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The owners in many new business ventures bring different assets to the table. Often one partner may have significant cash and another has certain skills that are essential for the success of the new venture. In these situations, it is important to consider tax issues when granting the service provider with an owneship interest in the…

If you exclude attorneys fees for services (such as preparing an operating agreement and determining what additional filings, permits, etc. that the business will need to get up and running), the most basic cost to register or “organize” an LLC currently in Wisconsin online is $130.00 paid to the Wisconsin Department of Financial Institutions, which…

One item often overlooked by parties while negotiating or deciding to enter into an Operating Agreement for a limited liability company or (“LLC”) with more than one member is what is often times referred to as a “capital call.” Buried deep in what can be voluminous pages of “legalese” contained in many LLC operating agreements, may lurk a requirement that members of the LLC contribute additional capital to the LLC – that is, more than their original investment . This can be triggered by majority vote, or, if so provided in the Agreement, by demand of a single Managing Member if he or she is given such power. 

Many investors in an LLC assume that once they make their initial capital contribution, they will not be required to contribute more, even if the underlying business is performing badly, unless they specifically agree to do so, or if “everyone” agrees to do so. Many times quite the opposite is true, and the unsuspecting investor could be facing some rather negative consequences. Continue Reading Beware of “Capital Calls” in LLC Operating Agreements

Similar to the required practices of maintaining a Corporation, it is a good idea to keep the important documents and minutes recording important transactions and happenings of an LLC in a minute book, to be maintained at the main business office and at the office of your attorney who can then remind you to annually file your annual report and update your minutes.  

Statutory requirements for Wisconsin LLC’s are less than that of a Wisconsin corporation. However, it is important to note that pursuant to Wisconsin Statutes, a LLC is required to file an annual report, keep certain written records, including copies of the LLC’s tax returns, records of the LLC members, the value of each member’s contributions to the LLC, records of the times at which, or the events upon which, any additional contributions are agreed to be made by each member.

The minute book would be an appropriate place to keep much of this information. In addition, even though "formalities" such as annual meetings are not required of LLC’s, following such formalities can be important to help protect the limited liability benefits provided by the LLC law in Wisconsin.   For example, maintaining an LLC minute book is one of the things you can do to help ensure that the "limited liability veil" is not pierced. When the courts "pierce the limited liability veil", they assign liability to individuals for actions that the limited liability company performed. It is not uncommon for plaintiffs to name individuals associated with a corporation or LLC as defendants in any litigation against a LLC or corporation.Continue Reading Consider Keeping Minute Book for your LLC

Think first before getting into an LLC. While the LLC has become the entity of choice, there are plenty of reasons to avoid them and consider the use of other forms within which to operate. This article will expose and arm you with the 10 best reasons for you to consider avoiding LLC’s.

  1. LLC’s are not unique. When LLC’s first came into vogue about 20 years ago, everyone – attorneys, accountants, bankers, insurance experts – all said that LLC’s would change the business world. In those 20 years I have attended dozens of business seminars related to the type of entity within which to do business. I’ve asked the experts what you can do with an LLC that you couldn’t have done with the already existing entities, such as an S corporation. I have never gotten a good answer

Continue Reading Think First Before Getting Into an LLC

Once coupled to a development idea, every entrepreneur faces the challenge of deciding which business entity would best suit his or her needs.  While one would think that there is one right answer to this dilemma, in fact, the answer depends on a number of factors that are unique to each business, resulting in many different entities being the "right" choice, depending on the circumstances.

Factors affecting entity choice include:

  • Liability Protection
  • Owner Relations
  • Income Tax Consequnces
  • Other Tax Consequences
  • What Others are Doing
  • Cost

Considering these factors, the owner has the following choices:

  • Corporation (S-corp or C-corp)
  • Partnership
  • Sole Proprietorship
  • Limited Liability Company (LLC)
  • Limited Partnership (LP)
  • Limited Liability Partnership (LLP)
  • Others, such as Joint Venture, etc.

Perhaps the best way to compare all these choices is through a table which sets forth some of the most common advantages and disadvantages of each type of entity in comparison to the above factors:Continue Reading Selecting the Right Entity to do Business