Small Business Summer Reading List

Start-ups and small businesses have unique needs. You know that. But you might not know everything you should about structuring your company, taxation and finance, government regulation affecting your business, and other relevant issues. For your reference, we’ve compiled a reading list of recent small business-related commentary, analysis, and guidance from lawyers and law firms on JD Supra. Your very own Small Business Summer Reading List.

Business Formation and Corporate Structure

Where should you incorporate your LLC? (Ropers, Majeski, Kohn & Bentley):

“A reader asks: What is the best state to incorporate an LLC? I have a plan for a website in which the only source of revenue will be from ads, so the revenue stream won’t be coming from a particular state. I’ve heard Nevada, based on their tax laws, is the best state in terms of starting a small business, but what do you think?” Read more»

7 Reasons to Use a C-Corp for Your New Business (Law Office of Alexander J. Davie):

“One of the first decisions a small business owner faces is choosing the right form of entity for his or her company. The most popular form of business in recent years is the limited liability company (LLC), because it is simple to organize and manage and can be taxed as a partnership (i.e. without the “double taxation” associated with C-Corporations). However, there are many reasons why you should avoid structuring your new business as an LLC taxed as a partnership and instead use a C-Corp structure.” Read more»

Road Map of a Start-Up and the Entrepreneur (Jeanne Goulet):

“A start-up venture is not just about product development, marketing and sales. It is a constant search for a business model that ultimately will result in a great product market fit. … During the course of this endeavor, the financial needs of both the entrepreneur and the business can be complex. The financial needs of the entrepreneur and the business model run on two parallel paths and can change substantially over the life cycle of the venture.” Read more»

S-Corporation or C-Corporation? Incorporating in Arizona (The Law Offices of Donald W. Hudspeth, P.C.):

“S-corporations and C-corporations share many of the same advantages and disadvantages. Probably the single biggest drawback to both forms of corporation in Arizona is the difficulty of proper incorporation. The process is much more complex—and requires much more accountant and attorney involvement—than forming a limited liability company, sole proprietorship, or partnership.” Read more»

How is an LLC governed differently from a corporation? (Law Office of Alexander J. Davie):

“One of the first decisions new business owners face is what type of entity they should use to form their new company. Most likely, this involves a choice between a limited liability company (LLC) or a corporation. These two types of entities differ significantly in how they are governed.” Read more»

Incorporation May Not Be a Shield if You’re not Careful (Christopher G. Hill):

“A discussion of a recent Henrico, VA corporate veil piercing and construction case by Christopher Hill, LEED AP and Virginia construction attorney. Companies need to be careful that they observe the corporate formalities in order to take advantage of the liability protections of incorporation.” Read more»

How Many Shares Should You Authorize For Your Delaware Corporation? (Doug Bend):

“Doug Bend answers a question which is posed when incorporating in Delaware: how many shares of stock do you need to authorize? He outlines the two approaches to answering this question. On the one hand, you can save your new corporation $275 per year by authorizing a small number of shares. On the other hand, you can gain flexibility and most likely better motivate employees by authorizing millions of shares.” Read more»

Taxation and Financial Considerations

Tax Tips for Start-Ups: US Sales and Employment Withholding Obligations (Jeanne Goulet):

“Tax ranks high among the many structural issues a start-up needs to consider. Even tax responsibilities that seem traightforward –such as collecting sales tax and setting up withholding for employees – can be challenging and need to be approached carefully.” Read more»

Where in the World is my Business (Jeanne Goulet):

“The problem for global entrepreneurs is this: While global business has become effectively geography-independent, tax remains stubbornly geographic. All over the world, in practically every jurisdiction, taxes are assessed based on the physical location of a business or a transaction. This has been the case for millennia. Throughout history, business transactions have been taxable in the place where they happen, and the business itself typically pays taxes where it ‘sits.’” Read more»

Tax Tips for Small Business Owners (Darrin Mish):

“If you are running your own small business, you should be well versed with some tax benefts for which you may be eligible. The IRS encourages you to claim for these benefts and use the tools and resources the agency has made available for you.” Read more»

Valuing Small Businesses (MSG):

“Valuing the very small company can often be more challenging than valuing a large firm or corporation. These types of valuations most commonly arise in the divorce cases, although they also are frequently present in shareholder litigation, partnership dissolutions, and similar litigation.” Read more»

Can I Go Bankrupt On Just My Business Debts? (John Skiba):

