Business Checklist

End of the Year Business Checklist

Giselle Ayala Mateus, Esq.

While the last few weeks of the year are some of the busiest, it is also a great time to quickly review some of the legal aspects of your business.

An end-of-the-year review is important to ensure you are ready for the new year, and, more importantly, make sure your business is protected. Below are a few things to consider before the new year:

1. Corporate structure

2. Final Report

3. Business Changes

4. Minutes and Notice for the Annual Meeting

5. Vendor and other Agreements

6. Employee Handbook

7. Intellectual Property

8. Website

9. Taxes

 

1.  Corporate Structure

“Corporate Structure” sounds like a very complex topic. However, it is relevant to you whether you have a small business, you work alone, or you have a start-up with several employees. If you have a sole proprietorship or a business that you haven’t incorporated, NOW IS THE TIME TO DO IT.

If your business is unincorporated, you are unnecessarily exposed to personal liability, in other words, your personal assets and values respond for everything related to the business, including employees and contractor’s misconduct. If you have not organized your business, speak to an attorney about which entity form will best suit the needs of your business and file the necessary paperwork with the Secretary of State. A properly set-up and well-maintained company can shield its owners from personal liability, minimize the tax impact, and provide flexibility.

When it comes to selecting a business entity to take your enterprise to the next level, it is essential to understand those key factors that make the difference, and ownership is only one of them. Control, governance structure, transferability, and income potential are some of the most important factors you consider before choosing between an LLC, Corporation, Partnership, or any other business structure.

2. Final Report

The end of the year is the perfect time to review the operations of the business and determine what worked and what did not. If your business has different participants, including investors and creditors, business reports act as a way to convey performance information and business strategies.

A Final Report of a business may include a variety of subject matter such as:

  • Cash flow and income statements to assess business growth.
  • Business plans to set the plans for the future.
  • Mission statements to state the main objective of the company.
  • Past year’s performance.
  • Feasibility studies to help determine future plans and projects.

The final report is crucial because it is the tools managers measure progress, monitor growth, provide performance evaluations, and track and address problems. With the final report you can make different analysis, like:

 

  • Monitor operations procedures within the company.
  • Review and correct actions that are not effective.
  • Supply upper management important information to make decisions.
  • Offer insight into the attitude and motivations of their employees.
  • Provide employee performance evaluations to determine that work is being done properly and efficiently.
  • Evaluating investment proposals.

3. Business Changes

After your business entity is properly formed, you must keep it in good standing by filing annual/biennial statements with the Secretary of State. It is also necessary to give notice of any amendments to the entity’s information of record. For instance, you must give notice to the Secretary of State if you change your name, address, agent for service of process, number of owners, among others.

To report changes, you must file a Certificate of Amendment. As opposed to other filings, a Certificate of Amendment cannot be filed online. Therefore, if you want to have the business amendment finalized by the end of the year, you must promptly submit the certificate. You may also pay an additional fee if you need the Secretary of State to process the paperwork faster, for instance, within one day.

4. Minutes and Notice for the Annual Meeting

When it comes to proper business management, just having a Corporation or an LLC is not enough, you also need to follow the “corporate formalities”, like holding an Annual Meeting.

When a business is formed, it has its legal identity separate from its owners.  This independent identity of the business is the legal feature that protects the owners from liability.  However, for the business to actually exist as a separate entity – which is key to maintaining the liability protections that are in place – business owners and managers must follow corporate formalities.

During the Annual Meeting, the managers of the business review the Annual Report, make important decisions like investment decisions, and memorialize compliance with corporate formalities. To properly document the annual meetings, managers should always create a minute that states:

 

  • The date of the meeting
  • The name of the Chair
  • The name of the Secretary
  • The participants of the meeting
  • Voting protocols, if any
  • Resolutions

5. Vendor and other Agreements

As part of your end-of-the-year review, it is also important to go through your agreements and organize them. You should determine if the current contracts align with how you do business in the present. You might still be using a contract drafted in 2010, or you might be using boilerplate agreements taken from the internet. During the review, make sure they are tailored to your specific needs and that they adequately protect you and your business.

