Business Entity Management

Business Entity Formation

There are four broad groups of business entities:

• limited liability companies
• corporations
• partnerships
• sole proprietorships

​The term Business Entity refers to the form of incorporation for a business. Limited liability companies and corporations are the most common types of legal entities because they offer the owners/shareholders a level of protection through limitations on what they can be held liable for. Sole proprietorships and general partnerships, which do not require formal registration with the government, do not have the same rights or protections as incorporated legal entities.

If you are starting a solo business and filing a single-member LLC in Louisiana, You probably do not need a lawyer. Louisiana’s Secretary of State has the GeauxBiz.com online filing system that is relatively easy to use and has some valuable information for people starting a business. You may need a lawyer if you are starting a more complex entity (more than one owner), soliciting investment, or borrowing funds from a bank. Initial consultations are at no charge to you and include a determination of whether you need legal help in forming your business and some tips on how to reduce fees. While not every company will need a lawyer to get started, they should consider a lawyer as another asset to invest in that, when used correctly, can reduce risk and avoid potential problems in the future.

Operating Agreements and By-laws

What happens if one of you wants to exit the business or a partner dies? How will profits be distributed, and in what percentages? How will decisions be made, and by whom? An operating agreement can outline the answers to the questions and the internal operations of your business. An operating agreement is an official contract binding its owners to its terms. Even when business partners have verbally agreed to specific terms, misunderstanding or miscommunication can occur. It is a best practice to have those agreements in writing so they can be referred to later should a disagreement arise in the future. Many states do not require operating agreements, but it is not recommended that your business not have one in place.

An operating agreement can cover a myriad of things about your business, including but not limited to:

• Percentage of each partner’s ownership
• Voting rights and responsibilities of each owner
• Powers and duties of its members and managers
• Distribution of profits and losses
• Holding meetings
• Buyout and buy-sell rules (procedures for transferring interest or in the event of a death)

The Guidry Group will develop an operating agreement that lays out the rules between you and your partners when it comes to your business. The Guidry  Group can also help with your other contracts through its Contract Lifecycle Management services.

Corporate Entity Compliance

To keep your business legally compliant, you must file specific paperwork and pay certain fees or taxes with state or federal governments.

Many states have different filing requirements based on the type of business entity, such as:

• Filings 
  • Most states require your business to file either an annual report or a biennial (every two years) statement. Some states set the due date on the anniversary of the business formation date, and other states pick a specific day for all businesses. Some states may even require initial reports at the time of formation.
  • You must also notify the state of any material changes to your company, such as a change of address, name, or membership. These changes may not be legally binding until you have filed the appropriate reports with the state.
  • Most businesses won’t have federal requirements beyond paying federal taxes and complying with the Affordable Care Act.
  • Your particular industry or location may have additional filing requirements. For example, most restaurants need to renew health and safety certificates regularly. Professional services like plumbing or nursing might require certification with a third-party board to keep your license.
• Fees & Taxes
  • • Fees typically accompany every required filing, which can be as small as $25 to amounts over $300.00.
    • Some states charge franchise taxes for corporations or LLCs that operate within their border. Formulas vary by state.
  • • Ensure that you meet all federal tax obligations, including income and employer taxes.

Internal corporate compliance is for your record keeping. Corporations should hold initial and annual director and shareholder meetings, record their meeting minutes, adopt and maintain bylaws, issue stock to shareholders, and record all stock transfers. LLCs should keep an updated operating agreement, issue membership shares, record all membership interest transfers, and hold annual meetings. It is a good idea to document all important decisions within your business. The Guidry Group’s Compliance Oversight services will assist you with these compliance activities, so you can get back to what you do best.

Mergers & Acquisitions

These transactions require a lot of paperwork and an understanding of business law. For this reason, lawyers play a critical role in M&A transactions. In any merger or acquisition, an attorney’s role is to advise either the buyer or seller on critical legal issues. An attorney cannot represent both sides of a deal, so each party should have their own lawyer. Your lawyer should have a deep understanding of nuances in the law and your business to ensure that proper terms are part of the transaction.

Transactional Due Diligence

Due diligence is an investigation of a business or person before signing a contract or entering into a transaction. If you’ve ever bought a home, you have experience with due diligence. Inspections and appraisals are forms of due diligence. Before closing the deal, due diligence is your opportunity to understand what you are buying, including any potential problems.

Due diligence requests usually fall into three broad categories:

1. Financial: Assess the financial statements of the business for accuracy
2. Operational: Review all processes and documentation needed to run the business
3. Legal: Confirm there are no current or probable legal issues with the business

The discovery of issues does not mean that the deal is dead. The discovery of issues can regularly lead to further negotiation on price or other terms to protect the buyer. Discovering issues during due diligence can also allow the buyer to develop new processes and procedures to address those problem areas before taking over the business. Without the proper due diligence, even a well-constructed purchase agreement cannot protect the buyer if it continues the problematic practices of the seller after the closing.

Registered Agent

Many lawyers will act as the registered agent for their clients once that business is registered with the Secretary of State. Companies must submit an annual report in Louisiana, which the registered agent can do on your behalf. The registered agent also receives any papers served against the business, so a lawyer in that role is well prepared to deal with that paperwork for you.