Leonardo A. Roth, Esq.

1

• Leonardo A. Roth, Esq.
• Roth, Rousso Katsman, LLP
• 18851 N.E. 29th Avenue, Ste. 900
• Aventura, Florida 33180
• 786.279.0000
• lroth_at_rrksatlaw.com

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• Factors to Consider in Selecting an
• Appropriate Business Entity
• Risk Limited Liability v. Personal Liability
• Finance Raising capital and Tax Implications
• Complexity of Formation and Management
• Equity types of owners and transferring
  ownership

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• Common Business Entities
• Sole Proprietorship
• C Corporation
• S Corporation
• Limited Liability Company

4

• Sole Proprietorship
• An individual carrying on a business for profit
• Unlimited personal liability
• Single level of income tax
• Relatively simple to start
• Managed by the sole proprietor
• Any transfer of the business would be of the
  underlying assets as opposed to a transfer of
  shares in the business
• Capital needs - addressed through loan to sole
  proprietor

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• How to Incorporate
• Select State of incorporation
• File with Secretary of State
• Request EIN from IRS Form SS-4
• Need officer or director with SSN, or
• Need to request ITIN with IRS
• Prepare bylaws and organizational minutes

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• C Corporation
• Limited liability for shareholders
• Tax at both corporate and shareholder level. This
  double level of tax can be minimized
• Formation similar to S corporation except sub S
  election not filed with IRS
• Typically required for publicly traded
  corporations
• No limits on type or numbers of shareholders
• Different classes of stock allowed
• Common Stock
• Preferred Stock

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• S Corporation
• Limited liability for shareholders
• Pass through tax treatment under most
  circumstances but not as complete as for the LLC
• Formation steps include filing Articles of
  Incorporation, filing sub s election with the
  IRS, adoption of bylaws, and, usually, adoption
  of a shareholder agreement
• Limitations on the number of shareholders and the
  type of shareholders
• Limit of 75 shareholders and only one class of
  stock
• Partnerships and corporations cannot be
  shareholders
• Only citizens or residents of USA can be
  shareholders

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• Limited Liability Company
• Combines limited liability with pass through tax
• LLC files a partnership tax return with all
  income and expenses passed through to individual
  owners
• Formation steps include filing articles of
  organization, contributing capital, and adopting
  an operating agreement
• Can be managed by the members or by managers
• Offers several advantages over the S corporation
  
• No limitation on the number of members
• No limitation on who may invest
• Favorable tax treatment
• Different classes of ownership are allowed

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• Bylaws
• Procedures for shareholder and director
• Terms of directors and how elected, types of
  officers and officer duties
• indemnification provisions for officers and
  directors

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• Shareholder Agreements
• restrictions on the transfer of ownership
• provisions for resolving deadlock among the
  shareholders
• method of establishing price of shares
• rights to purchase additional shares, rights to
  sell shares if other shares sold, rights to cause
  a minority shareholder to sell
• ownership of intellectual property

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• LLC Operating Agreements
• Takes the place of both the bylaws and
  shareholder agreement
• Type of membership interests
• Rights and duties of members
• Whether the LLC is member managed or manager
  managed
• Capital accounts and allocation of profits
• Transferability of interest

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• Piercing the Corporate Veil
• Limited liability of a corporation or an LLC can
  be lost if appropriate formalities are not
  followed
• Corporation or LLC should be appropriately
  capitalized
• Annual meetings of shareholders and directors (or
  members and managers if an LLC) should be
  conducted and minutes of those meetings placed in
  minute book
• Separate financial records and bank accounts
  should be maintained for corporation or LLC