCs, or foreign residents. If any of the requirements are not met at any time, the corporation automatically loses its S-Corporation status and will be treated as a a C-Corporation.

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What is a foreign filing?

Insight Michael Moradzadeh Michael Moradzadeh · August 19, 2009

Whenever a corporation or limited liability company does business (i.e. enters contracts or agreements) in a state other than the state in which they are domiciled, they are required to do a foreign filing in that state. For example, if a business is incorporated in Delaware, but has an office and/or employees based in California, that business needs to do a foreign filing in California. In such a situation the corporation will need to pay franchise taxes in both Delaware and California.

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What is pass-through/flow-through taxation?

Insight Michael Moradzadeh Michael Moradzadeh · July 18, 2009

In a pass-through (or flow-through) entity, the entity’s income and expenses “pass through” the entity and are treated as the income and expenses of its owners. LLCs and S-Corporations are pass-through entities. This differs from a C-Corpoartion (which is the default form of corporation) which is taxed a corporate income tax at the end of the fiscal year in addition to the personal income taxes and dividend taxes that its owners and employees pay. Federal corporate income tax is about 15% to 35% of profits, and most states also have corporate income tax. This means after a C-Corporation has paid its expenses for the year, it will be taxed at least 15%-35% of whatever is left above the amount the company started with that year. If the company is an LLC or an S-Corporation, there is no corporate tax, and indeed the owners can even apply losses of the company against their personal income.

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Should my business be a Corporation or an LLC?

Insight Michael Moradzadeh Michael Moradzadeh · July 17, 2009

If your business only has a few investors and you do not anticipate receiving outside financing in the near future, an LLC is probably best for you because of its flexibility, simplicity, and pass-through taxation (see blog entry on pass-through taxation). However, if you want a board of directors that is distinct from the officers and/or shareholders of the company, or if you are looking for institutional investors, then a corporation is probably a better form of entity because of its more organized and established structure of governance.

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What is the difference between an LLC and a Corporation?

Insight Michael Moradzadeh Michael Moradzadeh · July 16, 2009

A corporation is made up of three groups of people – the shareholders, the board of directors and the officers, although the same person can hold multiple positions. The board of directors is formally elected by the shareholders and represents their interests. It is the board of directors that hires the officers of the company, also known as the management. The management’s job is to oversee the day-to-day operations of the company. Major decisions, however, require the approval of both the shareholders and the board of directors. A corporate structure is thus a highly organized and rigid structure of governance that can often be quite burdensome. A corporation requires a slew of corporate governance documents that must be frequently updated. It also requires that annual meetings be held for shareholders and the board of directors.

LLC stands for “limited liability company”. Generally it provides the same legal protections from personal liability as a corporation, however it is governed more like a partnership than a corporation. Whereas a corporation’s owners are called shareholders, the owners of an LLC are known as members. An LLC does not require a board of directors or even officers and can simply be managed directly by its members, if so desired. It can also be structured more like a corporation, with managers that are distinct from its owners. LLCs allow for significantly more flexibility than do corporations. For instance, the owners of an LLC can allocate distributions in whichever way they see fit. Even if the ownership of an LLC is split 60/40, the owners can decide to split the profits 50/50 – something that is not possible in a corporation without a significantly more complicated structure.

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