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    Category Archives: Entity Selection

    Charging Order Challenge Successful

    If a creditor’s remedy is restricted to a charging order, that means that the creditor cannot get at the assets of a partnership or LLC, right?

    Wrong.

    Most business owners seek to protect their personal assets from problems arising from their business activities. They do this by creating business entities like a partnership or LLC. Unfortunately, sometimes these personal and business worlds collide, and that can be an asset protection nightmare.

    Usually, when these two worlds collide, there is an attempt to attack personal assets by piercing the corporate veil. But as a recent case illustrates, an attack can come through the personal world to attack the business assets…even when that business interest is in a partnership or LLC.

    Forbes recently reported on just such a case in an article titled “Webb & Carey: When Control Is Bad — Receiver Uses Debtors' Controlling Interests In Partnerships To Get At Partnership Assets.”

    There’s a new trick in which a creditor can access assets within a partnership by pairing the often created “charging order” with the powers of a “receiver” who, in return, takes up the powers of a debtor with controlling interests in the partnership. Whew!

    Teaching point: if you have a controlling interest in a partnership or LLC, be aware. A creditor may seek to take control over your interest and thereby for distributions or even the sale of the business.

    As a result, if you are working to protect your assets and the assets of your company, it is worth handing off control and closing that back door before the creditors come.

    Contact Meier Law Firm to discuss your asset protection options.

    Reference: Forbes (June 3, 2012) “Webb & Carey: When Control Is Bad — Receiver Uses Debtors' Controlling Interests In Partnerships To Get At Partnership Assets

    Business Entity Selection Secrets

    If you have a corporation—one you formed or inherited—should it be S or C? What does this alphabet soup even mean?

    A business is what you make of it, and that’s not just a marketing tactic or a business school platitude. When it comes to structuring your business, your selection of “entity” is key.

    Do you own, stand to inherit, or are just plain curious about how to start a business (especially if you have been downsized in this economy)? If yes, then you should read a recent article in Forbes explaining the differences between a “C” and an “S” corporation. It is titled “C or S Corporation Choice is Critical for Small Business.”

    Spoiler alert: the main distinctions between the two basic corporate structures are all about the tax code. Yaaaawn. That noted, however, there are other significant differences between the two. Not to muddy the already murky waters, the article explores the terrain between these old standards and the new standard that is the LLC, or Limited Liability Company.

    LLCs are, by and large, simpler entities, but that doesn’t mean they are ideal in all situations. For some current reading on the capabilities of the LLC, it’s worth taking a hop over to the Wall Street Journal, which recently published an article titled “An Inspired Financing Choice for Artists and Patrons."

    These articles only scratch the surface regarding what you need to know about the veritable alphabet soup of available business structures. Ultimately, you will need to bite the bullet and obtain qualified legal counsel to help you select and structure the appropriate entity for your unique circumstances and objectives.

    Contact Meier Law Firm for additional information on business planning.

    Reference: Forbes (May 3, 2012) “C or S Corporation Choice is Critical for Small Business

                      The Wall Street Journal (May 21, 2012) “An Inspired Financing Choice for Artists and Patrons




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