Examine Important Terms and Clauses

It is important to go through the entire contract with a fine-tooth comb, so start, review key terms and clauses, for instance:

  • Terms and conditions
  • Indemnification clause
  • Termination and Amendment clause

Termination and Renewal Rules

Contracts usually include a termination clause that specifies a predetermined execution time. This means that after the said period is completed, the contract ends, or other provisions regarding renewal or termination obligations operate.  Make sure you agree to and understand these rules during your contract review.

 The Contract Language

 Contracts can contain some tricky language, which can sometimes confuse the parties. As part of this end-of-the-year review, set some time aside to read your entire contract in full, paying attention to any confusing or misleading wording that might be included. You may also create a list of unclear terms to discuss with the other contract parties, and don’t be afraid to request revisions.

Review Default Regulations

A contract review is an opportunity to identify if a party performed as expected, in other words, if the other party complied with its part of the bargain. If not, you need to review the provisions of the contract regarding default. Before making any decisions, you need to understand what could happen if you fail to perform your duties and what legal recourse you have if someone else does.

Confirm Key Dates

To avoid default, consumer complaints, or sanctions, a contract should clearly state any timelines, deadlines, and other important dates. Carefully review these dates to ensure they work with your schedule before signing anything, if you have already signed, make any necessary arrangements to comply with them.

Look for Blank Spaces

Finally, if you are doing business online or using a template contract to memorialize your agreement, it is always necessary to revise the document to ensure accuracy. It is common to have blank spaces in templates, review them carefully. Any inaccuracy or inconsistency could lead to an incomplete contract, which could result in a contract that is not legally sound.

6. Employees

Do have a clear understanding of your team? Who is an employee and who is a contractor, and what are the legal implications of it? Now is a good time to assess each team member’s situation. Connecting this to the prior point, once you have reviewed your contracts, identify the rights and responsibilities of both you as an employer and the staff member.

After that, you should be in a good position to handle a second issue, do you have an employee handbook? Having a valid employee handbook may be one of your best defenses against a lawsuit or other legal issues with employees. It will also serve as a guide if you hire managers, directors, or officers for your business.

7.  Intellectual Property

As part of your end-of-the-year review, take a look at your branding and goodwill. A key component of any business is branding. To protect your brand and keep its value, it is crucial to secure certain elements, such as trademarks, trade dress, web address, or copyrights.  Filing a trademark registration or taking precautionary measures to protect confidential information is easier and less costly than enforcing your rights in court. It is also crucial to make an intellectual property assessment to identify the assets or branding elements that require urgent protection.

8. Website

In connection with the review of your contracts and your intellectual property, we can’t forget a review of your website. Your website is probably one of your most important marketing tools and the virtual space where you interact with current and potential customers. As part of your review, be on the lookout for any outdated terms, and make sure your terms of use and privacy policies are coherent with your business operations. It is also important to review your policy regarding user-generated content and the identification of infringing content.

9. Taxes

One of the main concerns of business owners is their tax burden. Therefore, the end of the year if the perfect time to review your numbers and gather your receipts, financial reports, and other tax documents. Your income tax return for 2022 won’t be due until April 18, 2023, which means that you have time to take several actions you can take now that could help you out when it comes time to complete your 1040 form. The end of the year is a great time to review your situation and make changes to reduce tax liability and maximize your refund. For instance, it is a good idea to double-check your paycheck for tax withholding, make charitable contributions, and strategize your business expenses.

10. The New Year Checklist

Finally, once you complete your end-of-the-year review, create a checklist of those aspects of your business that require attention. You may want to include at least some of the following items:

  • Planning and Networking
  • Increasing your online presence
  • Renovation of business premises
  • Increasing sales

 

 

New York City Business Lawyers – NYC

Dedicated to our clients and their success

When you have a business problem that requires legal attention, you need a New York City business lawyer who understands business. You need a business attorney who realizes that a legal disagreement can be handled and that a wrong decision has the potential to destroy a company.

Call (347) 329-3952 today to schedule your free consultation with an NYC business lawyer.

