Choosing the Proper Business Organization
Choosing the proper business organization is one of the most important decisions that a business owner may make. The type of organization will determine how the business handles tax matters and whether there is protection against personal liability. A business owner should consider several factors in choosing a business structure, including the number of individuals in the business, type of business, profit structure and insurance issues. The following are some of the more common types of business structures.
LLC – A Limited Liability Company operates as a partnership, but provides protection from personal liability.
PLLC – Professional Limited Liability Company is similar to an LLC, but it’s used by professionals and practices to limit liability.
Partnership – A standard partnership operates under an agreement between the parties.
Corporation (“C-Corporation”) – A "C" type corporation is a standard corporation that can limit liability to shareholders. This type of corporation pays income tax on earnings in addition to the income tax paid by the shareholders on dividends received.
Corporation (“S Corporation”) – A “Subchapter S Corporation” provides the same protection as a C type corporation, however income tax is paid only at the shareholders level (not by the corporation).
A Sample Case Involving Business Entities: One example of our litigation experience in this area of law is a case in which our clients were minority shareholders in two corporations. One corporation owned a multi-use building in Manhattan and the other leased the ground floor of the building, as a Tenant, operating a restaurant business. The majority shareholders were mismanaging both companies. We successfully obtained a Court Order which froze/restrained all property and accounts. Ultimately, the restaurant business and building were sold and our client’s received a return of their entire investments plus the gains earned on the sale of the business and building. Supreme Court, New York County Index No. 603623/1999.
Not for Profit Organizations
Our work with Public Interest Organizations and Not for Profit Organizations includes the representation of schools, synagogues, medical facilities, towns, villages as well as various other organizations. Not for Profit is a term used in New York, in order to emphasize the primary purpose of an entity’s operation, hence Not for Profit status does not prevent an organization from earning income, but qualifies the organization as operating with a “Not for Profit” primary purpose. Most other states use the term “Non Profit.”
From a general tax standpoint there are two basic types of Not for Profit entities. These are charitable organizations and non charitable organizations. In order for an organization or group to obtain charitable status, it must file the appropriate applications with the Internal Revenue Service. Since charitable status offers those contributing to the corporation a tax deduction, tax authorities pay close attention to the operations of charitable organizations. At times our Not for Profit work may include Family Foundations and Charitable Leads Trusts, which tie into our Estate work.
Both, Mr. Murtha and Mr. Bird have taught Not for Profit Law. Mr. Bird currently operates the Not for Profit Law Clinic at Touro Law School - Touro College Jacob D. Fuchsberg Law Center. In addition to his Not for Profit teaching experience, Mr. Murtha has served on the Board or as trustee of charitable organizations, including the Make-a-Wish Foundation of Metro New York. Mr. Murtha is also currently the President of the board of Catholic Charities of the Brooklyn Diocese, which provides housing, nursing home services and other benefits to those who are less fortunate.
A Sample Case Involving Not for Profit Corporation: Our firm has represented Not for Profit organizations at pretty much every level of the litigation spectrum. One area that is of particular concern to client's operating the Not for Profit entities is the exposure of officers and directors to liability. In one instance, we defended a Not for Profit Organization, its officers and directors (including a well established business man and a local court judge) from claims made by a creditor/mortgage holder. We successfully dissolved the Not for Profit Organization with the approval of the New York State Attorney General's Office, and no claims were upheld against our clients as officers and directors. Supreme Court, Rockland County Index Number 004868/2007
Our business and commercial experience enables us to handle sophisticated multi-jurisdictional commercial transactions. Every transaction is important and should be planned and executed properly to avoid problems in the future. Mistakes in complex transactions can cost a business time, resources and money.
Our experience in business and commercial transactions includes assisting domestic and international businesses, and their shareholders, directors and officers in the areas of:
Government (City, State, and Federal) Contracts
Agreements between related entities
Debt & Equity Financing
Distribution & Agency Agreements
Non-Disclosure Agreements (protection of trade secrets)
Sales and Supply Agreements
We regularly negotiate, draft and execute agreements and contracts for the purchase and sale of businesses and their assets.
A Sample Case Involving a Commercial Transaction: While we represent clients in various types of commercial transactions, one of the most difficult contracts to enforce or defend is a contract with the City of New York. In this case, our client was a party to a multi-million dollar service contract with the City of New York. The Office of the Comptroller for the City of New York believed that our client did not conform to the terms of certain contracts and the City of New York withheld our client’s payments on unrelated City contracts. Our office successfully obtained a restraining order from the Supreme Court State of New York, preventing the City of New York from withholding payments from our client. Separately, we also obtained an Order in favor of that same client preventing any negative information from appearing on the records sent to City Agencies. Supreme Court State of New York Index No.112981/07.