Law Office of John J. Tormey III, Esq. ? Entertainment Lawyer, Entertainment Attorney
John J. Tormey III, PLLC
1324 Lexington Avenue, PMB 188
New York, NY? 10128 ?USA
(212) 410-4142 (phone)
(212) 410-2380 (fax)
LLC?s, Corporations, And Other Business Structures - Part III: Written By New York Entertainment Lawyer And LLC Counsel John J. Tormey III, Esq.
? John J. Tormey III, PLLC. All Rights Reserved.
This article is not intended to, and does not constitute, legal advice with respect to your particular situation and fact pattern. Do secure counsel promptly, if you see any legal issue looming on the horizon which may affect your career or your rights. What applies in one context, may not apply to the next one. Make sure that you seek individualized legal advice as to any important matter pertaining to your career or your rights generally.
Part II of this article discussed how individuals historically incorporated their businesses in the hopes of avoiding personal liability, but then often became dissatisfied with the so-called ?double taxation? thereby resulting. This, among other motivations, brought the S-corporation and then, the limited liability company (LLC), into being. As a New York entertainment lawyer practicing in this day and age, I most often see limited liability companies (LLC?s) as opposed to other forms of entities used in film, music, television, publishing, and Internet businesses. However one cannot understand and appreciate the advantages typically provided by the limited liability company (LLC) unless superimposed as bas-relief upon the entity?s historical context ? which gives further meaning to the LLC across all sectors and industries including entertainment and media.
Society clearly benefits from encouraging people to start businesses - and take some commercial risks without an attendant risk of personal ruin. Yet otherwise well-intentioned and well-motivated people were either quitting businesses or exposing themselves to personal liability - in both instances due to their aversion to the so-called ?double layer of taxation? engendered by the C-corp. Additionally, the ?double? taxation of the C-corp was creating a disincentive for new people to go into business - particularly those who were risk-averse. There had to be a better way.
That better way, at the time, was the S-corp, which came into existence a number of years ago principally for the above types of reasons and rationales. It was named after a ?Subchapter-S? in the Internal Revenue Code of the United States, and was regularly recognized by the IRS and state tax authorities alike. One of the familiar tasks for an entertainment lawyer became the act of ensuring that clients timely made their appropriate S-corp elections (see below) with appropriate governmental authorities ? hardly the romantic notion one would have of what it is like to interact with talent and go to celebrity premieres..
Akin to the C-corp in most other respects, the S-corp only mandated a single layer of taxation, as opposed to the C-corp?s double layer of taxation. But there were also a few catches.
One had to make a formal written ?election? (or in some cases, ?elections?) to qualify as an S-corp. If one didn?t do so in time by a strict deadline, one would lose S-corp status and be ?doubly? taxed like a C-corp instead. As most entertainment lawyers can attest, this kind of eventuality could actually snuff out a fledgling entertainment or media start-up business in its first years of existence, already engaging in risky and speculative business activity as is often the case in media and entertainment.
There were other restrictions on S-corps, too, such as a limit on the number of shareholders, a limit on foreign ownership, and a limit on corporate parent-subsidiary ownership. Some of these restrictions have been loosened - and in some cases eliminated - in recent years; so one should not rule out the S-corp without first updating its tax code requirements with one?s lawyer ? entertainment lawyer or otherwise ? as well as one?s tax accountant. The historical restrictions of the S-corp put business owners in a ?Catch-22? situation - they clearly wanted a single layer of taxation, but in the context of an entity that wasn?t so restricted. The newer solution: scrap the idea of a corporation at all, and instead form a limited liability company, or LLC.
The limited liability company (LLC) is akin to the S-corp but without most of the attendant historical restrictions. Yes, there were a certain number of restrictions on the LLC, too, when it first appeared on the scene - most of which were subsequently lifted by either the IRS or state legislatures, or both. Again, S-corp restrictions have also been lifted in recent years, making the S-corp and limited liability company (LLC) look more similar to each other as time goes on.
But even as of this writing, the limited liability company (LLC) is usually considered the most advantageous entity from a tax perspective of all 3 most commonly available forms, for the small business owner to create. As a media and entertainment lawyer, the LLC is the entity which I am most often asked to create. The LLC is also considered the most flexible of all 3 entities. What does ?flexible? mean? Well, it is considered easier to adapt the LLC to later-occurring additional equity-holders in one?s business, for example, which is another familiar task for an entertainment lawyer in the context of artistic co-ventures - and the word ?easier? in this context translates to ?less legal fees?. The LLC is in most cases an entity which is easier to manage and administrate.