Our law firm based in New York provides legal services to a variety of businesses, small business owners, and business entities. We help our clients with business law, business contracts, intellectual property, operating agreements, business transactions, real estate, business formation, and more within NYC, New York. We are small business lawyers that are dedicated to helping business owners protect their businesses.

Committed to Your Success

Business Formation

Planning for and minimizing risk is essential to every business, especially when it comes to small businesses. By retaining our office, you will access a team of forward-thinking professionals who can design a cost-effective strategy that protects your business from start-up to exit planning. G.A.M. Law Office in NYC organizes and forms new companies for prospective business owners, which includes choosing an appropriate legal structure, drafting internal governing documents, and providing legal counsel in matters related to corporate governance.

Business Dissolution

A business dissolution attorney represents companies and the individuals who own and operate them in the negotiation of business termination transactions, the sale of businesses, litigation, actions seeking to legally separate the owners of these business entities, and derivative and direct actions, among others. If you or your company wants to bring or needs a law firm to defend it in business dissolution litigation or other corporate litigation, contact the New York business lawyers of G.A.M. Law Office.

Commercial Agreements

Commercial Agreements may come in all different types of forms, depending on the purpose of the parties. At G.A.M. Law Office, we are relentless in our efforts to understand your business so that we can provide support and advice which is both practical and reflects the commercial reality. You can trust our team of business attorneys, we will give you clear and accessible advice on everything from one-off, specific queries arising from your own business negotiations; to picking up and delivering on complicated, time-critical negotiations.

Corporate Compliance

Corporate compliance affects a wide spectrum of business issues, including those related to management, shareholders, suppliers, and third parties. To ensure success and stability, a corporate compliance program can make a difference. Whether you have a program or need representation for a lawsuit, consult with a corporate compliance lawyer first.

Non-for-profit Law

Non-profit organizations handle many of the same issues that affect businesses. An attorney can help your non-profit if you’re just starting up and need guidance on the paperwork that needs to be filed, when you file taxes, or when you need counsel to deal with litigation.

Call (347) 329-3952 today to schedule your free consultation with one of our business lawyers in New York.

What prospective business owners can expect when working with G.A.M. Law

R

The Best Business Legal Structure

We will closely collaborate with you to decide on the most appropriate legal structure for your business.

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Internal Governing Documents

We will help draft and construct internal governing documents that best serve you and your business.

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Corporate Governance Legal Counsel

We provide legal counsel in matters related to corporate governance.

Business Formation Attorneys in New York City

Planning for and minimizing risk is essential to every business, especially when it comes to small businesses. By retaining our office, you will access a team of forward-thinking professionals who can design a cost-effective strategy that protects your business from start-up to exit planning.

A properly set-up and well-maintained company can shield its owners from personal liability, minimize the tax impact, and provide flexibility.

Call (347) 329-3952 today to schedule your free consultation.

New York Business Formation – Selecting A Business Entity

Ownership v. Control v. Income

When it comes to selecting a business entity to take your enterprise to the next level, it is essential to understand those key factors that make the difference, and ownership is only one of them. Control, governance structure, transferability, and income potential are some of the most important factors you consider before choosing between an LLC, Corporation, Partnership, or any other business structure.

 

Control

It is important to understand that some legal entities limit the owner’s control and management more than others. This is important because those who manage the organization make important decisions such as the distribution of profits, the purchase of machinery, or any other decisions related to the business’s day-to-day activities. 

In general terms, partnership, limited or unlimited, allows owners to control and manage the business. Limited partnerships have a particularity; there are two types of owners. An unlimited partner, who responds personally for all liabilities and obligations acquired as a result of carrying on the business, and limited partners who contribute money or other assets, who do not get involved with the management of the business, and whose responsibility extends only to amount of their contribution to the partnership. If a limited partner gets involved in the management of the business, he no longer enjoys the benefit of limited liability. 

Corporations do not allow owners to manage the business’s day-to-day activities unless they are elected as directors or corporate officers. On the other hand, LLCs allow the owners or “members” to select whether they want to manage the business themselves or whether they want to elect managers to handle the business. 

