News & Insights

When Can a Profitable Corporation be Dissolved?

When Can a Profitable Corporation be Dissolved?

In New York, the Business Corporation Law (“BCL”) allows a shareholder who owns 50 percent of a corporation to seek dissolution of the business on various grounds. In a somewhat renowned case in legal circles, litigation between the two shareholders of the law firm Cellino & Barnes, P.C. (the “P.C”) addresses one issue that can … Read more

Partnership Agreements Govern Partnership Disputes

As a general principle, where parties have a contractual relationship, the terms of the agreement will govern any disputes. While there may be other laws that apply to the relationship, they may only be applicable where the contract is silent, invalid or some exception exists. The importance of the parties’ agreement in resolving conflicts also … Read more

BUYING THE ASSETS OF A BUSINESS? AVOID A DE FACTO MERGER

de facto

Generally, New York law provides that a company that buys the assets of another business is not liable for the seller’s pre-existing liabilities. However, there are several important exceptions to this rule. One of them is known as the de facto merger doctrine and it creates successor liability when the transaction between the purchasing and … Read more

So, You Want to Buy an LLC Interest. What Does That Mean?

Before you buy any interest in a business, it is crucial to confirm what you are buying and take all of the formal steps necessary to complete the transaction. In the case of purchasing an LLC interest, the most important document to be reviewed is the LLC Operating Agreement. An LLC Operating Agreement (or Shareholder’s Agreement … Read more

Tax Benefits of Converting a C-Corporation to an S Corporation

Many small companies are set up as Type “C” Corporations (“C Corp”), particularly those which have been in existence for many years. However, C Corps are subject to double taxation, and as a result, businesses may want to consider converting to an S Corporation (“S Corp”) to reap the tax benefits.

Tax treatment of C Corps vs S Corps

C corporations must pay taxes on earnings at the corporate level. In addition, their shareholders are also separately taxed on amounts distributed to them as dividends. Therefore, each dollar earned by a C Corp is taxed twice before it reaches the hands of the corporation’s shareholders.

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Minimizing Taxes When Inheriting Stock in an S Corporation

Generally, property you inherit from a decedent receives a “step-up” (increase) in basis equal to the fair market value of the property at the time of death. The step-up is potentially valuable as it allows the beneficiary to avoid paying capital gains tax on any appreciation in the value of the asset prior to the decedent’s death upon the future sale of the inherited property. However, when it comes to inheriting shares of stock in an S corporation, beneficiaries can be hit with a significant tax bill if they are not careful about selling property owned by the corporation.

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Can Trusts take advantage of the tax benefits of S corporations?

When it comes to tax planning, business owners should learn the difference between a C and an S corp trusts.

The letters refer to the subchapter of the federal tax code relating to the income taxation of corporate structures. For businesses, S corporations can provide a way to avoid the kind of double taxation that C corporations incur.

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Items to Address in Your New York LLC’s Operating Agreement

Under New York state law, business owners who form a limited liability company are required to create an operating agreement which details the procedures by which the LLC will operate.

Despite the requirement, many companies don’t have an agreement in place, or have created a document using boilerplate language without advice from an attorney.

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