Category: Uncategorized
The Corporate Veil: What is It and Why You Should Care?
October 12, 2020 | Barna, Guzy & Steffen, Ltd.
You may have heard mention of the corporate veil – the common term for the liability protections afforded to an individual (or entity) who creates a separate company to do business. However, this protection is not ironclad. Read our blog as we discuss the corporate veil, what it is, and why you should care. The benefits of setting up a corporation or L.L.C. For purposes of our discussion, let’s assume Ellen runs a canoe making business out of her garage called Handcrafted Canoes. If she doesn’t create a corporation or limited liability company (or other liability limiting entity), she is personally liable for all of the debts of the business. In other words – her personal assets are subject to claims relating to the business. Ellen’s smart attorney advises her to set up a corporation, and Ellen takes the advice. Handcrafted Canoes, Inc. (HCI) is formed as a Minnesota corporation. But is that the end of the story? If Ellen’s only act is to set up the corporation, and she doesn’t actually operate her business as a separate entity, creditors of her business may be able to get past that corporate “veil” and proceed against her personal assets. Piercing the corporate veil Parties that do business together have a reasonable expectation that if something goes wrong,…
Read MoreThe Company Sale: Stock or Asset
September 30, 2020 | Carole Clark Isakson
I have been handling sales and purchases of businesses for over three decades, and the first question I always have is whether the owners are selling their interests in the company (i.e. stock) or whether the company is selling its assets. The distinction here is CRITICAL and will impact how the deal is structured, how it is financed, how employees and third parties are impacted, and the tax consequences to the seller (and later, the buyer). Understanding the difference between a stock sale and an asset sale is an important first step for anyone wishing to buy or sell a business. Read on as we take an in-depth look at the company sale. Structuring the transaction While it’s best to leave the ultimate structure of the transaction you have in mind to your professionals, it is common practice for a buyer and a seller to agree on price and remain flexible on how the deal is organized until initial due diligence is conducted. Ideally a structure will be found that benefits both parties. For purposes of this discussion, let’s focus on a business operated by a corporation and the shareholders who own the stock in the corporation (the analysis would be roughly the same for a limited liability company). EXAMPLE: Tent Corporation is…
Read MoreBest Practices for Documenting Board and Owner Meetings
September 24, 2020 | Carole Clark Isakson
The day to day operations of an entity can be conducted by the officers and executives in charge. However, companies should be mindful that formal action is required in many cases, especially when making decisions that are outside the ordinary course of business. Such decisions may involve taking out a loan, selling an asset, bringing in new investors, or liquidating the company. Formal actions are taken either by the owners of the company, or by the board, if the company has a such a committee. In addition to these special actions, companies also typically have meetings and elections on an annual basis to cover common tasks allocated to the owners and boards. Read on as we discuss best practices for documenting board and owner meetings. The nuances of company ownership When referring to “company,” the statement is generally applicable to corporations, limited liability companies, and partnerships. In turn, the term “owners” refers to shareholders (the owners of a corporation), members (the owners of a limited liability company), and partners (the owners of a partnership). The owners of a company may elect a board of directors or a board of governors; for instance, limited liability companies are not required to have a board. Additionally, this blog is a general statement of typical provisions. Before making…
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