Our small business lawyers can help you understand the advantages and disadvantages of each business formation prior to finalizing your decision.

Governance Structure

Governance structure speaks of the number of people and the roles needed in the organization to manage it properly. The more complex the governance structure is, the more costs and time a business requires. 

Partnerships require only two or more people to join efforts to carry on a business as co-owners. However, more complex business entities, such as corporations, require a more complex structure. 

Corporations cannot be managed by their owners unless they are elected as directors or officers. A board of directors manages the corporation. Of course, a corporation can be an entity with only one owner. In that case, the sole shareholder occupies all positions. Nevertheless, even that single owner must demonstrate that corporate formalities are followed to handle the business for purposes of compliance. Corporate formalities are important, especially to keep the “corporate veil,” in other words, to keep the benefit of the limited liability. 

LLCs can be managed by their members (Member-Managed LLC) or by one or more managers (Manager-Managed LLC). In either case, the formalities are important to keep the protections of the “corporate veil”. 

Income

You may think that by owning a business in New York, you will automatically receive income from it. Well, it may not be as simple as that. In the case of a business owner who does not incorporate, in other words, who does not form a legal entity, that business owner receives income directly from his customers. However, when a legal entity is created or the business owner is in partnership with another, the situation changes.

Partners share equally in the monetary benefits of the business unless there is an agreement to the contrary. Unlike other legal forms, when it comes to partnerships, income is distributed equally regardless of the number of contributions made by each partner. In the case of limited partnerships, unless otherwise agreed to, partners share equally the income of the business, but their responsibility is different. There is one partner who is personally responsible and other partners who enjoy limited liability.

In the case of New York corporations, it is important to understand that the ones who run the business and decide whether income is distributed are the members of the board of directors by vote. Directors receive compensation from the company for their roles. If owners of the corporation want to receive income directly from the corporation, one way is to be a director or an employee of the corporation. Now, if the owners of the corporation, who are not employees or directors, want to receive income by way of dividend distributions, they have to wait for the directors to approve such a distribution. To deal with these, corporate shareholders select directors, at least one, who will support their interests and advocate for these distributions.

In the case of an LLC in New York, it all depends on the rules stated by the members of the LLC. If the LLC members agreed that a manager would make the decision of profit distributions, they should set some guidance or rule for making such a discretionary decision. On the other hand, if the LLC is member-managed, distributions of income will be decided by the members by vote, according to the percentage of interest in the LLC.

Our New York Business attorneys at G.A.M. Law Offices can help you with choosing the business structure and formation for your particular situation. In New York City there are various legal business formations and structures that are available to business owners or partners. Contact the business law lawyers at G.A.M. Law offices today.

Transferability

Another important aspect to consider is the transferability of the interest in the business. We all want to be successful in our business endeavors; however, things could go wrong; in that case, it would be great to be able to transfer your interest in the business to someone else. In the case of a partnership, the concept of transferability rarely applies because partners come together in consideration of each other’s personal characteristics. Additionally, since no express or written agreement is required to create a partnership, no special formality is required to end it.

Limited partnerships must be agreed to in writing. Consequently, whether an interest in a limited partnership is transferable depends on the terms of the agreement. Usually, general partners cannot transfer their interest because they are in charge of the management, responding personally. If a partner who has management and control of the business wants to leave, unless the other partners agree to continue with the business, the business must be dissolved.

Shareholders, owners of shares, own corporations. In general terms, the shares of a corporation are freely transferable. However, in real (practical) life, the transferability of shares also depends on the existence or not of a market for the shares. If the shareholder who wants to leave has no agreement that protects his interest or is a minority shareholder who cannot influence the decision-making process, it is unlikely that the individual will find a buyer for his shares. On the other hand, if the corporation is one of those who trade their share in the capital markets, such as the New York Stock Exchange, it is more likely that the shareholder who wants to leave finds a buyer.

LLCs are a mix of different concepts. As a result of that, the transferability of a member’s interest depends on the terms of the LLC agreement. There are cases in which a Member-Managed LLC has an agreement that limits the transferability of interest or states that even if a member sells his interest, the new member will not be allowed to get involved in the LLC management.