“I routinely meet with small business owners that are going through financial difficulties and often get the question if just the business can file bankruptcy and eliminate the company debts. Before I can answer the question it is important for me to understand what the goals and plans are for the business. Are you going to continue operating the business or are you looking to shut it down? Either way sometimes bankruptcy is not the best option.” Read more»

Regulatory Considerations

Small Business Securities Bulletin: SEC Proposes “Bad Actor” Disqualifications for Rule 506 Private Placements; XBRL Compliance Deadline Fast Approaching (Ober | Kaler):

“On May 25, 2011, the Securities and Exchange Commission (SEC) proposed rules to implement Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank). Section 926 requires the SEC to adopt rules that disqualify securities offerings that involve certain “felons and other ‘bad actors’” from reliance on the safe harbor exemption from registration under the Securities Act of 1933 (Securities Act) provided by Rule 506 of Regulation D under the Securities Act….” Read more»

Small Business Securities Bulletin: SEC Adopts Rules Implementing the Whistleblower Provisions of Dodd-Frank (Ober | Kaler):

“Consistent with Dodd-Frank and the proposed rules, the final rules provide that individuals who voluntarily provide the SEC with original information relating to a possible violation of federal securities laws in accordance with procedures established in the final rules, which leads to the successful enforcement by the SEC of a federal court or administrative action in which it obtains monetary sanctions totaling more than $1 million, are entitled to an award equal to between 10% and 30% of the amount collected.” Read more»

New Women-Owned Small Business Regulations: What Do They Mean for Your Federal Contracting Business? (Venable LLP):

“SBA’s final rule [implementing the women-owned small businesses program], which became effective on February 4, 2011, potentially could result in billions more federal procurement dollars being awarded to WOSBs annually as federal agencies get more serious about meeting their annual set-aside goals for WOSBs. An interim rule amending the Federal Acquisition Regulations (“FAR”) to reflect changes made to the SBA regulations for the WOSB Program was published on April 1, 2011.” Read more»

SEC Considering New Regulations Governing Capital Formation for Smaller Companies, Crowdfunding, Social and Other New Media (Sheppard Mullin Richter & Hampton LLP):

“On April 6, 2011, Mary L. Schapiro, Chairman of the Securities and Exchange Commission (“SEC”) sent a letter to Darrell E. Issa, Chairman of the Committee on Oversight and Government Reform, responding to a March 22, 2011 letter from Rep. Issa concerning capital formation issues. In her letter, Chairman Schapiro indicated that the SEC would consider revising the rules that govern the way in which small businesses are able to tap into equity markets in the new era of crowdfunding, social media and other new communications media that did not exist when the current SEC rules were established.” Read more»

Succession Planning

Window of Opportunity for Business Succession Planning (Fox Rothschild):

“The 2010 Federal Tax Act created a short window of opportunity for business owners to plan for business succession from senior to junior family members. The 2010 Tax Act increased federal gift and estate tax exemptions to $5 million ($10 million for a married couple), but only until December 31, 2012. Exemptions after that date are reduced to $1 million ($2 million for a married couple). While Congress can modify the scheduled reduction before 2013, there is currently no consensus, creating uncertainty after 2012. The next 18 months thus provide an unusual opportunity to transfer $5 million to $10 million of business value without incurring the gift tax.” Read more»

Will Your Business Survive Your Death? (Sabrina Winters):

“You have worked hard on your business to grow it and succeed. But not planning for what happens to your business after your death will make all your efforts worthless.” Read more»

Additional Insight

A Potpourri of Small Business Program Changes (Womble Carlyle Sandridge & Rice, PLLC):

“Significant new initiatives have recently been launched by the U.S. Small Business Administration (“SBA”) in an attempt to meet its small business contracting goals. These initiatives include establishing a women-owned small business set-aside program and also, after ten years of relatively no change to its 8(a) Business Development program, dramatic changes to the rules of that program. These new initiatives will have major implications for contractors for years to come.” Read more»

Significant Changes for Small Business Administration 8(a) Program (Jackson Walker):

“On February 11, 2011, the U.S. Small Business Administration(“SBA”) released its Final Rule containing changes to the regulations governing the 8(a) Small Business Development Program (“8(a)program”). The 8(a) program provides assistance to socially and economically disadvantaged business owners in the form of business development services, including the opportunity to receive federal contracts on a sole-source or limited competition basis.” Read more»

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