There are some disadvantages to the limited liability company (LLC), too. The LLC can take more time to finalize, and in some cases can be more expensive to form and/or file with the government - as compared to an S-corp. Some states historically prohibited 1-person LLC?s. Some states still have an underdeveloped body of judicial case law on the LLC, since the entity is still quite new in many states - so the treatment of the LLC under the law may be less certain than the treatment of a corporation. We in New York have an odd restriction, too, as a result of the powerful newspaper and media lobby galvanized during the legislation?s enactment which as a media and entertainment lawyer I suppose that I should not begrudge. This restriction may be present in another state or two as well in analogous form. The restriction is this: if one elects to form a New York LLC, one must publish its existence in periodicals for a number of weeks, before being accorded the legal privilege of initiating a litigation - as a plaintiff - in the LLC?s name in the New York courts. Publication of an LLC?s naissance in Manhattan is expensive - the publication of a limited liability company in periodicals of the creation of a proposed Manhattan LLC can range between $1,000 and $3,000 (the figures can vary and are smaller in other parts of New York State apart from Manhattan).
Even so, the limited liability company (LLC) is considered the trend-setting entity of those ?in the know?, across the country. As an entertainment lawyer in New York, I have noticed that hipster Californians gravitate to LLC?s just as much as hipster New Yorkers seem to do. And part from hype, assuming that one can afford to form an LLC, and assuming that one can live with whatever restrictions apply to the LLC in one?s jurisdiction, it may in fact be the entity of choice, and an improvement over the older S-corp and C-corp structures.
A limited liability company (LLC), though frequently mistaken for a corporation, is technically not considered a corporation ? rather, it is an unincorporated entity under the tax code, more like a partnership than anything else, but one that (like the S-corp and C-corp), if properly formed and maintained, should provide its members with insulation against personal liability.
If one doesn?t incorporate or form a limited liability company (LLC), the business will likely be what is known as either a sole proprietorship (if a 1-person company), or a general partnership, de facto or otherwise, (if comprised of 2 or more persons). Any entertainment lawyer or other lawyer will opine that this could result in unlimited personal liability for the entity?s owner or owners. Again, that means that an owner?s personal assets can be at risk to satisfy the obligations and debts of the business. Any entertainment lawyer or other lawyer will opine that personal liability is not a risk worth taking. In addition, using a corporate entity or limited liability company (LLC) ? particularly an LLC in this day and age - could add a good deal of ?cachet? or credibility to one?s business endeavors, in the eyes of other persons and companies with whom the business has contact.
Click the ?Articles? button at:
to return to the main Articles page.
My law practice as an entertainment lawyer includes incorporations and the formation of limited liability companies (LLC?s). If you have questions about legal issues which affect your career, and require representation, please contact me:
Law Office of John J. Tormey III, Esq.
John J. Tormey III, PLLC
1324 Lexington Avenue, PMB 188
New York, NY? 10128 ?USA
(212) 410-4142 (phone)
(212) 410-2380 (fax)
Page:
Business Structures - Part III
Title Metatag:
LLC, entertainment lawyer, corporation, limited liability company
Meta Description:
LLC,entertainment attorney,corporation,limited liability company,New York,entertainment lawyer,record label, start-up
Keywords:
business entities,corporation,entertainment attorney,entertainment lawyer,incorporation,legal services,limited liability company,limited liability companies,LLC,LLC?s,New York lawyer,start-up business, entertainment lawyer, entertainment attorney, business structures, LLC, corporation, limited liability company, LLC, corporation, limited liability company, New York, entertainment lawyer, record label, start up, business entities, corporation, entertainment attorney, entertainment lawyer, incorporation, legal services,
limited liability company, limited liability companies, LLC, LLCs, New York lawyer, start up business
ATTORNEY ADVERTISEMENT
Source: http://copyrightlawyerjohntormey.blogspot.com/2012/12/llcs-corporations-and-other-business.html
tornadoes in dallas anchorman 2 kentucky basketball oaksterdam the fray national anthem dallas tornado ncaa basketball
কোন মন্তব্য নেই:
একটি মন্তব্য পোস্ট করুন