In conclusion… before selecting a business entity, keep in mind that different factors are worth reviewing and that an attorney can help you make the right choice because she will be able to explain the terms of an agreement mean. For more information, feel to call or email. Our New York City law office will be happy to guide you and see your success.

Call (347) 329-3952 today to schedule your free consultation with an experienced business lawyer in NYC.

Business & Entrepreneurship

What Should Entrepreneurs Know About Incorporation and Business Structure?

There are tax and legal considerations for organizing your business as something different from a sole proprietorship. Incorporation allows you to protect your personal assets, acquire limited liability, especially in risky endeavors, and take advantage of deductions tax benefits provided to the business. Additionally, start-ups and small businesses incorporated have a better chance of getting investors because no investor wants to be involved in a project that offers to risk limits.

 

Protection of personal assets

Once a business is incorporated, the business is a legal entity (like a person) different and separate from its owners. The assets acquired by the business entity are not the owners’ assets and cannot be attached by creditors. In order words, creditors or third parties may only sue the business to recover money or damages. Following the same logic, the assets of the individuals that own the business are separate property. The separation of assets allows business owners to protect their personal assets from the risk and liabilities associated with carrying on business activities. Additionally, it allows business owners to organize their affairs and have a clearer picture of the real situation of the business.

Limited liability

The great endeavors of businessmen have been achieved thanks to limited liability. Limited liability refers to the fact that those involved in a business may only respond to the extent of the amount contributed to the business. Limited liability allows investors and entrepreneurs to measure and control their risks. Additionally, the possibility of limiting one’s liability creates opportunities to transfer interest in a business easily and also increases the number of participants.

Investors

If you are looking for investors, you have a better probability of getting investors if you are incorporated. If there is anyone interested in putting money into your business, they will more likely do it if they also enjoy the benefits of asset protection and limited liability. Additionally, once a company has been incorporated is in a better position to hire personnel, assume risks and operate.

Choosing the Right Legal Entity

What is a Partnership?

Even though partnerships remain one of the most straightforward business structures in New York and the rest of the United States, it is available for those who want to work together to make their business a success. It is important to understand that partnerships do not benefit from limited liability. Partnerships require minimal paperwork, and they rarely require public filings. Additionally, no one should be part of a partnership without a well-drafted agreement. If you are looking to start your own partnership, a business lawyer can help you draft the best possible partnership agreement for your needs. At the New York Law Office of Giselle Ayala Mateus (G.A.M. Law), we can help you decide whether a limited partnership or general partnership is right for your needs and help you draft the necessary documentation quickly.

Partnership Formation

A partnership is basically an agreement to carry on a business a co-owners. A partnership may be formed without an express agreement. In this scenario, the main risk is to end up in a relationship that binds you fully to the unauthorized conduct of another. With an agreement, however, you may choose the type of partnership you want to form, limit the partner’s authority, agree on the distribution of costs and profit, exclude business from the partnership, and more.

Types of partnerships

A partnership may be a general partnership or a limited partnership.

General Partnership (GP)

General partnerships make up most partnerships in the U.S., as they are the simplest type of partnership available. In general partnerships, each partner is involved in the day-to-day management of the business and shares in the unlimited liability agreed to under this structure.

Limited Partnership (LP)

Like a general partnership, general partners in limited partnerships run the business and take on unlimited liability. Unlike general partnerships, however, limited partnerships can have “silent” limited partners who are not involved in the business’s operations and have liability limited to the amount of their investment.

What is an LLC?

A limited liability company or LLC is a special business structure in the United States that combines some elements of the corporation and some attributes of a partnership. The owners of an LLC enjoy the privilege of limited liability. However, they are taxed as a partnership (only once). The owners of the LLC are called “Members.” Limited liability companies are hybrid entities. The regulations surrounding LLCs may vary from one state to another. Many states don’t restrict ownership, which means that anyone can be a member, including individuals, corporations, foreigners and foreign entities, and even other LLCs.

Formation of an LLC

The formation of an LLC requires a formal act of filing the Articles of Formation or Article of Organization with the Secretary of State of the jurisdiction where the LLC is formed. Additionally, as opposed to corporations, LLCs are governed by an Operating Agreement. This document is equivalent to the By-Laws. Additionally, to form an LLC, you need at least to complete the following steps:

  • Choosing an available business name
  • Deciding if the LLC will be Member-Managed or Manager-Managed.
  • Filing articles of organization with the state
  • Paying filing fees and license fees if necessary
  • Creating the operating agreement for your business
  • Holding your first annual meeting

The formation of an LLC can be easier than a corporation. Additionally, an LLC is easier to manage since it is not obligatory to have a board of directors, a secretary, and a treasurer. On the other hand, if you have plans to expand your business or go public, it may be better to form a corporation from the beginning. Given the flexibility of LLCs, this is also an interesting structure for short-term transactions when the parties involved want to benefit from limited liability. For instance, to buy or sell real estate.

What is a Corporation?

A corporation is a business organization separate and different from its business owners. A corporation is a legal person. Corporations are their own legal entity which the owners control through the shares they have in the company, by electing directors or by being elected as the directors or the officers of the corporation. When incorporating, you will have the opportunity to state how many shares you own as the corporation’s register.

Forming a Corporation

To form a New York corporation, it is important to make legal and accounting considerations. If you are a business owner conducting activities overseas, keep in mind that the rules applicable to corporations may change from one state to another. Additionally, you have the option to file an application for authority to operate as a foreign company, or you may form a domestic corporation. To form a corporation, you need at least to complete the following steps:

  • Choosing an available business name
  • Appointing directors
  • Filing articles of incorporation with the state
  • Paying filing fees and license fees if necessary
  • Creating bylaws for your business
  • Holding your first annual meeting
  • Issuing stock certificates

Bylaws are not a legal requirement, but they are highly recommended. Corporate directors will also need to be appointed, and a registered agent may be a necessity to receive official notices from different agencies such as the Department of State or the IRS.

If you haven’t set up your corporation, our office can help you with all the necessary steps, from incorporating document drafting and ongoing legal counsel for compliance. If you are unsure of which entity to choose, seeking help from a lawyer is recommended.

Public and Private Corporations

The main difference between private and public corporations is that public corporation negotiates their share freely in the capital markets. A publicly owned corporation will allow investors to be able to buy shares of your corporation. When going public, your corporation must follow further rules and regulations to adhere to the strict rules of the U.S. Securities and Exchange Commission (SEC).

A private corporation, on the other hand, aka a closely held corporation, is an entity whose shares cannot be freely negotiated. There is no market for them. Owners of a closely held corporation usually profit from the entity by receiving a salary for their services as directors or officers or by distributing dividends.

Public and Private Corporations

The main difference between private and public corporations is that public corporation negotiates their share freely in the capital markets. A publicly owned corporation will allow investors to be able to buy shares of your corporation. When going public, your corporation must follow further rules and regulations to adhere to the strict rules of the U.S. Securities and Exchange Commission (SEC).

A private corporation, on the other hand, aka a closely held corporation, is an entity whose shares cannot be freely negotiated. There is no market for them. Owners of a closely held corporation usually profit from the entity by receiving a salary for their services as directors or officers or by distributing dividends.

What is a Limited Liability Partnership or LLP?

Limited Liability Partnerships or LLPs are a flexible legal and tax business organization that allows partners to benefit from economies of scale by working together while also reducing their liability for the actions of other partners. The LLP is a formal business structure that requires a written partnership agreement. Additionally, as in a general partnership, all partners in an LLP can participate in the management of the partnership.

Formation of an LLP

To form an LLP, the partners must complete a formal act of filing papers before the Secretary of State. Additionally, only certain professionals are authorized to form LLPs. Limited liability partnerships are generally connected to firms of lawyers, accountants, architects, and similar professions.

Our New York Business Lawyers are dedicated to your success.

Call (347) 329-3952 today to schedule your free consultation.

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